Summarized by Kent Larsen
Big banks queueing on Mormon state's doorstep
London UK Telegraph 24Jan00 B4
By Andrew Cave in New York
SALT LAKE CITY, UTAH -- A Federal law in the United States makes Utah
the beneficiary of a strange loophole that allows financial institutions
to avoid regulation by the Federal Reserve. The law, passed while former
Senator Jake Garn, an LDS Church member, was chairman of the Senate
Finance Committee, allows corporations to offer everything a bank offers
except checking accounts, but avoid the regulations placed on Banks by
the Federal Reserve.
The law was passed in 1987, allowing the creation of "industrial loan
corporations." Chartering one of these corporations costs just $500 to
arrange, and large U.S. Corporations have taken advantage of the law,
and plentiful language skills in Utah from returned missionaries, to set
up the corporations and move operations to Utah.
One of these operations is American Express, which issues its Optima
credit card from Salt Lake City and has a national call center there.
Merrill Lynch and Morgan Stanely both own "industrial loan corporations"
in Utah. Volvo, a subsidiary of Ford, is trying to set one up. Currently
there are 20 "industrial loan corporations" with $14 billion in assets
and 7,000 employees in Utah. As many as 14 more are in the works.
Returned missionary Garry Cox, of the Utah Department of Financial
Institutions, says the benefits are very attractive, "The charter allows
you to operate as a bank without having the oversight of the Federal
Reserve. This is the only benefit but for a big company it is very
attractive. Merrill Lynch found that the Utah charter works well for
them because they do not want the Federal Reserve nosing around in their
parent company. If Microsoft wanted to come to Utah, they could come
here and be exempt. Let's face it. Everyone wants to avoid as much
regulation as possible."