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For week ended January 30, 2000 Posted 24 Feb 2001
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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."


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