Posted by: samhenry | September 17, 2009

A SMALL BUSINESS SECTOR UNDER FIRE: NICHE BANKS

submitted by SamHenry, Editor

While many small businesses are struggling due to lack of loan monies, many small “niche” banks are pressured by legislation proposed to regulate their parent corporate entities. Below is the bind in which one kind of niche bank finds itself:

NEW YORK TIMES, SEPTEMBER 16, 2009

By Eric Lipton

Utah is the nation’s unlikely capital of industrial banks — niche institutions that primarily make loans to businesses. Corporations like Sachs Group Incorporated” have been attracted to the state to set up such institutions. While they have brought billions of dollars in deposits, thousands of jobs and millions in charitable donations to Salt Lake City, the banks have also drawn fire from Washington.

Corporations like Goldman Sachs, Target and General Electric have been attracted to the state to set up such institutions. While they have brought billions of dollars in deposits, thousands of jobs and millions in charitable donations to Salt Lake City, the banks have also drawn fire from Washington.

The Obama administration argues that the banks pose a threat to the economy because their parent companies can engage in risky practices but are often exempt from routine scrutiny by the Federal Reserve. Treasury officials want to require the corporate owners of the nation’s 41 industrial banks to accept more rigorous regulation or be forced to sell or shut them down.

“The president’s regulatory reform plan is not about fighting the last crisis, but trying to avoid the next one,” said Michael S. Barr, assistant Treasury secretary for financial institutions. “If we preserve known loopholes in consolidated oversight, then we will just be inviting the next Bear Stearns or A.I.G.

But the banks are fighting back. “We are talking about survival here,” said Louise P. Kelly, president of EnerBankUSA in Salt Lake City.

Defending the institutions as safe and profitable, she and others have mounted a campaign to not only block the administration’s plan, but to expand the number of such banks. The industry is deploying lobbyists, jawboning lawmakers, doling out campaign contributions and trying to persuade Treasury and banking officials.

Find the rest of this article at:

http://www.nytimes.com/2009/09/17/business/economy/17industrial.html?_r=1&hp=&adxnnl=1&adxnnlx=1253183918-f6BTNoQ8QLiRrb5DHsjhFQ

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