Utah Gave GMAC a Head-Start on Bank Status

Now that GMAC has won approval to become a bank holding company, it should be noted that the idea of auto-lender-as-bank isn't entirely new.

Several auto companies and their captive finance companies, including GMAC, BMW and Toyota already created pseudo-banks, mostly so they could issue credit cards.

Until now, the auto lenders never took the trouble to achieve full-blown bank status, so they could avoid the higher capital requirements and a much higher level of government regulation that come with being a "bank" per se.

What's different, of course, is that the U.S. Treasury Department is offering bailout money through the Troubled Asset Relief Program.

That made it worthwhile, for instance, for GMAC officially to become a bank holding company, even though GMAC had to raise capital, and agree to submit to closer regulation. Its parent companies, Cerberus and GM, also had to give up controlling shares in GMAC.

The GMAC approval from the Federal Reserve notes that GMAC will become a bank holding company by converting the already existing GMAC Bank, in Midvale, Utah, to a commercial bank.

It's no coincidence that GMAC Bank is in Utah. To cultivate business, Utah in 1997 created the category of "Industrial Loan Corporation," which was later renamed "Industrial Bank." ILCs can take deposits and lend money like a bank, but their "mainstay" business is issuing credit cards, according to the Utah Division of Financial Institutions.

BMW has BMW Bank of North America Inc., based in Salt Lake City.

The state of Nevada has also made it easier for corporations to create bank-style businesses. Toyota has Lexus Financial Savings Bank and Toyota Financial Savings Bank chartered in Hendersonville, Nev., outside Las Vegas.