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Industrial Loan Companies: Where Banking and Commerce Meet


  • James R. Barth,

  • Tong Li,

  • Apanard Angkinand,

  • Yuan-Hsin Chiang,

  • Li Li

Tong “Cindy” Li, Ph.D. Economist Milken Institute 1250 Fourth Street,  Phone: 310 570 4655, Fax: 310 570 4625,


Should commercial firms be prohibited from owning banking institutions? Should the United States remain the only G20 country opposed to the “mixing of banking and commerce”? These questions have assumed new urgency as the Dodd Frank Act of July 2010 imposed a moratorium on the commercial ownership of industrial loan companies (ILCs), which was the last remaining entry point for commercial firms into banking. This paper specifically examines the role of ILCs in America's financial system from its beginnings in 1910 to the present. Special attention is paid to the performance of commercially owned ILCs prior to, during and after the most recent financial crisis. The examination is based upon both survey data and Federal Deposit Insurance Corporation (FDIC) data, which represents a database of the ILC industry that is the most comprehensive one available to date. The paper also reviews the laws and regulations regarding the mixing of banking and commerce, and discusses the advantages and disadvantages of allowing commercial ownership of banks.