The 'Big 3' automotive corporations in the United States have declared their entry into the banking sector. This comes as the Donald Trump administration has promised to ease corporate regulations, refocusing interest on banking, which had been avoided since the 2008 financial crisis.
According to the Washington Post (WP) on the 10th (local time), Stellantis submitted documents to the Federal Deposit Insurance Corporation (FDIC) last month to enter the banking sector. The FDIC is a government agency that provides deposit insurance to customers of commercial banks and savings banks in the United States, and any bank must obtain approval from this agency to operate. General Motors (GM) and Ford have also already submitted related documents to the FDIC.
The banks that the 'Big 3' corporations are attempting to enter are 'industrial banks,' with the primary purpose of supplying industrial funds. Automakers that are already providing loans and leasing contracts to customers and offering loans to dealers for resolving vehicle inventories are aiming to secure deposits and stable funding through entering the banking sector. Among foreign companies, Toyota and BMW already own industrial banks.
In Washington, there has been a long-standing debate about whether non-financial private corporations, such as automotive manufacturers, can own banks. This is due to concerns that corporate-owned banks may indiscriminately execute loans to increase their revenues, potentially increasing default loans that were one of the causes of the 2008 financial crisis. Approximately 20 years ago, Walmart and Home Depot, major U.S. retailers, sought to acquire industrial banks but abandoned their plans due to strong resistance from existing banks.
Mickey Marshall, a regulatory advisor for the Independent Community Bankers of America (ICBA), noted, "If banks are owned by private corporations, those corporations have the incentive to expand loans to customers, thereby increasing revenues." He further stated, "In this process, increasingly risky loans could be made, which could eventually lead to the collapse of the bank."
Particularly, GM has already experienced failure in the banking sector. GM established and operated GMAC, an industrial bank, in 1919 to lend money to its customers for purchasing vehicles but had to apply for government bailout during the 2008 financial crisis. WP explained, "Last summer, federal authorities were preparing to reject GM's banking establishment plan because the bank owned by GM during the financial crisis came close to collapsing."
The situation changed with the inauguration of the second Trump administration. President Trump has a policy framework aimed at relaxing regulations on corporations. During the first administration, he also sought to ease the 'Dodd-Frank Act' instituted by the Barack Obama administration. As a result, the industry expects that unlike the Biden administration, which approached the ownership of banks by non-financial corporations with caution, the principle of 'separation of business and banking' will be weakened over the next four years.
If the banking entry of the 'Big 3' corporations is approved, the entry of non-financial corporations into the banking sector is expected to accelerate. WP stated, "If the Trump administration approves the applications of the Big 3 automotive corporations, it will set a similar precedent for retailers, IT companies, and various businesses already providing financial services." Anonymous banking industry lawyers reported that several non-financial corporations are already reviewing requests for regulatory approvals to establish their own banks.
There is also significant opposition. Arthur Wilmarth, an emeritus professor of law at George Washington University, stated, "This would change the nature of our financial system and be very harmful to consumers, posing serious threats to the economy." He further questioned, "If federal regulators approve the applications of automotive manufacturers, how can they refuse similar requests from big tech companies like Apple, Google, Amazon, and Facebook?"
Some Democratic lawmakers are urging the FDIC to deny the industrial bank applications from the 'Big 3' corporations. Senator Elizabeth Warren, a Democrat from Massachusetts, stated, "If the FDIC faithfully applies the law, these applications will be rejected," adding, "Taxpayers will be able to avoid a potential $11 trillion corporate bailout crisis."
Automobile manufacturers emphasized that the banks they establish will focus solely on auto loans. A spokesperson for GM stated, "The goal is to establish a bank focused on auto loans and deposits to provide value to customers and dealers." Stellantis indicated in the documents submitted to the FDIC that it will provide essential financial and deposit services to auto dealers and consumers.