Sen. Bob Bennett told Treasury Secretary Timothy Geithner on Thursday that the Obama administration is making a horrible mistake with its new financial-system-overhaul proposals that would kill industrial loan companies.

ILCs are financial institutions that make loans but may be owned by non-financial companies — such as retailers or car manufacturers or stock brokerages. Utah is one of just seven states that charter them, and most large ILCs are chartered in Utah.

"Right now, one of the problems we have with the economy is that there is not enough credit, and yet the administration's proposal would kill ILCs, a major source of credit where there has been no difficulty with respect to the financial crisis," Bennett told Geithner during a Senate Banking Committee hearing.

"There is not a single ILC that contributed to the crisis. There is not a single ILC that went down," Bennett said.

Still, he said, the administration's proposal "is a destruction of the industry. We're going to cancel the ILCs' charter. We're going to cancel the industry as a whole."

Geithner told Bennett the administration believes it is essential that all institutions that accept deposits and make loans — thus essentially acting like banks — should face the same basic standards.

"We don't want to allow people to shop for less-vigorous regimes with less-vigorous standards," which led in part to the financial crisis with thrifts and banks, Geithner said.

But Bennett said, "This is overkill. There is not a single ILC that contributed to the crisis."

Geithner conceded, "This is a very difficult issue, and it's difficult to know what the right course is here." He said the Treasury Department would work with Bennett to address his concerns.

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