Banking: Venturing into Other Realms

As heavily regulated custodians of other people's money, banks are often blocked by authorities or sued by irate competitors when they try to venture into allied financial fields. Lately, bankers have found a legal loophole that —so far — lets them move into new enterprises. Substantial controversy has grown out of the bankers' rush to take advantage of the situation.

The loophole lies in the 1956 Bank Holding Company Act, which prohibits corporations controlling more than 25% of two or more banks from engaging in anything but banking. The law does not cover...