In a time when financial institutions are tightening their lending standards, investment bank and brokerage Wedbush is opening a commercial bank.

The Los Angeles financial services company launched a nationally chartered commercial and retail bank March 10 at the company's downtown headquarters.

Wedbush executives called the bank a "natural extension" of the company's existing operations, which include a financial brokerage and investment bank, a private equity fund and an investment company.

"There is a lot of synergism between a stock-and-bond brokerage firm and a bank," said Ed Wedbush, chief executive of Wedbush Morgan Securities, which has grown into one of the nation's largest private, independent brokerages since he founded it 53 years ago.

Wedbush was able to open the bank as a result of a law passed by Congress in 1999 that lifted elements of the 1933 Glass-Steagall Act, which prohibited investment banks from offering commercial loans to clients.

However, big investment banks such as Merrill Lynch have long operated lending operations called industrial loan companies that are not regulated by the Federal Reserve Board.

"My impression is that securities firms do not want supervision from the Federal Reserve," said William Emmons, an economist at the Federal Reserve Bank of St. Louis.

The initial capitalization of Wedbush Bank was $20 million raised from its parent company. Commercial lending is expected to occupy about 75 percent of the loan portfolio, with loans generally allocated to borrowers based on cash-flow secured by collateral.

Scott Racusin, chief executive of the new Wedbush Bank, said the securities side of the firm has been able to provide loans for its clients receiving margin calls. However, it has not been able to fill requests for business or commercial real estate loans.

"Now we will be able to say to our brokerage clients, 'We would be happy to make an introduction for you at Wedbush Bank,'" said Racusin, who dismissed the idea that the current financial crisis made it a bad time to open a bank.

"This is the perfect time to open a bank. We bring a clean balance sheet, liquidity and innovation to a tightening marketplace. Although lending standards are tightening up, they are probably just returning to where they should have been for traditional banking all along."

Instead of building a network of brick-and-mortar branch locations, the company will offer retail banking services through small kiosks where customers will be able to deposit money into their accounts.

The bank plans to open a few kiosks later this year, though the exact number has not been determined. The kiosks will be installed in high-density population centers, including a probable location in Orange County.

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