From the Morning News out of Arkansas:
Wal-Mart Stores Inc. will have to wait another year, at least, to find out if it can open an industrial bank after the Federal Deposit Insurance Corp. on Wednesday extended for one year a moratorium on considering applications of nonfinancial companies that want to establish or acquire banks.The decision puts on hold pending applications from Wal-Mart, Home Depot Inc., DaimlerChrysler AG and American Pioneer, and gives Congress time to consider legislation that would prohibit such companies from owning so-called industrial loan corporations, or ILCs.
John Kelly, director of financial services for Wal-Mart in Washington, said the company was disappointed with the FDIC’s decision.
“We’re mainly disappointed for our customers. This effort has always been about cutting unnecessary costs and saving customers money, and that is all this bank application is about,” he said in a phone interview.
Critics say the growth of ILCs risks blurring the line between banking and commerce, concentrating assets in the hands of a few big companies and stifling competition, which hurts consumers. They also have expressed concern that Wal-Mart opening an industrial bank would lead to it starting a commercial bank in the future.
But Kelly said the company has repeatedly said it would not engage in branch banking.“We would welcome restrictions put on our application that would prevent that. You will never see a Wal-Mart bank in a Wal-Mart store,” he said. “I think it was clear by the FDIC decision today that this was a broad policy issue, and we will be working closely with Congress on those issues.”
Wal-Mart could save millions of dollars by processing its own financial transactions, the company has said.
A group of House lawmakers on Monday renewed a push for legislation that would block commercial companies from owning these special sorts of banks that have been proliferating in recent years.
The FDIC said it received more than 1,500 letters and comments from individuals opposing Wal-Mart applying to open an industrial loan corporation in Utah, a type of bank that regulators let commercial businesses operate for specific purposes, such as processing payments.
Most of the negative comments stressed the dangers of an unregulated commercial company owning a federally insured bank. Besides banks, others who sent letters of opposition to Wal-Mart’s application include the Consumer Federation of America, the University of California and several unions.
“This (FDIC) decision recognizes that Wal-Mart’s lack of transparency and pattern of disregarding legal accountability are legitimate issues that deserve scrutiny. If Wal-Mart can’t be trusted to abide by wage and discrimination laws, then the FDIC shouldn’t trust it with a bank,” said David Nassar, executive director of Wal-Mart Watch in Washington, in an e-mailed news release.
Wal-Mart Watch is a union-backed group that has an ongoing campaign against Wal-Mart over its employment policies.
The House bill is sponsored by Reps. Barney Frank, D-Mass., chairman of the House Financial Services Committee, and Paul Gillmor, an Ohio Republican. Similar legislation sailed through the House last year, but is stuck in the Senate.
Posted by Sascha - February 2, 2007 02:57 PM - In The News