Cassius

No. 1 retailer set to face critics of its bank proposal during public hearings Monday.
April 7, 2006: 7:06 PM EDT

WASHINGTON (Reuters) - Wal-Mart will defend its bid Monday to open a bank amid unprecedented opposition to allowing the world's biggest retailer to start even limited financial operations.

At the first of four days of public hearings on Wal-Mart's bank application, the company is expected to outline the functions its bank would perform and try to clear up what it says are misconceptions about the bank's purpose.

But the hearings will give a platform to Wal-Mart's (Research) vocal opposition as well -- groups whose aggressive lobbying helped lead the U.S. agency considering Wal-Mart's bid to call the first ever formal public hearings on a bank application.

Already, members of Congress, banks and the National Association of Realtors have laid out a long list of complaints about Wal-Mart's application, ranging from worries about the company's ability to drive community banks out of business to the risk the bank could pose to the broad financial system.

The criticism has been months in the making, and Wal-Mart has largely remained silent, working behind the scenes with regulators and making changes to its application to win approval and perhaps ease opposition, at least in Congress.

The company has repeatedly said it looked forward to the hearings as a chance to discuss its bank's proposed functions, and to reiterate that the operation would only be used to process electronic payments for Wal-Mart's stores.

It will not, Wal-Mart says, offer any services to the general public, open bank branches or offer payment processing services to other retailers.

But that has done nothing to quiet critics who say they simply don't believe Wal-Mart's assurances.

"Wal-Mart does nothing on a small scale," Terry Jorde, chairman of the Independent Community Bankers of America, will tell regulators at the hearing Monday, according to her prepared testimony. "We respectfully suggest that Wal-Mart's recent history belies the assertions made in its narrow application, justifying our skepticism that Wal-Mart will honor the business plan as filed for very long."

What's more, given Wal-Mart's size, a financial problem at the retailer could bleed into its bank and disrupt the U.S. payments system, many opponents argue.

Still, some analysts and lobbyists say if the Federal Deposit Insurance Corp., the agency considering the application, follows statute and precedent, there is little reason Wal-Mart's bid should be denied when rival Target Corp. (Research) and other corporate heavyweights such as General Electric (Research) have succeeded.

"The FDIC, if it looks at this on its face value, for what it's being asked for, then there's nothing special, nothing unique about this," said Jim Reichbach, national managing principal for Deloitte & Touche USA LLP's banking and finance practice.

Wal-Mart's application is getting undue attention, he said, because the retailer is a "lightning rod" for other issues.

Wal-Mart or something broader?
Wal-Mart, in fact, is far from alone among corporations seeking industrial banks, called industrial loan companies (ILCs).

Industrial banks are state-chartered and state-regulated, and fall under the supervision of the FDIC. Commercial companies may own them because federal laws that bar nonfinancial companies from engaging in banking activities do not classify industrial banks as banks.

Wal-Mart's application has energized not only its regular critics, such as labor and environmental groups, but also those who want Congress to clamp down on ILCs overall because they benefit from a "loophole" in federal law that allows commercial companies to buy banks but escape full supervision by bank regulators.

Even Federal Reserve officials have urged Congress to review the ILC statute.

Such broader worries are, in fact, part of Wal-Mart's problem, according to analysts and lobbyists who say the ongoing and intensifying debate about what Congress might do to boost industrial bank oversight could lead to further delays in Wal-Mart's application.

"That's a strategy option, for sure," one source said.

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Little Nicky

People used to be scared of a big government seizing their freedoms and taking over every aspect of their lives but what if the real danger is from a huge money rich corporation with no loyalty to anyone but the company itself.
97% of all americans live within 15 miles of a Walmart. Mom and Pop stores are history when Walmart comes to town. With the introduction of the Super Walmart, supermarkets chains are slowly going out of business. At what point do we say to Walmart...Enough is enough.