Legislators in 2 states drawing up barriers to Wal-Mart banks
Posted on Saturday, March 18, 2006
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Wal-Mart Stores Inc. would be limited in the bank branches it could open under two bills introduced by state lawmakers concerned about the future of existing financial institutions.
The measures, submitted by Rep. John Gleason in Michigan and State Delegate Brian Moe in Maryland, are responses to Wal-Mart’s bid to start an industrial bank to process credit card and electronic-check transactions.
Commercial bankers and lawmakers say an industrial bank charter will allow Wal-Mart to enter retail banking and dominate savings and lending as it has other businesses such as groceries. Wal-Mart has said its bank, to be based in Salt Lake City, will save it from using third-party processing companies and won’t open branches or make loans.
“I’m really concerned that they’re going to put the local community banks out of business,” Gleason said. Wal-Mart recently broke ground for a store between two local banks in his district, Gleason said.
Industrial banks, created a century ago to make loans to workers, aren’t regulated by the Federal Reserve. They can accept deposits and lend money, raising the possibility that Wal-Mart, the world’s largest retailer, could open branches in its more than 3, 300 U. S. stores.
“We have no intention of doing what they seem to be trying to prevent,” Wal-Mart spokesman Marty Heires said. “Right in our application we state very clearly we have no intention of opening branches.”
The Federal Deposit Insurance Corp., which is considering Bentonville-based Wal-Mart’s application for deposit insurance, has received a record 1, 900 comment letters on the application, agency spokesman David Barr said last week. The FDIC will hold public hearings on the matter April 10-11 in Washington and April 25-26 in Kansas City, Mo.
Michigan’s banking code allows out-of-state banks to open branches with the approval of the banking commissioner. Gleason’s bill, introduced Friday, would bar industrial banks.
The Maryland bill, introduced Thursday, would prohibit commercial companies from opening banks on their premises, banning the retailer from adding Wal-Mart bank branches to its stores.
Federal Reserve Chairman Ben Bernanke is among officials who have expressed concern about commercial companies operating banks. “Congress has affirmed the principle of keeping banking and commerce separate,” Bernanke said in a March 8 speech in Las Vegas to the Independent Community Bankers of America.
Wal-Mart failed to open a bank in California in 2002 because lawmakers there “passed legislation tailored to prevent Wal-Mart from buying an Orange County industrial bank,” company spokesman Sharon Weber said in an e-mail in July.
Shares of Wal-Mart rose 33 cents to $ 46. 69 in New York Stock Exchange composite trading Friday.
Wal-Mart shares have traded as low as $ 42. 31 and as high as $ 52. 43 over the past year.
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