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Bankers Oppose Wal-Mart's Entry into Banking

October 15, 2005

Wal-Mart • General Complaints • Black Friday • Customer Service • Dangerous Products, Conditions • Grocery/SuperCenters • Lawn & Garden • Monogram Credit Card Bank • Pet Department • Pharmacy • Photos • Pricing Disputes, Errors • Returns • Sporting Goods • Tire & Lube • Vision Center • WalMart.com --- • Employees Complaints --- News • Wal-Mart Gaining On Grocery Chains • Black Friday Ads Target Wal-Mart • Wal-Mart Era Is Over, Wall Street Journal Declares • Consumers Respond to Toxic Wal-Mart Pet Toy Stories • Wal-Mart Expands $4 Generic Program • Lab Tests Find Lead, Other Toxins in Pet Toys Sold at Wal-Mart • Wal-Mart Plans Its Own Debit Card • Wal-Mart To Open In-Store Health Clinics • Wal-Mart Gives Up Bank Plans • Congressman Challenges Wal-Mart Banking Plans • Wal-Mart Expands Generic Drug Plan • Christmas Returns to Wal-Mart • Wal-Mart Jump-Starts the Holiday Shopping Season • Wal-Mart Cuts Generic Rx Prices To $4 In Florida • Wal-Mart Ending Its Layaway Program • FDIC Puts Retailers' Banking Plans on Hold • Wal-Mart/Sam's Club Settle with Connecticut on Pricing Violations • Congress May End Wal-Mart's Banking Dreams • Arizona Charges Wal-Mart, AutoZone with Consumer Fraud • Michigan Fines Wal-Mart $1.5 Million for Item Pricing Violations • Opposition Grows as FDIC Examines Wal-Mart Banking Bid • Wal-Mart's Banking Plans Draw Critics • Michigan Challenges Wal-Mart on Item Pricing • Wal-Mart May Stock "Emergency" Contraceptives • Black Friday Gives Wal-Mart a Black Eye • Connecticut Probes Wal-Mart Pricing • Wal-Mart Pushing Extended Warranties on Electronics • Bankers Oppose Wal-Mart's Entry into Banking • Wal-Mart Target Of Union-Led Boycott • Wal-Mart to Pay $14.5 Million for California Gun Law Violations • Wal-Mart Target Of Union-Led Boycott • Wal-Mart Tries to Buff Its Image

Judging by bankers' reaction to Wal-Mart's application to establish its own bank, you'd think the giant retailer was hiring an army of Bonnie and Clydes to burn and pillage the nation's banks.

Wal-Mart filed an application with the Federal Deposit Insurance Corporation (FDIC), which regulates community banks, because it wants to process its own debit, credit and electronic check transactions, saving a half cent or so on each of the 1.6 million transactions it handles each year.

The company says it would not actually open any bank branches, would not offer checking accounts or other consumer services and wouldn't go into the lending business. But bankers aren't buying it. They organized a storm of protest that included 1,150 letters to the FDIC complaining that being its own bank would give Wal-Mart "anti-competitive powers."

"When banking and commerce is (sic) mixed, a dangerous combination would produce an excessive concentration of economic power, jeopardize the impartial allocation of credit and extend the federal safety net where it was not intended," wrote Bruce A. Hanson, vice president of First National Bank of Blue Earth, Minnesota, in a comment typical of those the FDIC received.

A two-month public comment period on Wal-Mart's application ended Sept. 23, with FDIC officials staggered by the response. Most applications to open a new bank receive at most a few letters commenting on such applications, the FDIC said.

The Independent Community Bankers of America, representing 5,000 banks, asked the FDIC to hold a public hearing on the retailer's application for an industrial loan charter. An FDIC spokesman said the agency hasn't held a hearing on a new bank application since the 1980s.

Camden Fine, president of the trade group wrote that Wal-Mart's application "presents very serious public policy issues regarding the appropriate structure of our financial and economic system."

With or without a bank, Wal-Mart is moving into financial services. It introduced Wal-Mart and Sam's Club credit cards earlier this year. More than 1,000 independent bank branches now operate in Wal-Mart stores, and the company said it is seeking new financial institutions as tenants.

Many large retailers contract with specialized banks like GE's Monogram Credit Card Bank of Georgia, which operates the credit card programs for Home Depot, Lowe's, ExxonMobil and, at least for now, Wal-Mart and Sam's Club.

It's not the first time Wal-Mart has tried to get into banking. IN 1999, it tried to buy Federal BankCentre but a change in U.S. banking laws derailed the deal. In 2002, it tried to buy an Orange County, California, industrial bank but local lawmakers passed legislation outlawing it.

The current application and the bankers' attempt to quash it had gone unnoticed until it was reported by The New York Times today.

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