FDIC official floats conditional OK of Wal-Mart bank
By Becky Yerak
Tribune staff reporter
Published April 12, 2006
ARLINGTON, Va. -- At a federal hearing that matched the nation's largest trade association against the world's biggest retailer, Wal-Mart Stores Inc. continued to face ringing denouncements Tuesday about its plans to acquire a limited bank charter, though a regulator floated the idea of a possible conditional approval.
The 1.3 million-member National Association of Realtors was among the groups appearing on the second day of Federal Deposit Insurance Corp. hearings that will help determine whether Wal-Mart can start a Utah-based bank to process in-house its debit, credit and check transactions.
Wal-Mart has repeatedly assured critics that it has no plans to open company-branded branches or offer traditional banking products, explaining that it prefers to strike deals with independent banks to run branches in its stores.
But opponents aren't buying it and continue to warn federal regulators that Wal-Mart shouldn't be allowed to put the proverbial nose under the tent, given its more ambitious designs on the banking industry in the past. The Bentonville, Ark.-based retailer has made several unsuccessful attempts to acquire or partner with financial-services companies.
Nearly 40 people, most of them hostile to Wal-Mart, testified over a day-and-a-half of hearings. The FDIC, which has said it has no timetable for making a decision on whether Wal-Mart will receive federal deposit insurance, will hold a third day of hearings April 25 in Overland Park, Kan.
On Monday, Jane Thompson, president of Wal-Mart Financial Services, said she expected that any FDIC approval would be granted on the condition that her company agree not to open Wal-Mart-branded bank branches.
Questioning Wal-Mart opponents who testified Tuesday, John Bovenzi, the FDIC's chief operating officer, floated the hypothetical scenario of approving Wal-Mart's application with strict limits.
"Would fears be alleviated if the request was conditioned?" he asked. "What if the FDIC imposed conditions that any substantive change would undergo full review and public hearings? I'm not sure we can impose such a condition. But, if we can, would that alleviate" critics' concerns?
But Wal-Mart opponents remained entrenched.
The real estate group opposes Wal-Mart's bid partly on the grounds that it would create a conflict of interest.
"It would be possible for Wal-Mart to provide loans on favorable terms to the suppliers of Wal-Mart Stores," said Tom Stevens, president of the real estate group. "This would put commercial firms not affiliated with a bank at a competitive disadvantage."
He urged the FDIC to delay a decision on Wal-Mart's application until Congress reviews the issue and decides whether to close or limit the loophole allowing so-called industrial loan corporations.
Critics also continued to raise issues tangential to Wal-Mart's application.
"Wal-Mart regularly says one thing and does another," testified Andrew Grossman, executive director for Wal-MartWatch.com, a watchdog group.
Although rival discounter Target Corp. owns a Utah-based industrial loan corporation, Wal-Mart shouldn't necessarily receive the same treatment, Grossman said, explaining that Target is a fraction of the size of Wal-Mart.
But Jim Tozzi of the Center for Regulatory Effectiveness, which monitors regulators' compliance with federal laws, urged the FDIC to use the same criteria used for Target.
Lawrence White, a former Federal Home Loan Bank Board member who now teaches business at New York University, testified that Wal-Mart's application should be approved. He blamed the uproar, in part, on rival bankers.
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