Wal-Mart bank ban withdrawn for now

LITTLE ROCK, Ark. — The sponsor of a measure in Congress that would bar Wal-Mart from engaging in banking has withdrawn it for now, in exchange for a pledge that the issue will be dealt with next year.

The proposal by Rep. Jim Leach, R-Iowa, would put industrial-loan corporations into the same federally regulated classification as banks.

Currently, industrial-loan corporations are regulated only by state authorities, and a federal law barring commercial firms from owning banks does not apply to them.

Wal-Mart has attempted to purchase an industrial-loan corporation for several years, and has applied to the Federal Deposit Insurance Corporation to form such a company.

The company announced in July that it hoped to establish its industrial bank in Utah. According to Alan Whitchurch, who was named president of the would-

be Wal-Mart Bank, the bank's sole function will be to process credit card, debit card and electronic-check transactions from its retail locations. The bank does not intend to branch and has no intention to compete with local banks, Whitchurch told the Deseret Morning News when the application was filed.

Leach's measure would require industrial-loan corporations to be regulated like any other bank, keeping Wal-Mart from buying such a company.

At a meeting of the House Financial Services Committee in Washington on Wednesday, Leach pulled the measure down after first trying to attach it to the Financial Services Regulatory Relief Act. That measure would loosen restrictions on bank branching, capital requirements and loan extensions.

Rep. Barney Frank, D-Mass., said he agreed with the intent of Leach's measure, but the broader regulatory-relief bill was the wrong place to put it.

"Adding a major change to industrial-loan corporations invites a degree of opposition in the Senate, which is likely to doom the bill," Frank said. "There is a broad consensus to keep Wal-Mart out of the banking business. The question is how." Opponents fear the huge company, if allowed to operate a bank, would have an unfair advantage over smaller banking operations.

George Koch, a lobbyist for Wal-Mart, said it wouldn't be fair to keep Wal-Mart from owning an industrial-loan corporation, since Target Stores, a major Wal-Mart competitor, already owns one.