Wal-Mart bank opposed

U.S. lawmakers urged regulators to reject Wal-Mart Stores Inc.'s plan to open an industrial bank in Utah, saying it will drive community banks out of business.

In a March 8 letter to Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corp., more than 30 members of Congress said Wal-Mart's bank could dominate lending and hurt small businesses. The representatives also said they doubt Wal-Mart would abide by U.S. banking rules.

"We have grave concerns about Wal-Mart's record as a corporate citizen and believe its ownership of a bank will have serious negative impact on local communities," said the letter signed by representatives including Stephanie Tubbs Jones and Dennis Kucinich, Democrats from Ohio. "A Wal-Mart with thousands of branches would create competitive imbalances in the banking world and threaten small businesses, including community banks."

In July, Wal-Mart, the world's largest retailer, applied to open an industrial bank in Utah to process more than 1.6 million debit, credit and electronic-check transactions rather than pay third parties to handle them. Community bankers and lawmakers have said they are concerned Wal-Mart will eventually open retail branches. The company has said it doesn't intend to open branches.

The FDIC has received a record 1,900 comment letters on the application, agency spokesman David Barr said. The FDIC will hold public hearings on the matter on April 10-11 in Washington and April 25-26 in Kansas City, Mo.

More than 35 organizations have applied to speak at the hearings, including the National Association of Convenience Stores, the National Grocers Association, the National Center for Missing and Exploited Children and community banks and state banking associations.

Wal-Mart's industrial bank would be exempt from limitations imposed on commercial banks, including Federal Reserve oversight, said the letter, which was also signed by U.S. Rep. Neil Abercrombie of Hawaii and Ohio Rep. Tim Ryan.

If granted a bank charter, Wal-Mart could open branches outside of Utah, where it applied for a charter, the lawmakers said. The lawmakers also said the company could "skew loan decisions by steering capital away from businesses that compete against Wal-Mart."

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 spokeswoman Sharon Weber said in an e-mail in July.

Shares of Wal-Mart, based in Bentonville, Ark., rose 9 cents Friday to close at $45.33 on the New York Stock Exchange. The stock fell 13 percent in the year through Friday.