Michigan may bar bank

A Michigan lawmaker wants to bar Wal-Mart Bank — and all other industrial banks chartered in Utah — from operating in the Wolverine State.

Rep. John Gleason, D-Flushing, confirmed Friday he has proposed legislation amending the state's banking laws to bar Utah industrial banks from operating in Michigan.

"My legislation will protect Michigan banks and Michigan consumers from out-of-state banks that don't have to play by the same rules," Gleason said in a statement. "Owners of ILCs (industrial loan corporations) avoid regulations that apply to owners of full-service banks. If the state of Utah is irresponsible enough to let a company like Wal-Mart operate an ILC in their state, that is their business — but we will not allow it to happen here."

HB5884, proposed this week, amends Michigan's banking laws regarding branching by "out-of-state" banks by stating that "an industrial loan bank or industrial loan company organized under the laws of the state of Utah is not an out-of-state bank."

And Michigan isn't alone. In addition to similar bills proposed in Illinois and Virginia, a 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.

Opponents to a Wal-Mart Bank say granting the company an ILC charter will allow Wal-Mart to do in banking what it has done in retail — price its competitors, particularly local institutions, out of business — in addition to threatening the stability of the country's financial system. Wal-Mart has said repeatedly that its bank will handle payment processing, and that it has no intention of branching or making consumer loans.

The Michigan bill comes about a month before the Federal Deposit Insurance Corp.'s much-anticipated public hearings on the bank's application for federal deposit insurance. Industrial banks are state chartered and regulated, and supervised by the FDIC.

As of Friday, the Utah Department of Financial Institutions had not accepted Wal-Mart Bank's application as complete. But department Commissioner Edward Leary said he was "troubled" by Gleason's proposal.

And, Leary said, Utah, Virginia, Illinois and Michigan are all bank reciprocity states — meaning, essentially, that they have an, "If you let my banks in, I'll let in yours" relationship.