Wal-Mart bank gets backing of trade group

Wal-Mart Stores Inc. is being supported in its bid to open an industrial bank in Utah by a financial-services trade group that represents companies including General Motors Corp. and General Electric Co.

The American Financial Services Association has asked to testify in support of Wal-Mart before the Federal Deposit Insurance Corp., said William Himpler, executive vice president of government affairs at the trade association, which is based in Washington, D.C. Hearings will be held in Washington and Kansas City next month.

Commercial lenders oppose Wal-Mart's application to start a bank, known as an industrial loan company, because they are afraid of competition, said Himpler. Opponents argue Wal-Mart, the world's largest retailer, will open bank branches in its more than 3,300 U.S. stores, hurting community banks. Wal-Mart has said it plans to use the industrial bank to save on third-party, credit-card processing fees.

"The reason we're getting engaged is that by using Wal-Mart as a soap box, some people are arguing that ILCs are not adequately regulated, and that's just false," Himpler said.

Himpler said the drive to stop Wal-Mart comes from the largest banks that dominate the industry and their allies in Congress, including Rep. Jim Leach, R-Iowa. He has introduced legislation that would subject ILCs to the same regulation as other banks.

"He wants to close the ILC loophole, whether it's Wal-Mart or any other corporation," said Gregory Wierzynski, Leach's chief of staff. "He wants industrial companies that charter ILCs or purchase one to be covered by the Bank Holding Act. It would basically even the field."

Other AFSA members would oppose efforts to further regulate companies that own the banks.

"There is more than appropriate supervision," said Joanne Krell, spokeswoman for General Motors Acceptance Corp., a unit of General Motors.

Wal-Mart, based in Bentonville, Ark., also faces opposition from state lawmakers in Michigan and Maryland, who have introduced bills either barring industrial banks or keeping bank branches out of Wal-Marts.

Industrial banks, created a century ago to make loans to workers, aren't regulated by the Federal Reserve. They can accept deposits and lend money, raising the possibility that Wal-Mart could open banks in all its U.S. stores.

"We have no intention of doing what they seem to be trying to prevent," Wal-Mart spokesman Marty Heires said March 17. "Right in our application we state very clearly we have no intention of opening branches."

The retailer already has a substantial banking presence, with independent bank branches in more than 1,000 branches. It also issues Wal-Mart and Sam's Club credit cards.