Wal-Mart banking defended

ARLINGTON, VA — The "doomsday scenarios" of Wal-Mart eliminating competition in the banking industry wouldn't happen even if the retail giant broke its promise not to use a Utah-chartered industrial loan company as an entree into retail banking, an econo- mist testified Tuesday.

Critics of Wal-Mart's proposal to form a Utah-based industrial bank continued to warn officials of the Federal Deposit Insurance Corp. that the retail giant cannot be trusted.

But Lawrence White, an economics professor at New York University, dismissed the warnings as unfounded fear by Wal-Mart's rivals.

"The 'doomsday' scenarios of Wal-

Mart's rivals seem far-fetched and unrealistic," White said during the second day of unprecedented hearings before the FDIC on Wal-Mart's application for deposit insurance for its proposed industrial bank. "Such scenarios ought not to be guiding bank regulatory policy."

Wal-Mart has said it would use the bank to process credit card and debit card transactions.

White said using the industrial loan bank for "back office financial transaction costs" could not "generate any of the feared scenarios." And even if Wal-Mart did expand its banking operations, it is unlikely the Wal-Mart Bank would "sweep the countryside clean of all rivals."

But that's exactly what Wal-Mart critics told the FDIC board could happen if Wal-Mart is granted

deposit insurance, a condition for it receiving the Utah charter that is still pending before the Utah Department of Financial Institutions.

"You must presume and consider the impact of Wal-Mart as the retail banking giant in the near future," said Rashmi Rangan of the Delaware Community Reinvestment Action Council. "While this specific transaction may not rise to the level of a monopoly, but experience suggests that once the FDIC insurance is granted, nothing will prevent it from expansion using the Wal-Mart brand of reducing prices until competition is annihilated and then raising them when there is no competition left."

Other opponents said past regulatory violations and lawsuits, such as the largest-ever gender-discrimination case, demonstrate Wal- Mart can't be trusted to restrict its bank to merely processing payments. The company also can't be counted on to cooperate with regulators, said Jack Blum, counsel for Americans for Democratic Action, a Washington lobbying group.