Review sought of Wal-Mart leases

Rep. Barney Frank said he wants to examine Wal-Mart Stores Inc.'s leases with banks to determine how easily the company could oust them to open its own branches.

Frank, the top-ranked Democrat on the House Financial Services Committee, made the request in a May 3 letter to Wal-Mart after critics of the company's application to open an industrial bank raised questions about Wal-Mart's commitment to keep outside banks in its stores.

The request follows three days of Federal Deposit Insurance Corp. hearings in which community bankers voiced opposition to Wal- Mart's application on the grounds that the world's largest retailer could open its own branches. Wal-Mart has denied plans for branches and cited long-term leases with more than 1,400 banks that operate in its stores.

"Given that you have often cited the leasing of space to bank tenants in Wal-Mart stores as an indication of Wal-Mart Bank's commitment not to branch, I believe that it is important to clarify those differences," Frank, of Massachusetts, wrote.

In April 10 hearings before the Federal Deposit Insurance Corp., Jane Thompson, the president of Wal-Mart's financial services unit, said some of the leases lasted until 2024 and could only be terminated by the bank tenant. She cited those policies as evidence that Wal-Mart has no intention to open branches.

Later that day, former Rep. Thomas Bliley refuted that testimony and said many of the leases were "not as long as Wal-Mart sometimes states."

Some leases last only five years, are renewable only with consent of both landlord and tenant, and would not cost Wal-Mart much to break, said Bliley, who testified on behalf of the Sound Banking Coalition and is a former House Commerce Committee chairman who oversaw securities laws.

In July, Wal-Mart applied in Utah to open an industrial bank to handle credit card and check processing. The FDIC is considering whether to grant Wal-Mart federal deposit insurance.

Industrial banks, also known as industrial loan corporations, were created at the turn of the last century to provide credit to low-income workers. They can offer loans and other banking services to their parent company's customers. Unlike commercial banks, they aren't regulated by the Federal Reserve.

FDIC spokesman David Barr said Monday that the agency was reviewing the application, testimony and comment letters. There were more than 4,000 such letters, and more than 70 people testified at the hearings, he said.