In its letter, Wal-Mart argued that "the FDIC and the State of Utah have a long track record of successfully supervising ILC organizations in a manner that is comprehensive, effective and tailored to the facts and circumstances posed by a particular organization."

"The FDIC is not writing on a clean slate," the letter says. "There is ample history upon which the FDIC can rest its judgments, much of it in the FDIC's own files. Indeed, to reiterate, ILC opponents have raised no new substantive issues nor asserted facts or suggested analysis which undermines past conclusions.

"We believe that history demonstrates that depository institutions owned by or affiliated with commercial enterprises have not posed unusual risks, have an enviable track record of safe and sound operations, and have provided substantial public benefits," the letter says.

The American Bankers Association expressed concern about the Wal-Mart Bank application, but in its letter to the FDIC it urged the agency to let Congress deal with it.

"The flexibility of the ILC charter has made it an attractive vehicle to serve the business needs of a wide range of entities, many of whom engage in non-financial commercial activities," ABA director Mark J. Tenhundfeld wrote. "While this is a perfectly legal and logical development given the laws in place, it stands the basic 'source of strength' doctrine — where companies owning banks serve as sources of strength to the banks, not vice versa — on its head.

"It also has serious implications for the continued effectiveness of the barrier between banking and non-financial commerce. As such, we believe it is appropriate for Congress to revisit the question of whether ILCs should remain outside a system that subjects owners of other types of insured depository institutions to consolidated supervision and regulation."

The Independent Community Bankers of America, a Washington- based industry group, called on the FDIC to extend its moratorium beyond Jan. 31, 2007, to give Congress time to act on the issue. Legislation is pending that would ban commercial ownership of industrial banks.

The group, the most vocal opponent of commercially owned industrial banks, also urged the FDIC to hold another public hearing.

Bert Ely, a banking consultant based in Alexandria, Va., said Wal-Mart's letter lays out the kinds of arguments the retailer may eventually make in court. "What you are seeing is a draft of a legal brief that would be filed if the FDIC rejects the Wal-Mart application," Ely said.

Leary, the Utah financial services commissioner, said of the banking/commerce issues: "I think it's fair to say that the law as it is currently written does not reflect that concern.

"I understand why (the FDIC) would want to stop and take a look and solicit comments, but at the end of their deliberation, I think that they should conclude that ILCs are operating properly and in accordance with current law," Leary said.

As for when the department will rule on the bank's application, "We'll accept it when it is complete," Leary said. "From there, we'll proceed."

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Contributing: Bloomberg News.

E-mail: jnii@desnews.com