From Deseret News archives:
Wal-Mart bank bid is on life support
The retailing giant applied for an industrial-bank charter in Utah — the same type of permit the state had already given to many companies including Volkswagen AG, Pitney Bowes Inc. and even another big retailer, Target Corp. The Federal Deposit Insurance Corp., which insures deposits at banks, had blessed similar applications with nary a protest letter. To allay fears that it would compete with small banks, Wal-Mart promised not to open retail branches, saying it would use its bank to process card transactions.
Now, Wal-Mart's banking bid is on life support. The FDIC in July issued an unprecedented six-month moratorium on all applications for these specialized banks, freezing Wal-Mart's effort. Utah, which also must approve the application, has stayed mum. Powerful members of Congress are lining up to pass laws that would block Wal-Mart, or any nonfinancial company, from getting into the U.S. banking business.
That's bad news for the world's biggest retailer, which is already facing slowing growth in the U.S. and has stumbled in several overseas forays. It also affects 11 other companies that have applied for the type of permit Wal-Mart is seeking, including Home Depot Inc., DaimlerChrysler AG and Ford Motor Credit, part of Ford Motor Co.
Wal-Mart's effort to open a bank has galvanized a broad coalition of opponents: large banks, small banks, the Federal Reserve, unions, grocers, real-estate agents and congressmen of both parties. Some in the coalition are mainly interested in dealing a blow to Wal-Mart. Others are worried about the trend of allowing commercial companies into banking, which they fear could undermine the soundness of the financial system. That argument has been around for years, but it generated little political heat until Wal-Mart came along — illustrating the power of the company's name to transform stalemated policy debates.
Wal-Mart believes its intentions are being twisted by its foes. People who claim Wal-Mart intends to open branches and compete with hometown banks for deposits "are simply misinformed or just wrong," says a spokesman. The Bentonville, Ark., company also says its bank, by focusing on processing credit- and debit-card transactions, would cut costs and lead to savings for consumers. Currently Wal-Mart must pay fees to other banks to process transactions.
