Wal-Mart dropping bid to establish bank after months of debate

WASHINGTON — Wal-Mart Stores Inc. is dropping its bid to establish a bank after months of heated debate over whether the world's largest retailer should be allowed to gain the added financial power of a federally insured bank.

Wal-Mart announced Friday that it was withdrawing its application for a bank charter, which aroused widespread opposition from banks, lawmakers and consumer groups, and spurred debate within Congress and before the Federal Deposit Insurance Corp.

The FDIC was considering Wal-Mart's application to establish an industrial loan corporation, which is a limited-purpose bank for processing credit card and other payments.

Industrial banks have been proliferating in recent years — Target Corp., UnitedHealth Group Inc. and Harley-Davidson Inc. are among the nearly 60 that now exist. Critics say their growth dangerously blurs the line between banking and commerce, concentrating assets in the hands of a few big companies, stifling competition and hurting consumers.

News of Wal-Mart's decision came a day after details came to light of leases that Wal-Mart recently signed with banks that operate branches in hundreds of its stores, reserving the company's right to offer an array of future financial services in its stores. According to the lease terms, Wal-Mart can offer future services including mortgages, consumer loans, home equity loans, investment and insurance products and any other type of service or product that the company might develop.

The chairman of the FDIC, Sheila Bair, said the Bentonville, Ark.-based company's move to withdraw its application for a bank charter was "a wise choice."

"This decision will remove the controversy surrounding their intentions," Bair said in a statement.

Wal-Mart does not need to have the sort of bank in question "to play an important role in expanding access to financial services by partnering with banks and others," Bair said. "We look forward to working with Wal-Mart in meeting the need for low-cost financial services across all populations."

Wal-Mart's application to establish an industrial loan corporation based in Utah had prompted a firestorm of opposition from banks, unions, lawmakers, and consumer and community organizations.

Last April, groups representing those interests argued against granting the retailer's request at two public hearings, the first ever held by the FDIC on such an application.