ICBA - Advocacy - Keep Wal-Mart Out of Banking

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Last update: 09/02/10

Keep Wal-Mart Out of Banking

Close the ILC Loophole: Co-Sponsors Needed For H.R. 698
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What has happened?
Wal-Mart has applied for an industrial loan company charter in Utah. This is Wal-Mart's fourth attempt to enter banking. Utah is one of just 5 states that issue this type of state banking charter.
What is unusual about an ILC?
Commercial companies like Wal-Mart can own an ILC. Most ILCs now operating have limited activities, though one ILC holds more than $60 billion in consumer deposits. ILC assets have grown over 3,500 percent, from $3.8 billion in 1987 to more than $140 billion last year.
What are Wal-Mart's plans?
Wal-Mart says its ILC will have only "back office" functions, but there is no way to guarantee that the Wal-Mart Bank will stick to that plan; it could eventually branch into more than 20 states and gather consumer deposits. Wal-Mart's CEO stated that its next major growth area was financial services.
Where does Wal-Mart's application stand?
The FDIC is considering its application for federal deposit insurance. The FDIC may rule early in 2006.
What are the problems with a "Wal-Mart Bank?"
- A Wal-Mart Bank would create a dangerous concentration of commercial and financial power.
- Wal-Mart Bank could take capital out of local communities and refuse to make loans to local businesses.
- Wal-Mart has requested its ILC be exempt from the Community Reinvestment Act.
- Wal-Mart Bank would pose a serious threat to drive community banks out of business, like they have done to local grocery stores, drug stores, hardware stores, etc.
- No bank regulator would oversee Wal-Mart corporation, unlike other companies that own banks, so any problems with Wal-Mart could flow downstream and hurt the bank.
- Wal-Mart Bank will be directly connected to the payments system, which handles 81.2 billion consumer and business transactions ($822 trillion) each year.
- 70% of the products sold by Wal-Mart are made in China. Wal-Mart can be acquired by China or any other entity.
  Just think if Enron had owned a bank. Losses to the FDIC, consumers, and businesses could have been added to employee and stockholder losses.
What can you do about Wal-Mart's bank application?
- Write to the FDIC and urge the agency to reject Wal-Mart's application for deposit insurance.
- Urge your Representative to co-sponsor H.R. 698, the Industrial Bank Holding Company Act of 2007, legislation that would close the ILC loophole by putting ILCs parent companies under the supervision of the Federal Reserve. That way, no new commercial firm will be able to acquire or establish an ILC.


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