FOR IMMEDIATE RELEASE
ICBA Asks FDIC to Reject Wal-Mart Application
Requests a Public Hearing for Full Airing of Issues
Washington, D.C. (August 18, 2005) - The Independent Community Bankers of America (ICBA), independently and as part of the Sound Banking Coalition, asked the FDIC to reject Wal-Mart's application to own and operate an industrial loan company (ILC) in Utah.
In a joint letter, ICBA and the coalition of financial, retail and labor groups asked for a public hearing since "concerned taxpayers, consumers, small businesses and bankers should be entitled to present facts concerning the destructive impact that a Wal-Mart industrial bank would have on the convenience and needs of their communities."
Wal-Mart's application is particularly troublesome, the letter says, not only because Wal-Mart is the largest commercial company in the country, but because "The mixing of banking and commerce that would occur if Wal-Mart owned a bank as well as the lack of consolidated supervision of the bank by the Federal Reserve Board threaten some of the basic underpinnings of banking regulation in the United States."
The letter says the application should be denied because if granted an ILC, Wal-Mart could establish banks in its retail stores, causing competitive problems for local bankers in much the same way that it has for local retailers. "An industrial bank charter would give Wal-Mart the opportunity to destroy local banks much as it has destroyed other local businesses such as grocers, pharmacists, and florists," the letter continues. "If competitor banks are destroyed, surviving local businesses would be forced to go to their biggest competitor for deposits and loans, providing Wal-Mart with an even greater competitive advantage and creating a nightmare scenario which is a key reason for the longstanding U.S. policy prohibiting the mixture of bank and commerce."
Citing the risk that a Wal-Mart bank poses to the Bank Insurance Fund, local communities, as well as concerns about Wal-Mart's legal and ethical problems and management character and fitness, the letter asserts that "A Wal-Mart bank is simply a risk that United States tax payers should not be forced to take."
ILCs are hybrid FDIC-insured financial institutions, chartered by a handful of states, that are exempt from the Bank Holding Company Act. ICBA strongly believes that ILCs constitute a dangerous loophole in this longstanding federal law that prohibits commercial firms from owning banks and keeps banking and commerce separate. The Sound Banking Coalition has been working to close the ILC loophole to keep big-box stores, like Wal-Mart, out of the banking business. Mixing banking and commerce would produce an excess concentration of economic power, jeopardize the impartial allocation of credit, and inappropriately extend the Federal safety net to commercial firms. It also poses serious competitive issues for local merchants, including community banks.
In addition to ICBA, members of the Sound Banking Coalition include the National Association of Convenience Stores, the National Grocers Association and the United Food and Commercial Workers International Union.
View the joint letter and ICBA's letter at www.icba.org in the News and Media Center under "Letters to Regulators."