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Business Checking Bill Imperiled by Wal-Mart

WWR ARTICLE
MAY 31, 2002

 

BUSINESS CHECKING BILL IMPERILED BY WAL-MART

Wal-Mart Stores, Inc.-whose attempt in 1999 to purchase a unitary thrift crystallized the dangers of mixing banking and commerce and helped galvanize the political support needed to close the unitary thrift loophole-is at it again. This time Wal-Mart has set its sights on a tiny $2.4 million asset California industrial loan bank, Franklin Bank, which it says it will use to help reduce its check clearing and debt processing costs. But skeptics see this as another attempt by Wal-Mart to expand into financial services.

This latest Wal-Mart gambit puts at risk legislation-passed twice in the House and pending before the Senate-that would permit banks to pay interest on commercial checking accounts. Why? Because Senator Robert Bennett (R-UT) is insisting that industrial loan companies be accorded these new powers, while Senate Banking Committee Chairman Paul Sarbanes (D-MD), probably supported by the Federal Reserve System, is loath to give companies who can be acquired by the likes of Wal-Mart such new banking powers. At this time, neither side gives any indication they are inclined to blink.

Wal-Mart's proposed acquisition of Franklin Bank must be approved by California regulators as well as the FDIC. The Federal Reserve does not have the authority to regulate any such emerging hybrids.

The ICBA strongly supports Chairman Sarbanes, who for years has been on point in preventing commercial firms from buying banks. And anyway, community bankers are split on the wisdom of lifting the prohibition on paying interest on business checking.






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