CALIFORNIA FIGHT TO KEEP WAL-MART FROM OWNING A BANK GOES DOWN TO THE WIRE
An application from Wal-Mart is pending before the California Department of Financial Institutions to purchase an industrial bank.
This is yet another chapter in Wal-Mart's attempt to buy its way into the banking business. Another attempt to exploit a loophole in existing law. A crucial link in the Wal-Mart game plan to undermine banking's control of and fee income from the payments system. Another step toward its goal of enhancing the current competitive advantage it holds over small retailers by offering in-house lines of credit to Wal-Mart shoppers.
Just as the U.S. Congress, with full ICBA support, closed the unitary thrift loophole, a concerted effort is being made in the California legislature to close the industrial bank loophole. This remarkable effort in the last week of California's legislative session is strongly supported by the California Independent Bankers. On Tuesday, the California Senate Banking Committee passed out AB 551, which would prohibit Wal-Mart from buying an industrial bank. On Wednesday the California Senate Appropriations Committee followed suit.
At press time the bill was headed for the California Senate floor. If it passes the Senate, despite frantic opposition from Wal-Mart, including substantial campaign contributions, Assembly Banking Committee chairman Lou Papan is primed to do everything possible to move the bill through the Assembly. If this remarkable legislative achievement can be pulled off, California's governor is expected to sign the bill.
Separately, Wal-Mart's efforts in the courts to undermine the Visa payments system threaten the extension of credit to consumers by banks.