Wal-Mart wants to create a bank subsidiary to cut costs of processing of credit card transactions. But
Opponents believe Wal-Mart intends to use its Utah bank to place branches in its thousands of stores and offer savings accounts, auto loans and other services that would harm community banks and credit unions in the same way that hardware and grocery stores are hurt when a Wal-Mart store opens in a small town.
Wal-Mart may "be poised to disrupt an entire $120 billion industry."
OH MY GOD! COMPETITION IS COMING! CIRCLE THE WAGONS!
I could just puke. Anti-corporate fanatics never cease to amaze me with how willing they are to sacrifice the consumers they allegedly represent in their war on capitalism.
And who are their staunchest allies? The incumbent corporations who'll gladly sleep with the enemy to limit competition.
The link to the story is dead now, so here it is:
Article Last Updated: 10/18/2005 07:04 AM
The Salt Lake Tribune
Wal-Mart plan could shake up bank industry Industrial banks: Widespread opposition may nudge Congress to shut them all down
By Steven Oberbeck
Wal-Mart has a reputation for driving mom-and-pop grocery, hardware and other small stores out of business, but in Utah the retailer may be poised to disrupt an entire $120 billion industry.
Wal-Mart's bid to open an industrial bank in Utah is drawing widespread opposition from consumer and financial groups nationwide - an outcry that could persuade Congress to shut down all federally insured banks owned by stock brokerages and retailers, most of which are incorporated in Utah.
"The industrial banking industry in Utah has operated relatively quietly and out of the limelight for years," said Matthew Lee, executive director of the New York City-based Inner City Press/Fair Finance Watch consumer group. "The last thing it needed was for some retailing behemoth to come in and demand access to the same loophole that everyone else enjoys."
Utah's industrial banking industry comprises more than 30 financial institutions with assets of more $120 billion, including such companies as Target, General Electric and Volkswagen. The banks allow companies to process their own credit card transactions and loans in-house, saving them millions of dollars.
Opponents believe Wal-Mart intends to use its Utah bank to place branches in its thousands of stores and offer savings accounts, auto loans and other services that would harm community banks and credit unions in the same way that hardware and grocery stores are hurt when a Wal-Mart store opens in a small town. Wal-Mart executives claim they have no such plans and only want to save money on the 140 million credit and debit card transactions carried out at the company's stores each month.
Still, in the two months since Wal-Mart filed its banking application in Utah, the Federal Deposit Insurance Corp. received more than 1,100 letters commenting on the application, according to Bloomberg News. The agency typically receives fewer than a dozen comments on new bank applications.
The Utah Department of Financial Institutions, which also must approve Wal-Mart's application, has yet to open its comment period.
The popularity of industrial banks can be traced to an exemption in federal banking laws enacted by Congress in 1987 that for the first time in decades gave stock brokerages, retailers and other commercial companies an easy way to own a federally insured bank.
Prior to that time, such companies were prohibited from owning banks because, it was believed, the 1929 stock market crash was brought about in part by bankers loaning money to investors so they could buy the very stocks that banks were peddling.
Likewise, under the 1987 law, Wal-Mart and other retailers could issue credit cards and loan money to consumers who would then buy goods from their stores.
Already there are rumblings in Congress that could make any Utah-based Wal-Mart Bank a short-lived financial institution. Last month, Rep. Jim Leach (R-Iowa) introduced legislation that would block commercial firms such as Wal-Mart from owning industrial banks and force those who already own them to get rid of their banks within five years.
And that could impact the owners of at least a dozen industrial banks in Utah.
In addition, the Government Accountability Office released a report that recommended Congress consider strengthening the regulatory oversight of industrial banks and seriously consider whether there are any advantages to mixing banking and commerce.
"With Wal-Mart on the scene, pressure is increasing with every step for Congress to do something to rein in industrial banks," said Ron Ence, director of legislative affairs for the Independent Community Bankers of America. "Over the long run, industrial banks as we know them could very well cease to exist."
Wal-Mart executives hope it doesn't come to that.
"All we're after is a fair hearing on our bank application," Wal-Mart spokesman Marty Heires said. "And we're just going to have to wait and see how the public debate ends."