New banking bill aims to stifle Wal-Mart’s ILC bid

From Bloomberg:

Wal-Mart Stores Inc. would have to abandon its bid to operate a bank under the provisions of a bill introduced today in Congress.

Legislation proposed by U.S. Representatives Barney Frank and Paul Gillmor would ban non-financial companies seeking charters from operating industrial banks and stop current industrial banks from expanding their services. The Massachusetts Democrat and Ohio Republican are the senior members of the House Committee on Financial Services.

Wal-Mart and Home Depot Inc. are among 13 non-financial companies with bank applications pending, say Frank and Gillmor. Opponents say companies that operate their own banks, known as industrial banks or industrial loan corporations, can’t make disinterested lending decisions.

``There is ambiguity in banking policy, and retailers are exploiting a loophole,’’ said Steve Adamske, a spokesman for Frank.

Wal-Mart is especially disappointed by the introduction of the bill, having expected its bid for an industrial loan corporation (ILC) to pass easily.

The retailer applied a year ago to operate a bank in Utah to process credit-card and debit-card payments. Its bid generated a record 4,000 comment letters to the Federal Deposit Insurance Corp., which is considering whether to grant deposit insurance. That prompted the FDIC in April to hold its first- ever public hearings on a bank application.

``The purpose we’re all very concerned about is do they really want to get into retail banking,’’ said Steve Verdier, director of congressional affairs for the Independent Community Bankers of America in Washington.

• Click here to learn about Wal-Mart and ILCs.

• Click here and here to see what Reps. Frank and Gillmor are doing to stop the Bank of Wal-Mart.

Posted by Laura Jack on Tuesday, July 11, 2006

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