Wal-Mart Branches Into Mortgages

For Immediate Release
Thursday, May 11, 2006

Washington, D.C., Thursday, May 11, 2006 – Wal-Mart Watch Executive Director Andrew Grossman tonight issues the following statement in response to a Cox News Service report that Wal-Mart is seeking to hire a “senior manager” to oversee “new strategic initiatives” in the mortgage banking business.

“Today’s report is yet another instance of Wal-Mart misrepresenting their true intentions for their bank. For the second time this week, Wal-Mart’s actions have contradicted their testimony, and the FDIC should think twice about granting a banking charter to a company that won’t tell them the truth.”

Excerpts from the Cox story are below:

Wal-Mart Stores Inc. confirmed Thursday it is seeking a senior manager to oversee “new strategic initiatives” in the mortgage business, but said the move does not signal an expansion into retail banking. Some bankers, lawmakers and Wall Street analysts disagreed, saying they believe the executive search shows the retail giant is planning to move into full-service banking, despite promises to the contrary to federal regulators.

“This is the smoking gun. What more do you need?” asked Camden Fine, chief executive of the Independent Community Bankers of America. The trade group for small bankers is fighting Wal-Mart’s application to the Federal Deposit Insurance Corp. (FDIC) for permission to launch a small, special-purpose bank. Community bankers say Wal-Mart is being deceptive when it tells regulators it wants government-backed insurance only to operate a limited bank, known as an industrial loan company (ILC), to process its own stores’ credit and debit card and electronic-check payments…

“We are beginning to see a pattern of misleading or false statements from Wal-Mart with regard to their interests in branch banking,” Rep. Paul Gillmor, R-Ohio, said in a written statement Thursday. Gillmor, a member of the House Financial Services Committee, wants to restrain the proliferation of ILCs. “If true, reports of easy loopholes for Wal-Mart to escape from their lease agreements with in-store bank branches, and the news that Wal-Mart is actively recruiting mortgage and strategic banking specialists, make the need for FDIC scrutiny of Wal-Mart’s ILC application ever more important,” Gillmor said.

Fine, of the community bankers’ group, said he had a copy of the recruiting letter that laid out Wal-Mart’s specification for a senior manager with “broad financial services experience.” The letter, also obtained by Cox Newspapers, said the executive would have “direct contact” with Wal-Mart chief executive Lee Scott. Fine said he did not believe Wal-Mart would hire an executive to work directly with Scott if he or she were merely overseeing a minor employee benefit program. “They absolutely are laying the groundwork for a full-service banking operation,” he said.

Bart Narter, a senior banking analyst at Celent LLC, a Boston-based research and consulting firm, said Wal-Mart’s explanation for hiring a new executive to help with employee mortgages made little sense. “That’s an unusual benefit,” he said. “Providing better health care coverage is more common.”