Wal-Mart Bank Plan Faces New Hurdles
WASHINGTON — Wal-Mart Stores Inc. faces new hurdles in its bid to open a bank as resistance mounts among members of Congress and the Federal Reserve to allowing the world’s biggest retailer to start even limited financial operations.
In recent days, the Federal Deposit Insurance Corp., which is reviewing Wal-Mart’s application, said it would probably call a public hearing on the company’s bid -- the agency’s first formal hearing ever on a new bank application.
Federal Reserve Chairman Alan Greenspan also chimed in, urging Congress in a Jan. 20 letter to close what he called a loophole in U.S. law that allows corporations to own banks but avoid a level of federal supervision.
Rep. Spencer Bachus (R-Ala.) plans a hearing in the House on industrial banks, and some lawmakers are expected to propose legislation that may limit nonfinancial companies’ ability to get into banking activities.
Industrial banks are state-chartered and state-regulated and fall under the supervision of the FDIC. Federal laws that bar nonfinancial companies from engaging in banking activities do not classify commercial companies as banks.
Wal-Mart said it applied to open an industrial bank in Utah to handle electronic payment processing.
In his letter to Rep. Jim Leach (R-Iowa), Greenspan said Congress should review the statute that allows companies to own banks.
The Fed chief said the character, powers and ownership of industrial banks had changed “materially†since Congress first enacted the exemption from U.S. law that allows unregulated companies to buy insured banks for limited purposes.
Wal-Mart said Thursday that Greenspan’s letter was about the broader issue of industrial banks, and not its bank application.
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