The Bank of.... Wal Mart??

This nation is in trouble when retail giants like Wal-Mart try to set up their own bank. Even Federal Reserve lackey Alan Greenspan objects!

Wal-Mart maintains bank hopes despite Greenspan
By Lorrie Grant, USA TODAY
Fri Jan 27, 7:10 AM ET

Wal-Mart Stores remained confident Thursday about its effort to form a special type of bank, despite an appeal by Federal Reserve Chairman Alan Greenspan for changes in the law allowing commercial entities to own such banks.

In a letter released late Wednesday, Greenspan urged Congress to close a regulatory loophole that lets businesses own an Industrial Loan Corporation (ILC), a type of bank operated for specific purposes, such as processing payments.

"Chairman Greenspan's lengthy letter is about the broader issue of regulation of Industrial Loan Corporations. We look forward to the (Federal Deposit Insurance Corporation) public hearing on our application to operate an industrial bank in Utah," says Wal-Mart spokesman Marty Heires.

The 12-page letter, responding to an inquiry from Rep. James Leach, R-Iowa, of the House Financial Services Committee, does not single out Wal-Mart. It raises concerns about regulation of all such banks, noting Wal-Mart's application, but also noting ILCs already are operated by companies including General Motors and General Electric.

The parent of a chartered bank must register as a bank holding company, which are regulated by the Federal Reserve. ILCs aren't defined as traditional banks, and the parent is exempt from Fed oversight, though the FDIC oversees applications and insures them. ILCs' combined assets have grown by more than 3,500% from $3.8 billion 1987, when the current rules were set, to $140 billion in 2004, Greenspan says in the letter.

Wal-Mart has said it wants to form an ILC to process the 140 million credit, debit and electronic check payments it gets monthly.

Wal-Mart's FDIC application has gotten more than 1,500 comments, mostly from opponents ranging from small banks to unions. Many welcomed Greenspan's letter.

"If they get their hands on an ILC and get into financial trouble, they could swamp the FDIC fund, and we could have a repeat of the savings and loan collapse," says Camden Fine, CEO of the Independent Community Bankers of America.

"The so-called Bank of Wal-Mart has been dealt another heavy blow," says union-backed Wal-Mart Watch.

The letter might affect Wal-Mart's application by flushing out the larger issue, says Edward Yingling, American Bankers Association CEO. He says the wall between banking and commerce had a small and somewhat inconsequential crack that has grown with more ILCs. Wal-Mart's application might spur action, he says. "We're at a point where if policymakers (regulators and Congress) don't act, you run a real risk that the wall will crumble," Yingling says.