Community Bankers Association of Illinois

CONGRESSMEN JOIN CHORUS AGAINST WAL-MART APPLICATION
04/11/06

A bipartisan group of U.S. congressmen has asked regulators to deny Wal-Mart's bank application, the latest push from some on Capitol Hill to oppose the bid as public hearings near.

The House members, in a letter to the U.S. Federal Deposit Insurance Corp. obtained by Reuters say that due to Wal-Mart's scope and international dealings, financial problems within the company might damage the bank and disrupt the U.S. payments system.

The letter is similar to other congressional correspondence on the application, raising concerns about the lack of full bank regulatory oversight and the risk of loss to the federal deposit insurance fund. "Without proper regulatory oversight, an industrial bank owner may put the solvency of both the bank and parent at risk," writes the group of more than 39 congressmen, including Ohio Republican Reps. Paul Gillmor and Steven LaTourette and Democratic Rep. Luis Gutierrez of Illinois.

Industrial banks are state-chartered and state-regulated, and fall under the supervision of the Federal Deposit Insurance Corp. (FDIC). Commercial companies may own them because federal laws that bar non-financial companies from engaging in banking activities do not classify industrial banks as banks.

But after the Federal Reserve raised concerns that commercial owners of industrial banks escape a level of federal bank supervision, those opposing Wal-Mart's bid began questioning whether that lack of full oversight could allow troubles within the company to bleed into the bank's business and disrupt the payments system. CBAI has filed comments with the FDIC opposing the application and has prepared written testimony for the upcoming hearings.

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