The Bank of Wal-Mart?

Hillary Wicai Mar 15, 2007

KAI RYSSDAL: Wal Mart’s been trying for years to start a bank. And for years federal regulators have said nuh-uh. The company maintains it just wants to save money by processing its own credit card payments. It’s applied more than once for limited banking licenses. But there’s been a lurking suspicion among some that that would just be a front to get into retail banking. Wal-Mart’s been consistent in its denials. But Marketplace’s Hillary Wicai reports one congressman says he’s found what looks like a paper trail.

HILLARY WICAI: Republican Rep. Paul Gillmor of Ohio got a copy of an e-mail that he says concerns him. It was sent by a Wal-Mart executive to some of the banks leasing store space from the retailer.

The e-mail states Wal-Mart reserves the right to offer financial services like mortgages and loans. Congressman Gillmor believes Wal-Mart is crossing a line by engaging in both commerce and banking.

PAUL GILLMOR: What we revealed this morning was very clear evidence that Wal-Mart’s statements have been dishonest and deceptive and that they do have clear plans to go into nationwide banking as soon as they can.

A Wal-Mart spokesman wouldn’t comment on tape, but said as far as Gillmor, nice noise, no news.

Gillmor is co-sponsoring legislation that would prevent Wal-Mart and others from starting Industrial Loan Corporations. Gillmor should know banking: his father started one and the congressman has been on that bank’s board since 1967. But banking consultant Bert Ely says the stuff in Wal-Mart’s lease language isn’t banking.

BERT ELY: The key to banking is taking deposits. There is nothing in here that talks about the taking of deposits.

Peter Wallison with the American Enterprise Institute says even if it walks like a bank and quacks like a bank, and even if Wal-Mart has its ILC application approved, it’s still not banking.

PETER WALLISON: Their ILC application would not entitle them to take deposits. They’re only asking for the ability to transfer data, to transfer credit card charges back and forth.

The House Financial Services Committee is preparing for a hearing next week on the issue.

In Washington, I’m Hillary Wicai for Marketplace.

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