Will the FDIC shut Wal-Mart down?

by Christopher Menkin

Wednesday Leasing News wrote about the growing controversy about whether Wal-Mart would be joining the other 35 Industrial Loan Companies (ILC) located in Utah, which should be of interest as they have a “rental” and small “lease-to-own” program.

http://www.leasingnews.org/archives/February%202006/02-22-06.htm

New York U.S. Senator Hilliary Clinton requested a hearing be held on the issue as all industrial state banks are supervised and insured by the Federal Deposit Insurance Corporation (FDIC.)The U.S. corporation insuring deposits in the U.S. against bank failure. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices. The FDIC will insure deposits of up to US$100,000 per institution as long as the bank is a member firm.

Wal-Mart applied for insurance on July 19, 2005, through its Wal-Mart Bank, the proposed Industrial Loan Company, to be headquartered in Salt Lake City, Utah. The major concern being question is not regarding credit cards, or "rentals" or even "leasing," but opening branch offices. Wal-Mart says that is not its direction or intent, but the major banks that have opened offices in retail stores, including grocery stores, believe that it is Wal-Mart's long range plan to put them out of business in the retail story sector (the company says it is not, that it is competing with Target, and other retailers, such as Fry's Electronics, who utilize a credit card system through their "ILC."

The FDIC will hold hearings in Washington on April 10 and 11, from 9 a.m. to 5:30 p.m. Eastern Time each day. Another hearing, to be held in Kansas City, Mo., will be April 25 and 26, from 9:00 a.m. to 5:30 p.m. Central Time.

The FDIC states it is interested "...in obtaining the views of the general public, the financial services industry and other industry trade groups, public interest groups, state financial institution supervisors, other state authorities, and any other interested parties."

Wal-Mart has said it wants to process its own credit and debit applications by opening an industrial bank. Last fall, in reaction to criticism of the plan, the company pledged not to expand into branch banking, but lawmakers are questioning whether the federal government can permanently restrict the retailer from doing so.

Lawmakers and banks are concerned that Wal-Mart, with its size and unparalleled financial strength, could eventually open retail bank branches. Next may be a leasing company (look out GE Capital—Hold it, GE Capital supposedly slowing down small ticket leasing leaving market to Marlin, Microfinancial and IFC…maybe Wal-Mart knows what it is doing: Wal-Market Leasing—lowest leasing price!!!)