A stream of officials from the banking industry, unions and consumer groups — allies for once — urged federal regulators yesterday to reject a bid by Wal-Mart Stores Inc. to expand its empire into the banking business.
A company official, meanwhile, assured the Federal Deposit Insurance Corp. that the nation’s largest retailer had no plans to compete with community banks, including branches within its megastores.
The first day of the unprecedented FDIC public hearings on a bank application drew a wave of opposition to Wal-Mart. Among the protesters: officials of trade groups representing banks of every type and size; unions; lawmakers; consumer and community organizations; and associations of convenience stores, grocers, retailers, real estate agents and farmers.
Wal-Mart’s bid for federal deposit insurance for a state-chartered bank in Utah — which would handle the 140 million credit-card, debit-card and electronic-check payments the company processes each year — is just the camel’s nose under the tent flap, the critics said. It would be counter to the company’s nature to refrain from expanding into full-scale banking with retail branches that would destroy local banks.
The lone Wal-Mart executive who testified — Jane Thompson, president of Wal-Mart Financial Services — insisted that the $250-billion-a-year retailer is a good corporate citizen in the communities where it operates, pays its employees fair wages and complies strictly with laws and regulations.
The company says consumers and banks have nothing to fear and is pledging to stay out of branch banking and consumer lending. About 300 institutions operate branches in 1,150 Wal-Mart stores, and the company says it doesn’t want to compete with them.
“Wal-Mart is absolutely and unequivocally committed not to engage in branch banking,” Ms. Thompson told FDIC Chief Operating Officer John F. Bovenzi and two other agency officials, seated at a dais in an Arlington auditorium before about 70 people.
By handling its own payment processing, Wal-Mart would save the fraction of a penny per transaction it pays two large banks for the service, adding up to millions of dollars a year.
The regulators probed with questions but gave no indication of a position on Wal-Mart’s bid.
The Bentonville, Ark., company already is too big, opponents say, with 3,900 stores nearly saturating the U.S. market and unrivaled dominance — accounting for an estimated 10 percent of the U.S. retail economy. That means a Wal-Mart bank could pose a risk to the country’s financial system and to taxpayers, they say.
“Given Wal-Mart’s massive scope and international dealings, it is not possible to rule out a financial crisis within the company that could damage the bank and severely disrupt the flow of payments throughout the financial system,” said Rep. Stephanie Tubbs Jones, Ohio Democrat, who heads a group of lawmakers opposed to the company’s application. “The potential losses to the FDIC are staggering. Our country is extremely fortunate that Enron and WorldCom did not own banks.”
A few witnesses spoke in Wal-Mart’s favor: officials of the American Financial Services Association, which represents credit-card issuers and other consumer lenders, and the Salvation Army and the National Center for Missing and Exploited Children.
Supporters say a move by Wal-Mart into banking would benefit consumers by lowering fees and prices in an industry needing more vigorous competition.
Nearly 70 witnesses are testifying in FDIC hearings yesterday and today in Arlington and on April 25 in Overland Park, Kan. The agency has not set a deadline for a decision.
An unprecedented outpouring of 1,900 comment letters to the FDIC, most opposed to the application, prompted the agency to hold the hearings.