The Bank of Wal-Mart?

The Bank of Wal-Mart sounds like something from an episode of The Simpsons, but it may soon be a reality. The company has applied to the Federal Deposit Insurance Corporation (FDIC) for insurance for a proposed bank in Utah, one of the few states that allows commercial firms to operate banks.

Meanwhile, Utah is reviewing Wal-Mart's application for a bank charter. A coalition of labor unions, community groups, small bankers and other Wal-Mart critics has been urging the FDIC to hold hearings around the country before deciding the merits of Wal-Mart's application, and to compel Wal-Mart to disclose more information on how its new enterprise would affect local economies.

The small bankers also worry that the Wal-Mart bank, though based in Utah, could begin operating chapters in other states, threatening local lending institutions nationwide. And they worry about mixing commerce and banking. "If I'm the Wal-Mart Bank, how enthusiastic am I going to be about lending money to Wal-Mart's competitors?" asks Steve Verdier, senior vice president of the Independent Community Bankers of America. Even apart from the fair competition issues, he thinks, Wal-Mart's bank could wreak havoc on the economy: "Just think if Enron had opened a bank."

Verdier admits that while there are other principles involved, his group opposes Wal-Mart's charter mainly "because it's Wal-Mart. The way they operate is pretty aggressive." Labor and community groups have pointed out that given Wal-Mart's history of breaking labor and sex discrimination laws, there is little reason to think that Wal-Mart would obey banking laws. The company's past attempts to operate banks in California, Oklahoma and Toronto have all been rejected by government regulators.

Community advocates like ACORN are particularly troubled that Wal-Mart is trying to exempt its Utah bank from the Community Reinvestment Act, which requires financial institutions to make credit available in the low- and moderate-income communities in which they operate, and has sometimes been a genuine impetus to economic development in poor neighborhoods. You'd think a company trying desperately to become black America's new best friend wouldn't be trying to get out of its minimal legal obligations to poor communities of color.

There's a chance that the Bank of Wal-Mart can still be defeated, as it has been in the past. Wal-Mart Watch is circulating an online petition to the FDIC.

The FDIC recently extended the public comment period, from late August to September 30, in response to a high volume of feedback on Wal-Mart's proposal. So maybe they're listening.

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