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ARLINGTON, Va. -- The latest move to stop Wal-Mart from entering the banking business comes from within the supermarket industry. The National Grocers Association has submitted a statement to the Federal Deposit Insurance Corporation (FDIC), in preparation for testimony to be delivered on April 10 by Thomas F. Wenning, s.v.p. and general counsel of NGA.
"[Wal-Mart's] application raises important public policy questions and serves to focus the growing debate on the proper scope of Industrial Loan Companies (ILCs) and the recent review by federal agencies and Congress," said Wenning in the statement. "The FDIC should deny the application so Congress can exercise its authority to close the loophole for ILC interstate branch banking, and decide the future direction of ILCs and our nation's financial system."
Wal-Mart recently applied for FDIC insurance and a Utah charter as an Industrial Loan Company (the Wal-Mart Bank). NGA and other opponents note that Wal-Mart could modify the bank's application or charter in the future, so it could engage in interstate branch banking in Wal-Mart stores, which currently would be allowed in at least 22 states through the ILC loophole, according to NGA.
The Federal Reserve Board has maintained that Congress should not grant branching authority to ILCs unless the corporate owners of these institutions are subject to the same type of consolidated supervision and activities restrictions as the corporate owners of other full-service insured banks, according to NGA. In September 2005 the U.S. General Accountability Office advocated that ILCs, and their holding companies, be regulated in a similar manner as other insured depository institutions and their holding companies. Wal-Mart and its bank would not be subject to the same regulatory supervision under current law, reasons NGA.
"NGA strongly agrees with Federal Reserve chairman Bernanke, former chairman Greenspan, the Federal Reserve Board and the U.S. General Accountability Office on the need to preserve the federal safety net that supports our banking system and to assure a level playing field," said Wenning.
For more than three years, NGA has supported bipartisan legislation, co-sponsored by Representatives Paul Gillmor (R-OH) and Barney Frank (D-MA) that passed the House of Representatives, as a first step for Congress to limit the ILC loophole so commercial companies that establish ILCs do not engage in interstate branch banking and offer demand deposits without appropriate and consolidated supervision.
In addition, Gary Phillips, president and c.e.o. of Associated Wholesale Grocers, Inc. and N.G.A.'s immediate past chairman, will testify at the FDIC in Kansas City, Mo. on April 25 to recommend the FDIC deny the application until Congress acts.
NGA is a member of the Sound Banking Coalition, along with the National Association of Convenience Stores, Independent Community Bankers of America, and the United Food and Commercial Workers. The coalition calls itself "a group of concerned organizations that have come together to try to close the industrial loan company loophole to protect consumers and businesses against the competitive problems and the threat to FDIC insurance posed by ILCs."