The Federal Deposit Insurance Corp., which regulates and provides deposit insurance for industrial banks, is scheduled Jan. 31 to lift its self-imposed six-month moratorium on deposit insurance applications.
If and when the moratorium is lifted, Wal-Mart and such companies as DaimlerChrysler and Home Depot should have a sense of whether they can proceed with plans to get into the industrial banking business.
Wal-Mart said it respected the FDIC's decision to impose the moratorium to give it time to consider the issues surrounding industrial banks, which also are known as industrial loan corporations, or ILCs.
"And we now look forward to a decision on our application as the [FDIC] board concludes its examination of the issue," Wal-Mart spokesman Kevin Gardner said.
The FDIC adopted its moratorium last July just days after a coalition of 32 national groups, including the American Bankers Association and the AFL-CIO, wrote Congress asking members to step in before the FDIC acted and block Wal-Mart's application. Those groups argued that letting nonfinancial companies operate industrial banks could harm community-owned banks in much the same way that mom-and-pop retailers are hurt whenever Wal-Mart opens in a small town.
In explaining its actions, the FDIC stated it adopted the moratorium to "provide time to assess developments in the ILC industry, to determine if any emerging safety and soundness or policy issues exist" and evaluate whether laws or policies need to be changed.
Industrial banks were authorized under an exemption in federal banking laws in 1987. For the first time, stock brokerages, retailers and other commercial companies had an easy way to own a federally insured bank. Such banks can issue credit cards, take deposits and make loans. For individual consumers, about the only thing they can't do is offer standard checking accounts if their assets exceed $100 million.
Utah is home to 34 active ILCs, or about half of all ILCs in operation.
Nu Wexler, a spokesman for Wal-Mart Watch, which has long opposed Wal-Mart's efforts to get into banking, said he is certain the company is eager for the FDIC act.
"Clearly the political landscape has changed drastically for Wal-Mart," Wexler said. "They're now are dealing with [Massachusetts Democrat] Barney Frank as the chairman of the House Financial Services Committee, which is something they probably hoped would never happen."
Frank has been an outspoken critic of Wal-Mart's application and the commercial ownership of industrial banks. He contends that allowing them to operate threatens the long-standing national policy of separation of banking and commerce.
Early last month, Frank and Rep. Paul Gillmor, a Republican from Ohio, sent a letter to the FDIC asking it to extend the moratorium to give Congress time to address the regulation of ILCs.
The FDIC board will be meeting in the next couple of weeks, before the moratorium expires. "Everything will be on the table for discussion," FDIC spokesman David Barr said.
He said FDIC Chairwoman Sheila Bair has indicated she wants to make a decision this month. "And she also has indicated that she believes that those [companies] affected by the moratorium deserve an answer" on their applications.
Utah Department of Financial Institutions Commissioner Ed Leary said the state has yet to accept Wal-Mart's application as complete, which means that it may still have questions about the company's plans.
steve@sltrib.com
