A cadre of bankers, public officials and retailers argued that even though Wal-Mart says it won't create retail bank branches offering loans and accounts, the company can't be trusted.

"Don't believe it," Rep. Stephanie Tubbs Jones, D-Ohio, said Monday before a panel of FDIC officials during the first of three public hearings on granting Wal-Mart taxpayer-guaranteed deposit insurance.

The world's largest retailer has a history of using its size to "elbow competitors out of the way" and shouldn't be allowed to enter another industry, Jones added. "The people of America would be disappointed if you approve this application."

Wal-Mart countered that it has no plans to compete with retail banks and its application to run a bank in Utah is geared simply to process its 140 million annual debit- and credit-card transactions, and to pass that savings on to customers.

"The most important message is Wal-Mart is absolutely committed not to engage in branch banking," said Jane Thompson, president of Wal-Mart's financial services division. "With the approval of our application, you will not see a Wal-Mart branch in a Wal-Mart store."

Utah is one of a handful of states that allow what's known as industrial loan corporations. Retailer Target already runs an industrial loan corporation in Utah, and Wal-Mart's application is pending before Utah regulators.

The bank's application before the FDIC drew an unprecedented amount of public interest, more than 2,000 written comments and a litany of groups seeking to speak during the hearings. Much of the opposition has centered on fear of Wal-Mart ravaging the field of branch banking.

"I think that sometimes what we are looking at here is a race to the bottom," said Terry Jorde of the Independent Community Bankers of America.

Jorde took aim at Wal-Mart's plan to keep $125 million in capital on hand in case of problems. Given that Wal-Mart processes $170 billion in credit and debit transactions a year, $125 million is a pittance, she argued.

If her bank did that many transactions with only that much cash on hand, "you guys would shut us down within the hour," she said. "Beware of this modern-day Trojan horse."

Fending off questions about charges of unethical and illegal action, Wal-Mart's Thompson said the company is large and has been sued over various issues, but that, "we feel that we are upstanding citizens in the community."

Robert E. McKew of the American Financial Services Association also defended Wal-Mart's application, saying opposition is mainly misplaced fear of what an industrial loan bank is.

Generally if you can provide a consumer service that [offers] a lower price, I think that we should take a close look at mechanisms that can accomplish that," he said.

Former U.S. Sen. Jake Garn of Utah testified at the hearing representing the Utah Association of Financial Services, saying it was unfair to attack the industrial banks. "We believe these attacks are misleading, poorly reasoned and politically motivated," Garn said.

Garn let loose during questioning, saying, "I wish [Wal-Mart] had never filed an application" because of the unfair attacks it has generated.

Far more speakers feared the slippery slope of allowing Wal-Mart to run a bank. The company, many noted, has unsuccessfully tried three times to start banks.

"This isn't about spreading capitalism, this is about spreading monopolization," said John Taylor, president of the National Community Reinvestment Coalition.

tburr@sltrib.com