Federal Deposit Insurance Corporation (FDIC) chairman Sheila Bair said Wal-Mart Stores Inc. made a "wise choice" in withdrawing its 2005 application to operate an industrial loan corporation (ILC), a form of bank, from the FDIC.
Wal-Mart the application was surrounded by "manufactured controversy" over its bid to acquire its own bank, bizjournals.com reported.
"This decision will remove the controversy surrounding their intentions," Bair said. "They don't need an ILC to play an important role in expanding access to financial services, they can do so by partnering with banks and others. We look forward to working with Wal-Mart in meeting the need for low-cost financial services across all populations,â bizjournals.com reported.
"This action follows January's FDIC decision to extend the moratorium on a number of pending ILC applications," said Jane Thompson, Wal-Mart Financial Services president, bizjournals.com reports. "At no stage did we intend to use the ILC to establish branch banking operations as critics have suggested. We simply sought to reduce credit and debit card transaction costs."
Wal-Mart's announcement came one day after Rep. Paul Gillmor of Ohio, a Republican member of the House Financial Services Committee, released an e-mail that showed Wal-Mart was renegotiating leases with banks that operate branches inside Wal-Mart stores to preserve the retailer's right to offer a range of financial services, including mortgages and loans, the AP reported. Wal-Mart said those lease terms were nothing new. Rep Gilmore accused Wal-Mart of "a pattern of deception and dishonesty" about its intentions.
Thompson described the revision as a âone word changeâ, the Wall Street Journal reported, saying that Wal-Mart Financial Services had considered dropping the application in January when the FDIC extended the moratorium on ILC applications for a year. âProbably 5 percent of what we did had to do with the bank, but it was getting 200 percent of the noise. We just want to put the noise behind us.â
Wal-Mart's critics, especially community-banker groups such as the Independent Community Bankers of America (ICBA), were pleased by the action, the Journal said.
A record number of commercial businesses have applied for LLCs, including Berkshire Hathaway, Home Depot, Inc., Daimler Chrysler Financial Services America LLP, and the Blue Cross/Blue Shield Association. None of these companies have announced plans to withdraw their bids because of the one-year moratorium.
Representative Gilmore and the chairman of the House Financial Services Committee, Barney Frank (D-MA), are currently sponsoring legislation that would prohibit a company from owning an ILC unless at least 85 percent of its activities are financial in nature in order to maintain a wall between banking and commerce.