Another good reason to hate Wal-Mart, as if there weren't enough already......
[a href="vny!://today.reuters.com/news/newsarticle.aspx?type=businessNews&storyid=2006-03-10T164922Z_01_N10240586_RTRUKOC_0_US-FINANCING-BANKING-WALMART.xml&rpc=23"]Wal-Mart threatens US banking system
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By Kristin Roberts
WASHINGTON(Reuters) - A group of lawmakers on Friday said an industrial bankowned by Wal-Mart, the world's largest retailer, could threaten thestability of the U.S. financial system and drive community banks out ofbusiness.
In a highly critical letter to the acting chairman ofthe Federal Deposit Insurance Corp., obtained by Reuters, a group ofmore than 30 Congress members asked the bank regulator to rejectWal-Mart's application to open a bank in Utah.
"Wal-Mart's plan,to have its bank process hundreds of billions in transactions for itsown stores, could threaten the stability of the nation's paymentssystem," the lawmakers wrote.
"Given Wal-Mart's massive scopeand international dealings, it is not possible to rule out a financialcrisis within the company that could damage the bank and severelydisrupt the flow of payments throughout the financial system."
Thecongressmen said the losses to the FDIC, which insures deposits atbanks and thrift institutions, could be staggering if Wal-Mart beginsto have financial troubles that bleed into its bank's business.
"Consider the consequences if Enron or WorldCom had owned a bank," the group said.
Thegroup included Ohio Democrats Rep. Stephanie Tubbs Jones and Rep. TimRyan, Hawaii Democrat Rep. Neil Abercrombie and California DemocratRep. Loretta Sanchez. A complete list of signatures was not immediatelyavailable.
Wal-Mart is trying to open an industrial bank to handle electronic payment processing.
Industrialbanks are state-chartered and state-regulated, and fall under thesupervision of the FDIC. Commercial companies may own them becausefederal laws that bar non-financial companies from engaging in bankingactivities do not classify them as banks.
But as "industrial loan companies" owned by non-financial companies, they escape a level of federal bank regulation.
