Bankers urge Congress to stop Wal-Mart bank

Bloomberg reports:

Banking industry representatives on Monday pressed federal lawmakers to block a bid by Wal-Mart Stores Inc. to open a bank, a move they say would damage the industry and blur the divide between banking and commerce.

A coalition of 32 groups, including the American Bankers Association representing the nation's largest banks, sent a letter to every member of Congress urging them to step in before federal banking regulators act on the matter.

The Federal Deposit Insurance Corp. is weighing an application Wal-Mart filed last summer to open a state-chartered, limited-service bank in Utah, also known as an industrial loan company.

"We urge you to act so that Congress is making these policy decisions," the groups' letter states. "Until Congress is able to pass legislation on ILC policy, we hope you will insist that the FDIC reject Wal-Mart's application or, at least, hold it until Congress has the opportunity to consider the policies at stake and legislate."

Wal-Mart will use the bank for the strict purpose of processing debit and credit card transactions, a company official said during a hearing on its FDIC application in April.

Critics, consisting mainly of smaller community banks, maintain Wal-Mart will use the application as an entry point into full-service banking, a move they say would drive many banks out of business. They say non-financial companies should be barred from owning the banks, which are subject to less stringent federal regulation.

Steve Verdier, a chief lobbyist for the Independent Community Bankers of America, said the letter is part of a push to get lawmakers to sign onto a bill that would bar new commercially owned industrial banks as of June 1, 2006.

House Financial Services Committee members Barney Frank, a Democrat from Massachusetts, and Paul Gillmor, a Republican from Ohio, introduced the bill on July 10 and circulated a letter Monday urging their colleagues to co-sponsor the legislation.

In addition to the banks, the letter was signed by the AFL-CIO, the National Association of Realtors and the National Grocers Association. The AFL-CIO and the grocers are concerned a Wal-Mart bank would erode a community's banking options, while the Realtors want to maintain the separation between banking and commerce.

Look who've for high ATM fees.The big banks don't want free markets.It's amazing that they'll pulled the AFL-CIO in on the anti-competition plan.