Regulators to Hold Hearings on Retailer’s Proposed Foray

The controversy has put Wal-Mart under so much pressure that several months ago, it scaled back its initial plan for a full-service bank to one that it says will be mostly used to process credit card purchases for its thousands of stores across the county. And last month, in a bid to quell some critics, it withdrew its request to be exempt from rules that require most banks to make some investment in underserved communities.

Because controversy generated by Wal-Mart’s bid to own a bank has been so intense, the FDIC agreed to requests from dozens of members of Congress to hold hearings, the first ever for an insurance applicant in the agency’s 73-year history. Thirty-six witnesses besides Wal-Mart are slated for the first day alone. Many, such as George Hood on behalf of the Salvation Army, are expected to support Wal-Mart. Others, such as former congressman Thomas J. Bliley Jr., are expected to oppose the company’s bid to enter banking.

The criticism that could carry the most weight comes from some members of Congress and from the Federal Reserve officials, who say Wal-Mart — and dozens of other non-banking companies, including Target Corp. and Harley-Davidson Inc. — are using a loophole in banking laws in Utah and a few other states to circumvent a federal ban on commercial firms owning banks. They argue that letting commerce and banking mix would foster unfair concentrations of power, create conflicts of interest in how credit is granted and possibly pose risks to the FDIC insurance fund that could end up requiring a taxpayer bailout.

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