Thomas M. Stevens, president for the National Association of Realtors trade group, testified this week in opposition to an application by mega-retailer Wal-Mart Stores Inc. to form Wal-Mart Bank.
Stevens stated, “When commercial firms are allowed to engage in banking, the bank functions under an inherent conflict of interest. We cannot afford to open the door to actions that threaten the safety and soundness of the banking system.”
Approval of this application by the Federal Deposit Insurance Corp. “would establish a dangerous precedent that would inevitably lead to an erosion of the national policy against mixing banking and commerce,” according to an association announcement Tuesday.
In written testimony to the Federal Deposit Insurance Corp., Stevens stated that the application for Wal-Mart Bank “marks the latest chapter in Wal-Mart’s continuing effort to gain a foothold entry into the banking industry.”
He added, “Wal-Mart has publicly stated that the company’s sole motivation is to have the bank act as a vehicle for providing Wal-Mart with direct access to the payment system to process electronic payments such as debit and credit card and Automated Clearing House transactions. However, the publicly available portions of Wal-Mart’s FDIC application expressly provide that ‘the Bank will also offer certificates of deposit.’ As best as we can determine, Wal-Mart proposes no limitation in the application that precludes Wal-Mart from significantly expanding the bank’s deposit taking activities at any time.”
The testimony also states that Wal-Mart may at some time attempt to compete with other depository institutions in accepting deposits, and “these risks would be exacerbated if the bank were to engage at some future time in lending activities.”
The Realtor group has waged an aggressive and costly lobbying campaign over the past several years in an effort to block federally chartered financial services companies from entering the business of real estate brokerage.
The group has worked to block the Federal Reserve Board and U.S. Treasury Department from finalizing a rule that would allow national bank subsidiaries to engage in real estate brokerage activities, for example, and has also opposed Office of the Comptroller of the Currency rulings that have allowed banks to engage in real estate development, such as the construction of hotels and condos.
“As in the case of the Wal-Mart deposit insurance application, NAR believes that Congress, not regulatory agencies, should resolve the clash between banking and commerce,” according to a statement by the trade group.
Art Johnson, chairman of the American Bankers Association’s Government Relations Council, also offered testimony at the FDIC hearing this week in opposition to the Wal-Mart Bank application.
“It’s clear that Wal-Mart has both a demonstrated appetite to engage in full-servicing banking and has a recent and ongoing track record of expanding the retail banking services it offers,” Johnson said in a statement. “Given this record, Wal-Mart’s application presents an unprecedented challenge to the settled policy of keeping banking separate from non-financial commerce. It risks a direct and irreparable breach of policy.”