AMIBA Offers Testimony Opposing Wal-Mart Bank

On Monday, April 10, Jeff Milchen, co-founder of the American Independent Business Alliance (AMIBA), testified at a public hearing to voice opposition to Wal-Mart's plans to open an industrial bank in Arlington, Virginia. The Federal Deposit Insurance Corporation (FDIC) called the hearing after Wal-Mart Bank, the name of Wal-Mart's proposed Industrial Loan Company to be headquartered in Salt Lake City, applied to the FDIC for federal deposit insurance. Wal-Mart is looking to open the bank in order to lower costs by processing credit and debit cards and electronic checks internally. The two-day hearings ended on Tuesday, April 11.

For AMIBA, the biggest issue regarding Wal-Mart's proposal, aside from its size and its ability to dominate any market it enters, is the potential that the superstore will branch out from industrial banking into commercial banking, said Milchen. And while Wal-Mart insisted in written testimony that the retailer "is absolutely and unequivocally committed not to engage in branch banking," he is incredulous.

"The claim is not credible," Milchen said and pointed out that, by its very nature, a publicly traded corporation is designed to grow perpetually. As such, he contends, it is only a matter of time before the retailer looks to expand its reach into financial services.

"This threat is greatest at the community level," Milchen continued. "In a small community, Wal-Mart might be the biggest, or perhaps, the only bank in town, so what are the chances that Wal-Mart will provide a loan to a hardware store or to a bookstore. And what store owner [seeking a loan] would show his business plan to Wal-Mart?"

In written testimony provided to FDIC by Wal-Mart, Jane J. Thompson of Wal-Mart Financial Services stressed that Wal-Mart is committed to its in-store bank leasing strategy through long-term contracts with bank tenants. "With the largest number of in-store banks, Wal-Mart may be one of the most supportive institutions or independent regional and community banks anywhere," Thompson wrote.

AMIBA was one of a broad number of organizations that spoke out against Wal-Mart's desire to enter the realm of banking, which included the American Bankers Association, the AFL-CIO, the National Grocers Association, and the National Association of Realtors.

In AMIBA's written testimony to FDIC directors, Milchen wrote: "Well-run independent businesses still can compete successfully against Wal-Mart in a genuine market economy, but unfortunately we no longer have such a free market. AMIBA's testimony at this hearing was provoked by years of observing Wal-Mart Corporation's economic clout translating into political dominance in towns throughout the country, undermining both market competition and representative democracy.

"Wal-Mart and other giant companies often use their uncontrolled size and power to distort free markets through extracting public subsidies, anti-competitive practices, and by violating with near-impunity a wide range of laws that theoretically protect communities, workers, and healthy living conditions. Wal-Mart alone has obtained subsidies for hundreds of its facilities, including 90 percent of its distribution centers.

"In too many cases, America's independent businesses, which rarely look to taxpayers to pay their bills, are being out-lobbied, not out-competed by Wal-Mart."

Another set of FDIC hearings regarding Wal-Mart's application will take place in Kansas City on April 25 and April 26. --David Grogan