Walmarts to take over banking industry?04/27/03 Banks fear Wal-Mart may become rivalBLOOMBERG NEWSTulsa World (Copyright 2003) WASHINGTON -- Wal - Mart Stores Inc., the world's largest retailer, may be encouraged to compete with banks across the United States under a bill before Congress, said community lenders who want lawmakers to change the proposal. "We have seen what Wal - Mart has done to the local hardware store and grocery store," said Jim Ghiglieri, president of Alpha Community Bank in Toluca, Ill., about 40 miles northeast of Peoria. Giving Wal - Mart entry to the banking business "is not good for community banks, andespecially not for the consumer."The bill, intended to eliminate outdated banking rules, would let banks and industrial loan companies expand more easily across state lines. By purchasing an industrial loan company, Wal - Mart , which has more than 3,300 stores, super centers and Sam's Clubs in all 50 states, could ownbanks nationwide, the Independent Community Bankers of America wrote Congress. "Branch banking by ILCs makes them a tempting target for Wal - Mart ," said Michael Wilson, chief lobbyist for the United Food and Commercial Workers International Union (AFL-CIO), which is trying to organize workers at Wal - Mart , a non-union company that opposes the measure. Industrial loan companies resemble banks in that they can take deposits and sell loans. They differ because they can be owned by commercial businesses, such as Wal - Mart . Banks can't. The debate over the bill may lead Congress to more broadly consider the role of industrial loan companies, state versus federal regulation of financial institutions and the traditional barriers in the U.S. between banking and commerce. " Wal - Mart 's got everybody scared," said Rep. Barney Frank, D-Mass., the ranking Democrat on the House Financial Services Committee. Industrial loan companies were set up in the early 1900s to make loans in areas that banks avoided. Today, many offer checking accounts and deposits insured by the Federal Deposit Insurance Corp.The House has already passed a bill allowing industrial loan companies to pay interest on business checking accounts, a move that would make them more like banks and "would alter the structure of banking in the United States," Federal Reserve Chairman Alan Greenspan said in a letter last month to House Financial Services Committee Chairman Michael Oxley.Wal - Mart says the proposed law "really has no connection to our business," according to spokesman Tom Williams. "We don't own any banks, so we don't have a comment on it. We don't speculate on what we may or may not do." "The Wal - Mart scenario is not theoretical," the UFCW union wrote lawmakers. " Wal - Mart has tried to enter the banking industry several times." Bentonville, Ark.-based Wal - Mart tried to buy Franklin Bank, an industrial loan company in Orange, Calif., last year. The bid failed after the California legislature banned commercial companies from owning such companies. Wal - Mart 's 1999 effort to buy Broken Arrow-based Federal BankCentre, since renamed First BankCentre, was thwarted after Congress passed a law prohibiting commercial firms from obtaining thrift charters after May 4 of that year, a deadline that ruled out Wal - Mart . In January, the retailer said it would expand financial services to offer check cashing, money orders and wire transfers. The company already rents space in some 900 locations to local banks. The interstate banking provision in the bill, sponsored by Rep. Shelley Moore Capito, R-W.Va., would preempt requirements in 33 states that banks and industrial loan companies must buy a bank in a new state to establish a branch there. Frank and Capito said they are working on amending the measure to respond to the bankers' concerns. "I want to see if we can ease their anxiety over this," Capito said. Other lawmakers will be looking out for the industrial loan companies.Utah Republican Senator Robert Bennett "sees no reason to prohibit ILCs from operating across state lines," said Maryjane Collipriest, his spokeswoman. "They should have the same access as other financial institutions."