Why Shouldn’t Retailers Own Banks…I’ll Give You 49 Billion Reasons

To some people, banking at Wal-Mart seems like a good idea.  It is the world’s largest retailer and more than 100 million people shop at their 3,400 American stores every week.  That is why I support letting Wal-Mart have banks in their stores- just not its own bank.  Companies like Wal-Mart, Home Depot and others are trying to take advantage of a loophole in our laws to charter industrial loan companies (ILCs) which act like banks but have no ownership restrictions and less regulation by the federal government.  ILCs are a hot topic these days and now with 14 applications pending, Congress needs to act.

The 61 ILCs in existence have $98 billion in deposits today.  This may be a small figure compared to our whole system but the entire FDIC insurance fund only stands at $49.2 billion.  After the GAO found that the deposits of commercially-owned ILCs may be of higher risk to the insurance fund we must ask, what happens if a commercial firm buys a bank and something goes wrong?  The answer- American taxpayers get to pick up the tab.  This is not how our system was intended to work and that is why today, Rep. Barney Frank and I introduced H.R. 5746, the Industrial Banking Holding Company Act of 2006, to seal up this loophole until Congress chooses an appropriate balance.