WASHINGTON -- A community group has filed a formal objection with regulators over retail giant Wal-Mart Stores Inc.'s proposed entry into the banking business, a few days after the House Banking Committee chairman denounced the deal.
Inner City Press/Community on the Move, a liberal group based in New York, submitted its objection to the federal Office of Thrift Supervision on Thursday, the final day of the public comment period for Wal-Mart's proposed purchase of an Oklahoma savings and loan.
Bentonville, Ark.-based Wal-Mart, the nation's biggest retailer, asked the thrift regulators last month for permission to buy Federal BankCentre of Broken Arrow, Okla., and open at least five branches at its stores in several states.
Last weekend, Banking Committee Chairman Rep. Jim Leach, R-Iowa, told a group of Iowa bankers that the proposed deal "should not be allowed" because it would dangerously mix commerce and banking.
"This is a step toward concentration of commerce and banking which I believe to be counter to the American tradition," Leach said in a speech to the Iowa Independent Bankers Association's convention.
Inner City Press, which often challenges proposed mergers and acquisitions in the banking industry, said the Wal-Mart move "raises grave issues of public policy" such as the retailer's adherence in the future to laws requiring banks to invest in low-income communities.
The group called the discount chain the "most destabilizing" of the nation's retailers.
"They're clearly a company that's willing to use their power to hurt competitors," Matthew Lee, the group's executive director, said in a telephone interview Friday.
A small Arkansas bank, in its own letter to the thrift agency, expressed the same criticism of Wal-Mart.
"Wal-Mart came on the scene and spread across America and ... caused many small retailers to be forced out of business," wrote John R. Stipe, the president of Forrest City Bank of Forrest City, Ark.
A spokeswoman for Wal-Mart at its corporate headquarters had no immediate comment.
Inner City Press maintained that small, local stores -- which now have been replaced by Wal-Mart -- had deposited their earnings in local banks, while Wal-Mart has a practice of transferring its daily receipts back to the Bentonville headquarters. That makes less money available for loans in the local communities, the group said.
Wal-Mart's sales topped $137 billion last year.
Leach and other lawmakers have long objected to any mixing of banking and commerce, which they believe could create the same kinds of financial problems and corruption that have occurred in Japan and other countries that allow it.
"No national interest is served in having a system which allows Chase Manhattan (Bank) and General Motors to merge," he said in his recent speech. "Likewise, no national interest is served in allowing Wal-Mart on its own to become a Norwest (Bank)."
The issue has been raised by the debate over revamping the financial services laws. The House and Senate recently have passed sweeping legislation that would lift Depression-era legal barriers and allow banks, securities firms and insurance companies to merge.