Capitol Hill - Wal-Mart Application for Insurance and Industrial Bank Charter

As you are aware, one of the longstanding “line in the sand” issues with the Independent Bankers Association of Texas is the separation of banking and commerce. Additionally, you are aware that a majority of our member banks have offices in rural areas – many of which have been negatively impacted and forever changed by the appearance of a Wal-Mart store in their respective communities. As such, you will not be surprised to know that we are adamantly and unconditionally opposed to the Wal-Mart application to enter the banking business with the benefit of federal deposit insurance.

After a cursory perusal of the surprisingly large number of comment letters opposing this application, I have chosen to concentrate on a few key points, although we are concerned generally with the ILC charter and the inconsistent regulatory treatment thereof.

Community banks continue to operate in a highly competitive environment, with many of its primary competitors enjoying economies of scope and scale, and even outright favorable treatment regarding regulatory oversight and taxation. The trends toward consolidation of the banking and financial services industry are clear, and in our assessment, quite disturbing. It is our opinion that this seemingly small step into the breakdown of the wall between banking and commerce will only accelerate this trend, and provide fewer and less flexible choices for the American consumer.

We operate in a dynamic industry. The only constant is the expectation and realization of change. The ILC charter, just like the credit union charter and the savings and loan charter in the 1980’s, continues to evolve. We have serious reservations regarding the stated future intentions of Wal-Mart, and feel strongly that the temptation to enter a full range of banking products and services will be something that they will not be able to resist. That notwithstanding, control of the payments system, or even a substantial portion thereof, by the world’s largest retailer should send a chill down every rational person’s spine.

While our concerns are clearly centered around the potentially cataclysmic impact on the community banking industry, we also have grave concerns about the availability of credit to small businesses in rural areas. Imagine if you will a “Wal-Mart” bank, having purchased or “priced out of business” the only other bank in a small town. If indeed a small grocery store, hardware store, clothing boutique, auto repair/tire store or other small business is still surviving and in need of banking services, their only local alternative could well be their primary competitor – Wal-Mart. How uncomfortable and indeed ludicrous would it be to ask these small business borrowers to provide the last three years of income tax returns, personal and business financial statements, inventory and receivable reports, business plans, etc. to their primary competitor? And how likely would it be for that competitor to make an unbiased decision based upon the highest and best use of capital?

Our financial system is the envy of the world, and one of key – although shrinking as a percentage of the whole – components is a vibrant and adaptive community banking industry. We firmly believe that if Wal-Mart’s application to enter the banking business is approved, history will prove that such was an ill-advised decision that started a dramatic change in our economic infrastructure – and not at all for the better.

As always, we appreciate you considering our comments and opinions, and are grateful for the FDIC’s willingness to seriously contemplate the significant and long-lasting implications of this troubling application.

Sincerely,

Christopher L. Williston, CAE

President and CEO