Extension Sought on Wal-Mart Bank Freeze

U.S. Representative Paul Gillmor is looking to ask the FDIC to extend a freeze on industrial-bank applications to give Congress more time to pass legislation that would restrict these institutions.

If you’re like me, you’ve no doubt spent sleepless nights either suffering from holiday indigestion or worrying about the state of Wal-Mart’s bank application.  It had been put on hold – the “freeze” mentioned above – pending further investigation.  Critics’ biggest worry?  That Wal-Mart won’t use the bank simply to process credit card payments the way it is claiming.  Instead, they worry that Wal-Mart will open banks that will do to small banks what the giant superstore did to mom-and-pop stores.

In a Dec. 7 letter signed by more than 100 lawmakers, Gillmor and Frank, a Massachusetts Democrat, asked Bair to extend the moratorium at least through July. The additional time will allow Congress a chance to offer the FDIC direction on the extent to which commercial firms can enter the banking business by owning industrial banks, they wrote.

The FDIC, which insures deposits at U.S. banks, suspended its consideration of industrial-bank applications to review the risks posed to the U.S. financial system. Bair has called the controversy a "drain" on the agency, saying she wanted to decide how to handle the applications by January.

In a company statement, Wal-Mart said it looked forward "to a decision on our application as the board concludes its examination" later this month. Wal-Mart spokesman Kevin Gardner declined to elaborate.