WASHINGTON — Even though Wal-Mart Stores Inc. has pulled its industrial loan company application, several states have not flinched in their efforts to ban companies like it from ever opening in-store branches.
Since Wal-Mart withdrew its application March 16, three states — Colorado, West Virginia, and Tennessee — have enacted bills that would restrict ILC branching, and the Kansas Legislature passed a bill March 27. A spokesman for Gov. Kathleen Sebelius of Kansas said she is still deciding whether to sign the bill.
Proponents of the bills said that they could not wait on federal legislation to ban commercial ownership of ILCs, and that they worry Wal-Mart may apply again in the future.
"Congress says they're going to close the loophole, but until they do so, nothing is to say … that Wal-Mart doesn't come back next year and then we're in the same posture," said Timothy Amos, the general counsel of the Tennessee Bankers Association.
Matthew Street, the American Bankers Association's deputy general counsel for state relations, said support for state restrictions on ILC branching largely has gone unaffected by Wal-Mart's pullout.
"Nobody has jumped up and said, 'Oh, gosh, the Wal-Mart application is gone. Now we don't have to do this,'" Mr. Street said.
But observers said Wal-Mart's withdrawal has not gone unnoticed in statehouses. In Florida, for example, industry representatives had backed a wide-ranging banking bill that included a provision to ban commercially owned bank branches. However, shortly after Wal-Mart pulled out, supporters of the bill — sensing that a ban was not immediately needed and that a federal bill had promise — removed the provision to help move the legislation through a short session. The legislation is currently pending in committee.
"Strategically, that was the thing to do for now," said Alex Sanchez, the president and chief executive officer of the Florida Bankers Association. "The landscape was changing in D.C. Wal-Mart withdrew its application. We had to decide what would be the most expedient way to get the other language in the bill passed."
Gerald Noonan, the president and CEO of the Connecticut Bankers Association, said getting lawmakers' attention for a banking bill was easier when Wal-Mart was in the mix.
"It got labeled as a Wal-Mart bill … which it really isn't," Mr. Noonan said. "Wal-Mart withdrew, and they say, 'Well, what's the point?' You've got to explain to them what it does and what it means. It's Home Depot, and Wal-Mart could come back. That larger philosophical discussion" about the mixing of banking and commerce "has to take place."
There are still three pending ILC applications from commercial companies, including Home Depot Inc. and DaimlerChrysler AG. The applications are frozen until at least February under a moratorium imposed by the Federal Deposit Insurance Corp.
Eight states enacted laws restricting ILC branching in 2006 and 2007. In addition to Kansas, 10 states have bills pending.
The Texas House passed a bill on March 22; that bill is pending in the Senate. The Washington House passed a bill March 14, and the state Senate Financial Institutions Committee passed it March 28. (The state's full Senate has not yet acted).
"There are still ILC applications out there" and some commercially owned ILCs, including one owned by Target Corp., said Jerry Cavanaugh, the general counsel for the Community Bankers Association of Illinois. A bill is pending in that state's Senate after clearing the House on March 1. "Who knows if a year or two years or five years from now … there may be some value to this?"
George Sutton, an attorney for several ILCs in Utah, said that they are not overly concerned about the branch restrictions, but that he hoped the national debate over whether commercial firms should own ILCs would dissipate after Wal-Mart's pullout.
"Everybody that we've talked to in Washington, with a couple of exceptions, would say to us, 'Here's rule number 1. Wal-Mart can't have a bank.' A good number of them said, 'Rule 2 is we don't care beyond that,'" Mr. Sutton said. "With Wal-Mart out of the picture, there are more pressing issues in Washington, and hopefully this will just fade away."
