Community Banker Alert

As you know, Wal-Mart’s long-term plans are to move aggressively into full banking services. A previous attempt to obtain FDIC deposit insurance was not successful and they are currently seeking FDIC approval for deposit insurance for their Wal-Mart Bank which they claim will be to handle their “payment systems.”

Our national trade associations, particularly ICBA, have made fighting Wal-Mart’s entry into banking a top priority and PACB is joining the fight.

First, we have formally weighed in against Wal-Mart’s application for FDIC deposit insurance through the enclosed letter to the FDIC from Brent L. Peters, our Chairman. For a variety of reasons articulated in our letter, this application must be denied. The specter of Wal-Mart in banking and what it would do to the competitiveness of the overall system and the risks it poses is just too great.

On a related note, Senator Tina Tartaglione of Philadelphia, who has been a good friend to community banks, has introduced legislation in the state Senate, Senate Bill 1141 (a copy is enclosed for your convenience). This legislation would bar Industrial Loan Corporations (ILCs) chartered in Utah from branching into Pennsylvania. ICBA has been coordinating and supporting an effort within the states to have this type of legislation introduced and enacted. PACB will be vigorously supporting this legislation working with the General Assembly and the Governor to hopefully make sure that even if Wal-Mart is successful in obtaining deposit insurance, they will not be permitted to branch into Pennsylvania through their Utah ILC.

Make no mistake that we face incredible challenges from the tax-exempt credit unions. Wal-Mart because of its sheer size and presence in communities throughout this country and the Commonwealth would be an incredible and daunting force for community banks to compete against. The line between banking and commerce would be considerably blurred, if not removed, by Wal-Mart’s entry into banking.

We will keep you posted on this issue and will alert you at the appropriate time to contact your state legislators in support of Senate Bill 1141.

Concerning the deposit insurance issue, please feel free to use PACB’s letter of opposition to the FDIC as a model for your own letters and communications opposing Wal-Mart’s application.

If you have any questions, please feel free to contact me or Dave Transue.

Enclosures