Inner City Press/FFW: Watchdogging and Taking Action Since 1987

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Update of June 17, 2013: What a trio: Green Dot Bank, the subsidiary bank of Green Dot Corp., on June 7 agreed to try to acquire from GE Capital Retail Bank reloadable prepaid cards bearing the marks of, yes, Walmart - jeez...

Update of March 22, 2010: Wal-Mart plans to open 500 more of its MoneyCenters. Asked for comment, Inner City Press opined

"Wal-Mart's proliferation of check cashing and $4.50 for bill payment (same day) into 500 more stores must be seen in the context of the company's recent gender discrimination settlement, use of tainted cotton from Uzbekistan, and standardless sale of the resources of the Democratic Republic of the Congo. We are still monitoring Wal-Mart, as it become more banklike without any of the regulation. We would suggest that the Consumer Financial Protection Agency, wherever housed, also look at Wal-Mart."

The domestic and CFPA portion of the comment appeared in the Charlotte Observer and elsewhere. "Wal-Mart adding financial sites," by Christina Rexrode, Charlotte Observer, March 16, 2010

Update of October 8, 2007: South of the border approval has been procured for Banco Wal-Mart de Mexico Adelante, which Citigroup says will open 10 to 12 branches in the next year...

Update of March 17, 2007: Last week in dropping Wal-Mart's ILC application, Wal-Mart Financial Services President Jane Thompson said the company's July 2005 bid was "surrounded by manufactured controversy." Made in a sweatshop...

Update of June 5, 2006:  In the FDIC proceeding, Wal-Mart's main defense has been that other retailers have banks, and no one opposed them. So with Home Depot trying to acquire a Utah bank, it was time for opponents to make their voices heard. Inner City Press / Fair Finance Watch filed comments, click here for the June 5 ICP CRA Report.

Update of April 17, 2006: At the FDIC's hearings in DC, there was little but kabuki theater. The FDIC asked canned questions, after withholding Wal-Mart's CRA plan (such as it is) until the day before the hearing. Even with the now-proposed restriction of branching, a Wal-Mart charter should not be approved...

Update of April 10, 2006:  Amazingly, the FDIC waited until the business day before its Washington, DC public hearing to make available the Community Reinvestment Act plan -- such as it is -- submitted by Wal-Mart on March 31. See also Bloomberg News' April 4 story,  "Wal-Mart to Open 50 Stores in High Unemployment Areas," by Lauren Coleman-Lochner, quoting ICP asking, "'Are they seeking CRA credit for any of these moves announced today?' asked [ICP], referring to the Community Reinvestment Act. Scott said this initiative isn't related to the bank application. 'Everything stands on its own,' he said." We'll see. The below will be delivered, though not necessarily as expected:

Good morning. Inner City Press / Fair Finance Watch has remained opposed to Wal-Mart's cynically shifting attempts to enter the field of banking since 1999, when Wal-Mart applied to the Office of Thrift Supervision to buy a savings bank. At that time, Wal-Mart admitted it wanted to be a full service bank. Now it aims lower, or claims to. But given its record of destabilizing communities, of mistreating its employees including in sub-contracted sweatshops, and of taking money out of rather than reinvesting in neighborhoods, this application should not be approved.  Each of these elements of Wal-Mart's record is detailed in the written submissions of Inner City Press and other opponents.  For purposes of today's hearing, Inner City Press wishes to emphasize flaws and unfairness in the FDIC's review.

   While initially heartened that the FDIC agreed to hold hearings, Inner City Press asked to testify from the FDIC's office in New York, as the OTS allows. The FDIC said no, stating in a March 17 letter to Inner City Press that  "the FDIC does not believe it likely that allowing public participation by videoconferencing with FDIC regional offices would result in our obtaining significant viewpoints that would not be adequately represented by the presentations at the Kansas City, Missouri, and Washington, D.C. locations."  This position is contemptuous of the views of grassroots groups not based in Washington (or Kansas City)...

    More substantively, while Wal-Mart said it would submit a CRA plan -- this in a March 1 letter that the only released later in the month -- the Plan only went up on the FDIC's web site on Friday, April 7, the business day before today's hearing. While ICP had only now begun to review it, page 5 states that Wal-Mart seeks to limit its CRA assessment area to Salt Lake County, Utah. This is laughable, for a corporation of the size and scope of Wal-Mart.  Inner City Press formally requests the dismissal and denial of Wal-Mart's application, for the reasons in each of its written submissions (see below -- and contact us for any more information. Click here for Inner City Press' new study of the just-received 2005 mortgage lending data).

Update of April 3, 2006: Inner City Press / Fair Finance Watch last week commented to the FDIC:

We note that on March 1, 2006, Wal-Mart tersely informed the FDIC (without sending copies to timely commenters such as ICP) that

“Wal-mart will withdraw its original request for a ‘Special Purpose’ designation replacing it with a request for a ‘Wholesale’ designation for CRA purposes. A CRA Plan consistent with this request will be provided.”
See, http://www.fdic.gov/regulations/laws/walmart/letterofintent.pdf

   But now four weeks after Wal-Mart's letter, and on the FDIC's deadline for written comments, ICP does not have any copy of any CRA Plan from Wal-Mart. (Wal-Mart made a clearly frivolous request for confidential treatment for the above-quoted letter, and is perhaps doing the same for the referenced CRA Plan -- note that such a Community Reinvestment Act plan cannot be withheld under FOIA, and that no other federal bank regulatory agency has withheld CRA Plans, or, as Wal-Mart frivolously requested in this case, even letters projecting the subsequent submission of a CRA Plan).

    Perhaps the idea is for Wal-Mart Financial Services President to suddenly describe a CRA Plan in the twenty-five minutes you have accorded her on April 10 (less than two hours before ICP's five minutes to respond have been scheduled).  At a minimum, the period for written comments must be extended. It is also imperative that Wal-Mart provide the referenced CRA Plan as far in advance of April 10 as possible -- or that further public hearings (including by videoconference from the FDIC's other regional offices, see below) be scheduled. The FDIC wrote in its March 17, 2006, letter to ICP that     

   "the FDIC does not believe it likely that allowing public participation by videoconferencing with FDIC regional offices would result in our obtaining significant viewpoints that would not be adequately represented by the presentations at the Kansas City, Missouri, and Washington, D.C. locations and/or in comments or written testimony."

           For the record, ICP continues to disagree that all "significant" viewpoints are those held by groups who can afford to travel to either Washington or Kansas City...

Update of March 27, 2006: Last week, Wal-Mart announced it is no longer seeking exemption from CRA. Other issues exist - on to the April 10 hearing...

Update of March 20, 2006: On March 8, ICP formally asked the FDIC to allow community groups to present testimony through any of the FDIC's regional offices, by video conferencing.  Even the Office of Thrift Supervision allows this option -- ICP has participated, from the New York area, in OTS hearings in Dallas (on Greentree / Conseco) and San Francisco (on Citigroup and Washington Mutual, among others). If the FDIC views Wal-Mart's application as important enough to hold a hearing on, shouldn't it do at least what the OTS does, to allow testimony?

         On March 17, the FDIC faxed ICP a response, stating that 
"With regard to the first request, the FDIC does not believe it likely that allowing public participation by videoconferencing with FDIC regional offices would result in our obtaining significant viewpoints that would not be adequately represented by the presentations at the Kansas City, Missouri, and Washington, D.C. locations and/or in comments or written testimony."

            The FDIC is saying that all "significant" viewpoints are those held by groups who can afford to travel to either Washington or Kansas City -- truly extraordinary. We'll have more on this.

Update of March 13, 2006: Last week Inner City Press / Fair Finance Watch sent the following to the FDIC, about Wal-Mart's application:

Dear Mr. Feldman and others at the FDIC:

    On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is a timely request for present oral testimony to the Federal Deposit Insurance Corporation (FDIC) in opposition to the pending applications to charter and insure the proposed Wal-Mart Bank (FDIC Application # 20051977). ICP requests to be scheduled for early on Monday, April 10, 2006.
   Beginning in July 2005, ICP has submitted written comments to the FDIC opposing Wal-Mart's proposal, which represents the stealth attempted entry of this country’s largest and most destabilizing and dis-investing retailer into banking. See, e.g., <www.fdic.gov/regulations/laws/walmart/comment_letters/Inner_City_Press_July_25.pdf>. ICP specifically opposes Wal-Mart's attempt to circumvent the Community Reinvestment Act by requesting for designation as a special purpose bank.
   Given the scope of Wal-Mart's operations, and the fact that there is little exclusive nexus between Wal-Mart's proposal and Kansas City or the District of Columbia (nor Utah, other than the fortuity of the industrial loan company loophole), ICP suggests and requests that the FDIC allow for oral testimony to be presented by video conference, at least from each FDIC regional office.
  Note for example that the Office of Thrift Supervision has repeatedly conducted hearings on contested applications by allowing video participation from its regional offices, for example in Jersey City, New Jersey, Dallas, Texas and Daly City, California. ICP has participated in such hearings on applications by Citibank FSB, Conseco, H&R Block and Washington Mutual. Particularly given the volume of comments in opposition to Wal-Mart's proposal, the FDIC should do no less in this regard that the OTS -- the FDIC should arrange for video conferencing from its regional offices. 

  Also, based on its experience with the public hearings held by the OTS and, less frequently, the Federal Reserve Board, ICP suggests and request that the FDIC explicitly extend the comment period for at least two weeks after the last day of hearings, to permit the parties to address in writing the issues that arise at the hearings

  We'll see..

Update of February 27, 2006 -- From the FDIC:

Update of November 7, 2005: Wal-Mart was last week forced agreed to pay a $50,000 fine and equip its trucks with portable generators following an investigation that found the company's trucks idling illegally last year in Massachusetts and Connecticut.

Update of October 24, 2005: The article “Wal-Mart plan could shake up bank industry; Industrial banks: Widespread opposition may nudge Congress to shut them all down,” by Steven Oberbeck , Salt Lake Tribune, October 18, 2005, after quoting ICP, has  Wal-Mart spokesman Marty Heires saying   "All we're after is a fair hearing on our bank application.” Well alright then -- let the public hearings begin. ICP was also on talk radio in San Antonio speaking about the Wal-Mart application...

Update of August 29, 2005:  The FDIC has, following ICP/Fair Finance Watch’s comment and request, provided a copy of Wal-Mart’s application. Therein, Wal-Mart states:

“Subject to regulatory approval, the Bank will be a special purpose bank... Consequently, the Bank is exempt from CRA regulations, and a CRA Plan is not included with this application. A copy of a letter to the FDIC requesting designation for the Bank as a special purpose bank under CRA regulations is included with the Business Plan as Attachment 14.”

            While much as been withheld, this letter (from the law firm of Ballard Spahr) argues that “Wal-Mart Bank’s proposed activities are limited and do not include granting credit to the general public.” Then it refers to confidential attachments.

            As editorialized by the Salt Lake Tribune, this is entirely unacceptable...

Update of August 22, 2005:    The Los Angeles Times last week reported that the comment period has been extended to September 30...

On July 25, Inner City Press / Fair Finance Watch filed with the FDIC and Utah regulators a ten-page opposition to the applications to form "Wal-Mart Bank."  A summary is below. For further information, click here to contact us

July 25, 2005

VIA TELECOPIER

Federal Deposit Insurance Corporation
Attn: Mr. Don Powell, Director, et al.
550 17th Street, NW, Washington, DC 20429

Federal Deposit Insurance Corporation
Attn: Ms. Nancy E. Hall, Regional Director,
and Ms. Linda Ortega, Community Affairs Officer
25 Jessie Street, Suite 2300, San Francisco, CA 94105-2780

Re:  Initial comment opposing the proposal to charter and insure “Wal-Mart Bank”

Dear Director Powell, Ms. Hall, Ms. Ortega, others:

            On behalf of Inner City Press/Community on the Move and its members and affiliates, and the Fair Finance Watch (collectively, "ICP"), this is an initial comment opposing, and requesting public hearings on and a copy of, the applications to charter and insure the proposed Wal-Mart Bank (FDIC Application # 20051977).

This application represents the stealth attempted entry of this country’s largest and most destabilizing and dis-investing retailer into banking. While cynically styled as no more than a proposal to “enable it to recapture fees that it pays third-party institutions to process the 140 million debit, credit and electronic check transactions at its stores each month,” Wal-Mart’s financial services director answered the Chicago Tribune’s question, whether shoppers could someday shop for mortgages at Wal-Mart, with this phrase: "We continue to look for what makes sense to the customer."  (Chicago Tribune, July 2, 2005, “Wal-Mart Seeks Permission to Operate a Bank”). We at ICP continue to look at what make sense to consumers and the public interest, and for this reason request hearings on, and the denial of, Wal-Mart’s applications.

            On an application to charter and insure a bank, including an industrial loan company, the Federal Deposit Insurance Corporation must consider a range of factors, including managerial integrity, compliance with law and regulation, such as anti-discrimination provisions, including as a predictor of Community Reinvestment Act performance.  Wal-Mart has a history of violating the law, and of destabilizing and disinvesting in communities, as set forth below in this comment.

Wal-Mart is subject to the largest anti-discrimination in employment class action lawsuit in U.S. history.  “The lawsuit, Dukes v. Wal-Mart, alleges that the world's biggest retailer discriminates against its female employees in terms of pay and promotion. Six female employees filed the suit in California in 2001, claiming they were passed over for promotion by men. In June 2004, a California federal judge ruled that the suit could be certified as a class action.” Arkansas Democrat-Gazette, June 22, 2005, “Hearing set in suit against Wal-Mart.”  This is “the largest class-action suit in American history, consisting of 1.6 million current and former Wal-Mart employees. Between 1996 and 2001, women working at Wal-Mart made approximately five per cent less than men doing similar jobs.”  Canadian Dimension, May 1, 2005.  Documents made public in this lawsuit reflect not only discrimination but also other managerial issues that must be considered by the FDIC.  See, e.g., “Wal-Mart Ignored Own Report,” by Karen Gullo, Bloomberg News, July 16, 2005: “Wal-Mart Stores Inc. took no action on internal warnings seven years ago that it was falling short in promoting women, documents in a federal sex-discrimination lawsuit show.The world's largest retailer didn't carry out the 1998 recommendations of a diversity task force and disbanded the panel, according to company memos, reports and depositions filed in the case. Two years later, Wal-Mart had a reduced percentage of female managers.”

        Wal-Mart has been charged with discrimination not only by gender, but also by race.  See, e.g., New York Times of July 14, 2005: “Two black truck drivers have filed federal lawsuits against Wal-Mart Stores in Arkansas, arguing that the company discriminated against them by denying them jobs because of their race. Lawyers who filed the suits are seeking class-action status.”  The asserted discrimination is not only against employees, but also consumers.  See, e.g., Boston Globe of July 13, 2005: “Customers Sue Wal-Mart Over Alleged Bias, Suit Claims Cases of Racial Profiling” -- “In a lawsuit filed in US District Court in Boston yesterday, the consumers alleged they were followed, searched, humiliated, and in some cases, detained by greeters at the store after entering the retail center in 2002 or 2003.... The lawsuit, brought by one white consumer and nine minorities, including three African-Americans, several West Indians, and a Mexican shopper, alleges that Wal-Mart employees illegally detained the minorities until police arrived and searched bags or stopped them as they were leaving.”

Rather than reform its practices, Wal-Mart targets its critics, including in paid advertisements it later, belatedly, apologized for.  See, e.g., Arizona Daily Sun of May 14, 2005: “Wal-Mart's corporate headquarters announced Friday the company would issue an apology to Flagstaff voters for an ad relating a Nazi book burning to the big-box ordinance. The company's apology came after condemnation of the ad by the Anti-Defamation League.”  Beyond that, as further examples of Wal-Mart’s substantive violations, Wal-Mart “reached an out-of-court settlement in a child labor case in which teen clerks in three states were allowed to use heavy equipment in violation of safety laws. The company's vice chairman was fired a few months before his scheduled retirement after an accounting scandal became the subject of a criminal investigation.” St. Petersburg Times, June 4, 2005. 

This pattern of law-violation has given rise to shareholder resolutions, including by elected officials in New York.  As reported in the N.Y. Post of June 2, 2005, “Wal-Mart Blasted for Rule-Breaking,” the “shareholder group, co-headed by New York City Comptroller William Thompson Jr., called on Wal-Mart's board to set up a special committee to monitor Wal-Mart's future compliance with laws and regulations. The shareholders said they also were concerned about Wal-Mart's 24 violations of child labor laws in three states. Thompson said the board's laxity on compliance ‘could be indicative of inadequate internal controls and a lack of board oversight and accountability.’" This is a standard that the FDIC must consider on this application, including at the public hearings ICP is hereby timely requesting.

While Wal-Mart is segmenting its actual proposal into pieces, seeking to charter this institution and then later expand it, the FDIC must consider in this proceeding all of the dangers raised by allowing this large, destabilizing, disinvesting and, ICP contends, presumptively disqualified company from entering the business of banking. ICP contends that this pattern of export of capital is relevant to, and must be considered on, Wal-Mart’s application to get into banking, as a Community Reinvestment Act matter and otherwise. ICP also formally contends that several of Wal-Mart’s documented business practices -- including predatory pricing, mislabeling of products, sale of merchandise made with child labor, etc. -- are adverse factors under the FDIC’s regulations and under the CRA.

The record should reflect that this is by no means Wal-Mart’s first attempt to slip into the banking industry. In 1999, ICP opposed  the applications of Wal-Mart Stores, Inc., Walton Enterprises, L.P., Broadleaf Investments, Inc., et al. (collectively hereinbelow, “Wal-Mart”) to become savings & loan holding companies by acquiring Federal BankCentre, a one-branch thrift in Oklahoma.  See, e.g., Reuters, “Group Tries to Block Wal-Mart Bank Effort, Advocates for Low-Income Groups Filed a Protest against the Retailer’s Applications to Buy a Savings and Loan,” e.g. in the Orlando Sentinel of July 24, 1999, and the Associated Press, “Wal-Mart plan to open thrift draws fire,” (e.g. in Boston Globe of July 24, 1999). That application was filed by Wal-Mart in an attempt to beat the Gramm-Leach-Bliley Act deadline.  After that application failed, Wal-Mart tried to partner with Toronto Dominion Bank, and to buy an industrial loan company in California. Both forays failed.  Now Wal-Mart tries the FDIC -- ICP urges the FDIC to hold hearings, and to deny, Wal-Mart’s applications, including on CRA grounds.

Wal-Mart Destabilizes and Dis-Invests in Communities

        Below in this comment, ICP presents for the record on this application a thumb-nail sketch of Wal-Mart’s track record of destabilizing communities, including driving locally-controlled merchants out of business by predatory pricing, then siphoning off the assets and insured deposits that these local businesses used to deposit in local banks, and shifting the assets to Bentonville, Arkansas and the various Walton heirs’ stock portfolios.  This pattern has resulted in increasing opposition to Wal-Mart’s proposals. See, as four examples just last month, the Denver Post of The Denver Post of June 28, 2005, “Wal-Mart foes pack hearing;” Charlotte (NC) Observer of June 5, 2005, “Wal-Mart battle goes to public;” Philadelphia Inquirer of June 3, 2005, “Wal-Mart plan brings out challengers;” the Madison, Wisc. Capital Times of June 2, 2005, “Rally Rips Wal-Mart on Health Care.”  See also, NBC Dateline of June 17, 2005, linking Wal-Mart to sweatshops in Bangladesh.

The FDIC should take note, and consider on Wal-Mart specifically, all of the dangers of mixing banking and commerce that have been raised (including not only risk to the insurance fund and taxpayers, but Wal-Mart’s ability to use its status as an FDIC insured lender to forward its other interests, just the sort of “leverage” that Wal-Mart has shown itself more than willing to use, on its vendors and others, see supra). Note, for example, this statement by Wal-Mart’s Thomas Patrick Seay, being deposed on February 7, 1996 in Forrest Drive Associates v. Wal-Mart Stores, Inc., 94 CVS 765: “if we want to to continue out program of expanding stores, relocating stores, building new stores, [continuing] our growth... then in today’s financial environment we have to fund it ourselves.” Emphasis added. Also, given the regulator-acknowledged dangers of sharing of private consumer information, consider the dangers of allow Wal-Mart and its data base of customers to own an insured financial institution and creditor.

        Much has been written about the effects of Wal-Mart on the stability and local control of communities across the United States (this Comment contains citations to a number of sources the FDIC should review, and that ICP is incorporating into the record by reference). Numerous analysts have noted how Wal-Mart, to destroy competition, lowers its prices, then raises them once competitors have been driven out of business. Predatory pricing is acknowledged as illegal under the antitrust laws, violating the prohibitions against monopolization, conspiracies to monopolize, and attempts to monopolize that are found in the Sherman Act (15 U.S.C. § 1, et seq.). In addition, if the predator does not engage in below-cost pricing in all of its markets, predatory pricing constitutes "primary-line" price discrimination in violation of the Robinson-Patman Act (15 U.S.C. § 13, et seq.).

A 1995 study of Iowa showed that, since Wal-Mart’s entry into the state in 1983, 50% of clothing stores had closed, 30% of hardware stores had closed, 42% of variety stores had closed, 26% of department stores had closed, 25% of building materials stores had closed, etc.. See also, What Happened When Wal-Mart Came to Town?  May, 1996 Muller / Humstone study of Wal-Mart’s economic impact on seven Iowa counties; and Ken Stone’s 1995 study of Wal-Mart’s impact on small Iowa towns from 1983 to 1993. See generally, Thomas Keon, Edward Robb, and Lori Franz, Effect of Wal-Mart Stores on the Economic Environment of Rural Communities, Business and Public Administration Research Center and College of Business and Public Administration, University of Missouri, 1989, incorporated herein by reference.

A study conducted by Residents for Responsible Growth of Lake Placid, New York, found that for every one job created by Wal-Mart, at least 1.5 jobs are lost. (Other sample New York State communities in which Wal-Mart has faced well-founded opposition include East Aurora and Ithaca; in Massachusetts, Northfield and Quincy; in Vermont, Williston and St. Albans; Lancaster, PA; Cleveland Heights, Ohio; Cottage Grove, Oregon; Fort Collins, Colorado; and Fernandina Beach, Florida [see ABC World News Now of June 30, 1999, Transcript # 990630003-j04]).

            While some bank regulators go to great lengths to state that they cannot consider job loss (see, e.g., the Federal Reserve Board’s mega-merger decisions, for example its Wells Fargo - First Interstate approval order), ICP hereby puts into the record before the FDIC that Wal-Mart’s negative effects on communities are not limited to job loss. Whereas the locally-based stores, pre-Wal-Mart, would deposit their receipts long-term in local banks (and these would be reinvested in the community, as loans), Wal-Mart has a practice of quickly transferring its daily earnings back to corporate headquarters in Bentonville, Arkansas. This is (FDIC / CRA - cognizable) DISINVESTMENT. It results in a decrease in credit availability from communities from which Wal-Mart siphons off money - a degree of disinvestment that Wal-Mart’s state plans for its thrift would do little to counter-balance. The FDIC must inquire into and consider this CRA-relevant disinvestment by applicant Wal-Mart.

      For all the foregoing reasons, ICP is requesting public hearings on this proposal, and is formal requesting that Wal-Mart’s applications be dismissed or denied.

If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.

Respectfully submitted,

_____________________

Matthew Lee, Esq., Executive Director

Inner City Press / Fair Finance Watch

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