Wal-Mart Eyes Banking; Potential Rivals Mum.

THERE IS NO SUCH THING as a small move by Wal-Mart these days. Last week's federal hearings into the company's application to open an industrial loan corporation was no exception, though the companies that would be most affected by the move--credit card giants American Express, Visa and MasterCard--stayed on the sidelines.

The Federal Deposit Insurance Corp. hearings--over a charter that would let Wal-Mart issue credit cards and loan money but not enter the retail banking business featured nearly 40 speakers. Most represented the usual suspects list of Wal-Mart opponents: Labor unions, associations of small businesses, politicians and consumer groups.

The FDIC also received more than 2,100 letters on the subject, the most it has ever received, per the agency. Only one came from Big Finance. GE Consumer Finance, which issues the Wal-Mart credit card, not surprisingly was all for it.

Mike McKeon, who heads consultant Booz Allen Hamilton's financial services group, said others should worry. "I think [the credit card industry] should be nervous about Wal-Mart getting into this business," he said.

What do the companies say?

Nothing, so far. Those companies routinely decline to talk about Wal-Mart, which is understandable. The mega retailer is a big customer and one that has in the past been more than willing to express its displeasure with the credit card industry.

"Wal-Mart sued Visa and Master-Card over the fees they charge merchants, and won," said Tanya Azarchs, managing director of bank ratings analysts at Standard & Poor's. The decision in Wal-Mart's favor was handed down by the U.S. Supreme Court in 2004.

Wal-Mart's stated reason for wanting to establish a loan company is so it can process its cards and save fees it now pays to o[hers.

Fears have been expressed that Wal-Mart was preparing to go into the retail banking business, a move which a rep for the retailer denied and something not covered under the charter. If it was allowed to take deposits and offer checking accounts, the banking industry believes, the world's largest retailer would decimate local banks the way it has cashiered many small businesses.

Local banks think the charter is the start of an attack on retail banking. "[Wal-Mart has] had a number of different business strategies in the past when it came to financial services," said Robert Schmermund, a rep for America's Community Bankers, an industry group. "The fact that they're only applying for an [industrial banking] charter doesn't really provide us any comfort."

Wal-Mart has made at least two previous attempts to buy or open a bank--an industrial bank in California and a savings bank in Oklahoma-both of which were blocked by legislation. That's one motivator why community groups want to get Wal-Mart on record as firmly as possible now, in case the company tries to apply for a retail banking charter down the road.

Consultant Mc-Keon wouldn't speculate on who may have been behind the opposition at the FDIC hearing, or why. He did say it would only make sense that large companies wouldn't speak out directly against Wal-Mart.

"They would do it through lobbyists," said McKeon, who predicted that the FDIC will readily approve Wal-Mart's charter application

It wouldn't be entirely surprising if the bank and credit card corporations limited their opposition to behind-the-scenes maneuvering and let others do the shouting. Wal-Mart criticism is almost a genre unto itself. "You get a much more visceral response to Wal-Mart" than to other companies, said Schmermund.

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By Constantine Von Hoffman