The growth of under-regulated ILCs is a problem and Wal-Mart owning one makes them a bigger problem. ILCs exist under an old loophole that was never supposed to encourage new, large entrants, but Wal-Mart and some powerful Wall Street securities firms, with support from the Utah political apparatus (which has gone so far as to promote ILC's as an alternative to burdensome Fed regulation) are trying to push the ILC door open to allow more mixing of banking and commerce.

It's a truly bad idea that has harsh risks for the economy: (1) Bad business practices by the firm that owns the ILC could result in losses by the ILC that place the safety and soundness of the taxpayer-guaranteed FDIC insurance fund at risk. (2) Loans from the ILC itself could be made either imprudently (also a safety and soundness issue) or with favoritism or cronyism, skewing credit allocation in the marketplace and further consolidating Wal-Mart's demonstrable power over a broad sector of the economy.

Excerpt from our letter: "Allowing the largest retail firm in the world to purchase an industrial loan company (ILC) would represent a dangerous and unprecedented blending of banking and commerce. It would allow Wal-Mart to offer many of the same services and loans as commercial banks without the same rigorous regulatory oversight."

For more on Wal-Mart and banking, see this piece by Stacy Mitchell in the New Rules Project's Hometown Advantage Bulletin.