Senate OKs Bill to Block Wal-Mart’s Bid for Bank


A last-minute bill to prohibit discount giant Wal-Mart from acquiring a small industrial bank that could save it millions of dollars sailed through the Senate on Thursday.

The action raised some of the same issues as a so-called “big box” bill that suddenly emerged in the final days of the legislative session three years ago and threatened to put California off-limits to expansion of such mega-stores as Costco and Wal-Mart, the world’s biggest retailer.

That bill, sponsored by organized labor, was rushed through the Legislature by majority Democrats without normal public hearings and scrutiny. Gov. Gray Davis vetoed it, calling the bill anti-business and an example of the “worst kind of end-of-session maneuvering by special interests.”


The latest bill, also backed by labor--AB 551 by Assemblyman Lou Papan (D-Millbrae)--would forbid Wal-Mart from buying the Franklin Bank in Orange, which would enable the company to reduce its processing costs for debit-card payments.

As its own bank, the retailer could tap customer checking accounts for payments. Now, it must pay a fee on debit-card transactions to the bank that sponsors its access to the network.

Proponents of the bill said federal law prohibits businesses from acquiring such banks unless they already are providing financial services such as lending, investing and exchanging and transferring money.

Sen. Joe Dunn (D-Garden Grove) said the bill would plug a “loophole” in California law that supporters asserted would allow the acquisition.

Wal-Mart branded the bill an unfair intrusion by the Legislature into a business transaction that was legal and advancing toward approval by government regulators. Its officials denounced the legislation as “punitive,” warning it would result in the loss of jobs, harm consumers and reduce competition.

Among the chief backers were the Council of the United Food and Commercial Workers and the Teamsters. Organized labor long has been a foe of Wal-Mart because it is a nonunion employer.