CARSON CITY, Nev. (AP) -- Key senators were skeptical Monday of legislation to block nonfinancial companies, including retail giant Wal-Mart, from buying Nevada banks and operating their own financial services.
Backers say AB389 would close a loophole allowing corporations to hoard financial power by snatching up state-chartered thrifts, or independent loan companies. Opponents including Gov. Kenny Guinn say it'd cause Nevada to lose out on jobs and future money-making opportunities.
The Democrat-backed legislation is nearly identical to a California law enacted last year which halted the bid by Wal-Mart Stores Inc. to buy small Franklin Industrial Bank in Orange, Calif.
The retailer said it hoped to save money by processing its own debit card transactions. It has not discussed plans to purchase thrifts in other states, though under current law it could do so in Nevada and Utah.
In the past year, several companies have contacted Nevada about buying thrifts, said Larry Hickman, deputy commissioner of the state Division of Financial Institutions.
On behalf of the governor, he asked the Senate Commerce and Labor Committee to reject the bill, saying the thrifts boost Nevada's economy and spread financial risk nationwide with out-of-state lending. Four independent loan companies, or ILCs, now operate in Nevada, including one in Carson City that arranges loans for buyers of Harley-Davidson motorcycles.
"We complement the state banks, we don't hurt them," said Donal Hummer, Jr., vice president of Harley-Davidson Financial Services.
AB389 would allow the Harley thrift and others to remain in their current form but not to sell their assets to a commercial firm. No other nonfinancial firms could buy banks or begin bank-like operations.
The measure passed the Assembly 29-13 largely along party lines but is unlikely to emerge from the Republican-controlled Commerce and Labor Committee, according to the panel's chairman, Sen. Randolph Townsend, R-Reno. His panel took no action on the bill Monday.
Craig Hudson, western director of the Independent Community Bankers of America, said Wal-Mart and other firms are trying to get around federal law dictating that banks must have separate ownership from retail companies.
He said conflicts of interest would course through any new commercial banking operations in Nevada.
"You don't want to mix banking and commerce," Hudson said, adding that the "safety and soundness" of the banking system is jeopardized under current law.
While Wal-Mart has said it had no intention of offering full commercial banking, laws in Nevada and Utah put no specific limits on the types of operations allowed by thrift companies once their charters are approved.