Home Depot Giving Up in Quest to Have Its Own Bank

WASHINGTON — Home Depot Inc. threw in the towel Thursday on its bid to enter the lending business by taking over an industrial loan company.

The Atlanta-based retailer has been trying since May 2006 to get government approval to purchase EnerBank USA, a Salt Lake City company offering home improvement loans.

But its application has been held up amid intense political wrangling over the question of whether a retailer should be allowed to edge into banking. Consumer advocates implored Congress and regulators to stop allowing such deals, fearing a concentration of capital that would harm consumers.

Home Depot spokeswoman Sarah Molinari said the company's decision was not spurred by political considerations. "This was purely a business decision," she said.

She read a statement saying that "this acquisition is no longer part of our strategy as we are focusing all of our resources on our core retail business."

In its FDIC application, Home Depot said it did not intend to open bank branches, but rather wanted to work with EnerBank USA to help its customers pay for remodeling projects and home improvements.

When Congress created industrial loan companies, or ILCs, in 1987, its goal was to help low-income industrial workers get small loans.

Such banks attracted little attention until recent years, when more and more major companies began seeking charters to do bigger and more elaborate lending. Today, dozens of companies, including General Motors Corp., Target Corp. and American Express Co., operate ILCs.

The outcry about began in 2005 when Wal-Mart Stores Inc. applied for an ILC charter. Labor and community groups, as well as independent bankers, said the retailing behemoth could kill community banks with its enormous reach across the country.

The complaints spurred the Federal Deposit Insurance Corp. to impose a moratorium in 2006 on all ILC applications. That freeze is scheduled to expire at the end of this month. Meanwhile, Congress held hearings into the issue.

Last year, the House passed the Industrial Bank Holding Company Act of 2007, a bill to restrict commercial ownership of ILCs, but the Senate has not yet acted.

Last March, Wal-Mart announced it had withdrawn its application rather than continue tangling with regulators and lawmakers.

Earlier this week, Senate Banking Committee Chairman Chris Dodd, D-Conn., promised to get ILC legislation moving soon.

But now that Wal-Mart and Home Depot, both high-profile applicants, have dropped their quest for ILC charters, the Senate may have less incentive to approve legislation.

Sen. Robert Bennett, R-Utah, a senior member of Senate Banking, strongly opposed the legislation. Most ILCs are chartered in Utah.