Home Depot has decided that it's not ready to get into the banking business.
The DIY chain, which had applied to buy EnerBank USA, a Utah industrial loan bank in May 2006, had been waiting during an 18-month moratorium placed on new charters by the Federal Deposit Insurance Corporation (FDIC). Interestingly, Home Depot is pulling out just as the waiting period is due to expire next week.
Ron DeFeo, a spokesperson for Home Depot, told the New York Post that the company's decision had nothing to do with the opposition it has faced or the current state of housing and credit in the U.S.
"As we start 2008, this acquisition is just not part of the strategy," Mr. DeFeo said. "We're focusing all our efforts on the retail business."
Home Depot's move follows a decision last year by Wal-Mart to withdraw its application to operate a bank. The world's largest retailer had faced stiff opposition on Capitol Hill from members of both parties sitting on the House's Financial Services Committee.
Last year, the House passed legislation that would only make industrial loan bank charters available to companies that generate 85 percent of revenues from the financial business. The Senate was looking at its own industrial bank legislation and the likelihood is Home Depot would not have met the criteria worked out between the two bodies.
A number of non-financial companies including Wal-Mart rival Target were able to establish charters before the FDIC's moratorium went into effect.
Discussion Questions: Should retailers be able to charter industrial loan banks? Do American consumers derive some benefit from keeping retail businesses out of banking or does it ultimately work against them?