It's time to go after Wal-Mart, everyones favorite corporate whipping boy...... even whether it's the customer who comes out forward. Wal-Mart wants to open a limited-purpose bank in Utah from where it might provide service nationwide, but first it must secure approval in the Federal Deposit Insurance Agency (FDIC) as well as from Utah regulators. The retailer has said it merely really wants to process its own credit and debit dealings, but opponents fear it is placement itself to expand further into list banking. Wal-Mart says it would cut costs if it could handle its personal debit, credit and electronic-check transactions with an in-house bank. It says it wouldn't offer payment processing to other merchants, nor open bank branches for the general public. Opponents fear Wal-Mart eventually will open up bank branches, forcing small community banks from business. When Jack Pansegrau in Hand Springs, Calif., heard about the debate, he sided with Wal-Mart. Maybe the organizatio
n that has saved Americans "billions and billions" could lower fees for use of automated teller machines along with other charges, he wrote. Such letters right now number nearly 2, 000 - the largest-ever response to some bank application at the FDIC where the problem is so controversial that the FDIC has had the unusual step of holding open public hearings. Unfortunately, though, these hearings may become more of the sideshow and it's likely the issue could be more a referendum on Wal-Mart the shop, than on Wal-Mart the potential bank. The Federal Reserve has raised issues that commercial owners of industrial banks avoid an amount of federal bank supervision and it's prompted opponents to question whether that insufficient full oversight could allow potential troubles inside the company to spill into the bank's company and disrupt the payments system. Additional, less oblique opposition has focused about the historic separation of banking and commerce within the U. S. Intere
stingly, Wal-Mart is not the only commercial firm to seek to setup an industrial loan company. Its competitor, Target, succeeded in its industrial financial institution application. GM and GE also possess industrial banks. But along comes Wal-Mart and suddenly some people decide that the regulating procedure is inadequate. A few says are even threatening preemptive legislative motion against Wal-Mart's bid, but hopefully New Hampshire won't follow suit. Quickly determining which method the wind is blowing, politicians as well as opponents are weighing in. Senator Hillary Clinton, that curiously once served on Wal-Mart's panel, now says she has "serious reservations" concerning the bank application. Her "new" position is shared by several large Ny financial institutions, which view such banks as potential causes of competition. Alan Greenspan has said the applying process has the "potential........ to further undermine the policies Congress has built to govern the banking sys
tem. inch His successor, Ben Bernanke, agrees. Numerous lawmakers, including anti-business Congressman Barney Honest ( D-MA) and Paul Gillmor (R-OH) dispute that granting Wal-Mart a bank rental, given the retailer's "massive scope as well as international dealings, " would carry a lot of risks. In an example of reasoning gone terribly awry, Steve Verdier, Senior VP from the Independent Community Bankers of America, thinks Wal-Mart's bank could wreak havoc on the economy even in addition to the fair competition issues. "Just think in the event that Enron had opened a bank" he or she states. But he admits that while you will find other principles involved, his group opposes Wal-Mart's rental mainly "because it's Wal-Mart. "Many other people, however, say low bank pricing is what you want. "Wal-Mart sees banking as an chance to give the customer a better offer, " says Howard Davidowitz, chairman of the New York retail consulting and expense banking firm. "That's what Wal-Mart's
regarding. That's why they have demolished the meals and toy industries. If it's better for that customers, then that's the way it should be. " Even Robert B. Reich, the liberal-minded labor secretary within the Clinton administration, says that even though Wal-Mart is "not my personal favorite employer, " he is in favor of the Wal-Mart bank, for the very progressive reason it would improve life for ordinary individuals. All the opposition to the strategy, he added, "is a pretty good sign that consumers would be helped if Wal-Mart might get in somehow. "It's interesting to imagine what might happen if Wal-Mart applied its legendary price-cutting along with other business techniques to banking. Clearly, it could do things that banks don't (or won't) perform........ like giving customers faster access to money and paying more focus on low-income families so they could possibly pay lower fees to cash inspections. Sky high credit card interest rates would surely decrease too. T
he retailer might actually bring to banking exactly the same cost-cutting strategy that made it prevail over less-efficient competitors and be the preferred retail outlet in United states. Given its technological and business experienced, inexpensive capital, instant geographical reach, and understanding of the financial arena, small and midsize banks have valid reason to be paranoid. Even big ones ought to be looking over their shoulders. After just about all, as grocers, toy retailers, and jewelers have discovered, complacency in the face of Wal-Mart could be competitively dangerous, if not fatal, and that's what a free capitalist economy is about. As submitted in an earlier line, Wal-Mart runs its business and earns its profits through the voluntary decisions of its customers to look there. Within this context, A Wal-Mart "bank, " would operate very much the same. No one would be forced to make use of its services. Wal-Mart's opponents (whether these people be posturing p
oliticians, competitors, unions--who fail again and again to organize its employees, or the government) certainly have the right to to argue in regards to what line of business Wal-Mart can or cannot get into. But as long as it doesn't violate any laws, Wal-Mart's should possess the right to function in a free capitalist economy in a manner it sees fit. Hopefully, it willl be a force in banking............. and that could be good news for all those. "Many people want the government to safeguard the consumer. A much more urgent problem would be to protect the consumer from the federal government. " Milton Friedman
Ted Sares, PhD, is really a private investor who lives and writes within the White Mountain area of Northern New Hampshire together with his wife Holly and Min Pin Jackdog. He writes a weekly column for any local newspaper and many of their other pieces are widely published.
View this post on my blog: http://creditcard.valuegov.com/banking-on-wal-mart/
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