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Monday, April 10, 2006

Wal-Banking

Wal-Mart is once again facing off with the folks who want to paint them as the evil destoyers of all that is good in small town America.

This time it's over their request to open an Industrial Loan Corporation, or Industrial Bank, as the are regularly known. Folks are screaming that Wal-Mart is going to use this avenue to destroy community banking. Um, excuse me folks, but look around, it's already dead, or at the very least on life support.

I mentioned a few months ago eating dinner in the vault of the place where my first account was opened. We didn't eat there because the bank was doing a promo, but because it was bought by a larger bank (Bank One), and closed. It's now a restaurant, not a community bank.

Local banking does exist to some extent, but it's not as though it dominates the landscape like it did a few decades ago. Banking regulations allowing banks to operate across state lines in 1994 created huge banks and a few smaller community banks, but not nearly as many. The Wells Fargo's, Citibank, and others are now the "community bankers".

Back to Wal-Mart, they aren't trying to open a consumer bank, but an "industrial bank". In this case, it's a bank that would handle credit card transactions at their stores. This would save them about $10 million a year by eliminating payments to a third party to do it. They aren't the only retailer to be doing such a thing, Target already has it's own industrial bank. Here's a link to a list of the industrial banks in the state of Utah where Wal-Mart is attempting to charter theirs.

While some also dislike the idea of retailers getting into the financial sector, this type of hulabaloo wasn't raised when Sears started running a credit card company (Discover), or bought out Dean Witter Financial Services in 1981.

No, the actual issue here isn't an industrial bank, the issue is it's Wal-Mart wanting to open it. Never mind that their application specifically says they aren't getting into commercial banking. Never mind that because of the application they couldn't get into for three years if they do get approval.

Never mind that they have leases that go out to 2024 in some of their stores with other banks, that would cost them millions to terminate. None of the facts matter, only who's trying to open it, not the why.

Could they, in three year, get into commercial banking? Yes, but they'd have to go through the whole FDIC review process again. That would be the appropriate time to be screaming. Instead the folks at WakeUpWal-Mart, etc, are screaming now, with mostly lies and a few half truths.

(Yes, Dorothy, Edelman PR did e-mail me about this issue, though I used none of their references)
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3Comments:

Blogger Tim said...

The Walton kids already have enough money!

6:49 AM  
Blogger Crazy Politico said...

So Tim, what's the maximum amount of money a company can make before they are no longer allowed to kill inefficiency in their operations.

10:47 AM  
Blogger James B. said...

Congress needs to pass the Equalization of Opportunity Law!

3:26 PM  

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