We note with some bemusement that Wal-Mart Stores Inc.’s application for a Utah industrial loan corporation charter is attracting predictable suspects, both for and against.
WalMart’s plans have, of course, spread panic in the ranks of bankers large and small, which panic has reached sufficient pitch to prompt the FDIC to schedule hearings on the matter. Indeed, 40 members of Congress have signed a letter in opposition to WalMart’s application.
That letter, sent on March 10 to FDIC vice chairman Martin Gruenberg by Congresswoman Stephanie Tubbs Jones (D-Oh), raises some interesting oversight issues—mainly, that regulation of economic giants like WalMart should be in the hands of the Federal Reserve and not the FDIC—but most of its concerns are about Wal-Mart’s possibly abandoning its pledge to run only a merchant-acquiring operation, and eventually go into the branch-banking business.
As we’ve previously observed, Wal-Mart couldn’t do this without either applying for permission to do so, or committing perjury. In the former case, opposition is almost guaranteed to be fierce; the latter is unlikely in the extreme, considering that the $600 million the company could save as its own merchant acquirer is practically a rounding error to a company with $312 billion in revenues.
But the strongest argument in favor of granting Wal-Mart’s application is the spectacle of bankers—capitalists all, we hope—raising the specter of Wal-Mart’s being unfair competition because of its size.
No bank, to our knowledge, has protested in support of poor Joe Lopez, a small businessman who had $90,000 stolen from his Bank of America bank account by cyber crooks, despite his telephoning the bank to try to stop the unauthorized transfer. Based on the court records in Miami, BofA is employing exactly the same tactics that fellow bankers are deploring in the WalMart case—overwhelming power. But the protesting banks have somehow concluded that while they’re entitled to what they call an “even playing field” when dealing with weaker entities, they themselves are entitled to be protected from competition from bigger fish, lest they be eaten.
On WalMart’s side are many of the nation’s biggest industrial and financial companies, including Goldman Sachs & Co., General Electric, and Merrill Lynch. All of these companies have Utah industrial loan corporations themselves, and don’t appreciate this assault on what they’ve found to be a very useful means to be as much of a bank as they choose, without annoying federal regulations.
Of course, since government can’t deny Wal-Mart its application without rubbing up against such companies, the array of force tells you how this is going to play out: The most that opponents can hope for is some modification of Wal-Mart’s charter and oversight provisions.
That being the case, we can’t help but think that the energy and treasure being put into this show by banks would be better spent investing in better systems, products, and marketing campaigns that could improve their competitive positions. The marginal adjustments in favor of Wal-Mart’s opponents can’t, it seems to us, avoid the main issue: that customers, and the market, decide these matters, not government. All this noise is only making banks seem weak and panicky, and their allegiance to competition selective, at best.