Bank of Wal-Mart Freaks out America

Only Wal-Mart has enough clout that when they file a routine regulatory application with the FDIC to open a new company called Wal-Mart Bank does it stop the massive agency dead in its tracks. The FDIC received so many complaint letters that it had to hold its very first deposit application public hearing. (Time Magazine)

Wal-Mart is by far one of the most controversial American corporations. Americans love to shop there because they offer super low prices on almost every imaginable product, yet these super low prices have been suffocating Mom & Pop small businesses to the point of extinction.

Now Wal-Mart wants to get into the banking business and it’s not just the small business owners yelling this time. Folks in the financial industry are concerned that Wal-Mart could push them out of town by easily offering higher interest rates on deposits while lowering bank service fees.

I have to admit I don’t have much compassion for bankers. They have been raping everyone since the beginning of time with their nickel and dimming service fees and the only reason they get away with it is because they can. It is nice to see a one time small business grow to the point where they can frighten those that have been smacking Americans around with 18% interest rates with zero compassion while living the fat life.

Before I make my point I should state that I am usually on the side of Wal-Mart when one raises the “Is Wal-Mart good for America” debate. I can sum up my argument on behalf of Wal-Mart with they only grew to their massive size because people liked shopping their. Just like JC Penny, K-Mart and Target they started with humble beginnings and by analyzing and perfecting every possible process they grew to who they are today. Simply put, if Americans did not like Wal-Mart they would not shop there.

But with the case of Wal-Mart Bank there are a few issues we should understand. (MSN Money)(Fool.com)(The Nation)

The benefits are quite obvious; if they can do to banking what they did to retail then there should be a huge shake up among the banking industry and hopefully our service fees would go way down. But there are those that are saying (primarily bankers and economists) Wal-Mart Banks could be a huge conflict of interest. They propose the argument that there is no incentive for Wal-Mart to give small business loans to businesses who want to get into retail or any competing venture.

Additionally, Wal-Mart Bank could be so big that the FDIC could not insure them and if it ever became a bust the tax payers would have to flip the bill.

To be fair, as much as I know Wal-Mart is only saying that they want their banking license because they want to handle the complete processing of debit cards and credit cards and not have to pay 3rd party fees. These fees could save Wal-Mart pennies per transaction which adds up to millions a year.

I am still not sure where I stand on this just yet. I am leaning a bit towards Wal-Mart because everything they do on a macro level seems to offer substantial monetary savings to the economy.

On a side note, my wife just walked in with her hands full of goods from Target. Right in the middle of me writing this post she is showing me all these things she bought and telling me how much she loves that store.

This entry was posted on Tuesday, April 18th, 2006 at 9:48 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.