Wal-Mart (ahem) Expands? (Updated)

If this isn’t the be-all, end-all, last-word killer argument for finally dumping deregulation, I don’t know what is: Wal-Mart wants to become *cough* a bank.

The federal agency that insures bank deposits is expected to decide this week whether Wal-Mart Stores can move ahead with its plan to open a bank.

Wal-Mart critics want the Federal Deposit Insurance Corp.’s board, which meets Wednesday, to deny the retailer’s application for a type of bank known as an industrial loan company, or ILC.

Since the Great Depression, Congress has kept commercial companies out of the highly regulated banking industry. But ILCs are an exception. These limited-service banks can be owned by commercial companies, such as retailers, and are free to make loans and take deposits insured by the taxpayers.

About a dozen other consumer-oriented companies also are seeking FDIC approval for ILC applications. For example, Home Depot wants to buy an existing bank, EnerBank USA, to offer home improvement loans.

Opponents fear big retailers will squeeze out community banks. But none of the other applications has stirred the same level of opposition as the one by Wal-Mart, the world’s largest retailer.

Geez, I wonder why that is?

If I was the banking industry, which I obviously am not, I would be shaking in my Bruno Maglis. Godzilla just landed on Tokyo Beach.

[S]ince the early 1990s, more and more large commercial companies, including General Motors Corp., Target Corp. and American Express Co., have been opening ILCs to process loans and credit card transactions. Today, more than 60 companies operate ILCs.

These banks attracted little attention until Wal-Mart announced it wanted a Utah-chartered ILC. Labor activists, community bankers and others flooded the FDIC with protests, prompting the agency to hold hearings last spring. In the summer, it declared a moratorium on all ILC applications through the end of January.

Wal-Mart’s gaping maw precedes it wherever it goes. Poor Wal-Mart. Just because they destroy every vestige of retail competion in every town they move into by paying starvation wages, using slave labor, and forcing their suppliers to do likewise, everybody thinks they’re next.

A 2003 wage analysis reported that cashiers, the second most common job, earn approximately $7.92 per hour and work 29 hours a week. This brings in annual wages of only $11,948. [“Statistical Analysis of Gender Patterns in Wal-Mart’s Workforce”, Dr. Richard Drogin 2003]

The average two-person family (one parent and one child) needed $27,948 to meet basic needs in 2005, well above what Wal-Mart reports that its average full-time associate earns. Wal-Mart claimed that its average associate earned $9.68 an hour in 2005. That would make the average associate’s annual wages $17,114. [“Basic Family Budget Calculator” online at www.epinet.org]

Well, they are but that’s beside the point. Wal-Mart is doing the nation a service by sucking up all the money that’s running around loose and putting it in a safe place: Lee Scott’s pocket. I think it’s very noble of them to want to do the same great service in the financial industry that they do in the retail industry by taking it over.

So what’s next for Wal-Mart? Hey! GM! Ford! Daimler! You ready for the 2010 WM Econo-Buggy?

Update: The FDIC says, “No way.”

The federal agency that insures bank deposits decided unanimously Wednesday to block Wal-Mart Stores, Home Depot and other commercial companies from getting into banking for at least a year.

The Federal Deposit Insurance Corp.’s board extended a moratorium on the companies’ banking applications to “allow Congress a reasonable interval to determine whether and on what terms commercial companies” can move into banking, Chairman Sheila Bair said.

On Monday, House Financial Services Committee Chairman Barney Frank (D-Mass.) and Rep. Paul Gillmor (R-Ohio) introduced a bill to more strictly limit banking to financial companies. Frank said in a statement that the FDIC moratorium “gives us the ability to legislate and maintain the historical and necessary separation between banking and commerce.”


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