Tuesday, April 11, 2006

Bankers, unions, & pols: Wal-Mart in banking? Hey, no way, that would force competition
Wal-Mart stoppers mob hearings

A stream of officials from the banking industry, unions and consumer groups -- allies for once -- urged federal regulators yesterday to reject a bid by Wal-Mart Stores Inc. to expand its empire into the banking business...
Given Congresswoman Stephanie Tubbs Jones legislative track record in 109th congress (bills passed: 0 of 17) plus her apparent lack of knowledge of the banking and retail industries, one wonders why her party and the banking and union lobbyists would want her to take the lead in the public hearings. Perhaps they knew they could count on her to demagogue the issue with statements like this:
"Given Wal-Mart's massive scope and international dealings, it is not possible to rule out a financial crisis within the company that could damage the bank and severely disrupt the flow of payments throughout the financial system," said Rep. Stephanie Tubbs Jones, Ohio Democrat, who heads a group of lawmakers opposed to the company's application. "The potential losses to the FDIC are staggering. Our country is extremely fortunate that Enron and WorldCom did not own banks."...

Here’s the real reason banks and unions don’t want Wal-Mart in the banking business:
Wal-Mart's bid for federal deposit insurance for a state-chartered bank in Utah -- which would handle the 140 million credit-card, debit-card and electronic-check payments the company processes each year…

By handling its own payment processing, Wal-Mart would save the fraction of a penny per transaction it pays two large banks for the service, adding up to millions of dollars a year…

Supporters say a move by Wal-Mart into banking would benefit consumers by lowering fees and prices in an industry needing more vigorous competition…

As the article points out, Wal-Mart “[accounts] for an estimated 10 percent of the U.S. retail economy.” Guess what happens to unionized processing centers and bankers' payment transaction fees when a lower-cost entity, robust enough to handle 10% of the transactions, shows up on the block. If you were a small retailer and likewise wanted to lower your transaction costs, to whom would you turn?

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