House lawmakers offer bill to ban Wal-Mart bank

[Donnachaidh]

WASHINGTON (Reuters) - The top Democrat and Republican on the U.S. House Financial Services Committee on Monday introduced a bill that would ban Wal-Mart (WMT.N: Quote, Profile , Research) and other commercial companies from owning a type of bank known as an industrial loan company (ILC).

The bill was co-sponsored by Barney Frank of Massachusetts, a Democrat who is chairman of the panel, and Paul Gillmor of Ohio, the ranking Republican.

"We are seeking to prevent the expansion of a historically small special niche into a full-fledged alternative banking system, which dissolves the line between banking and commerce," Frank said in a statement.

http://today.reuters.com/news/articlebusiness.aspx?type=ousiv&storyID=2007-01-29T204307Z_01_N29212459_RTRIDST_0_BUSINESSPRO-BANKS-CONGRESS-DC.XML&WTmodLoc=Home-C4-Business-ousiv-6&from=business

[MaineDem]

1. Maine House has a bill to prevent this, as well.

Along with critics of the company, the bankers say setting up an ILC is really a way for Wal-Mart to enter the commercial banking business. They note that the rules in Utah -- where the Wal-Mart ILC would be chartered -- would give the company the ability to do most things banks and credit unions do, such as issuing credit cards and offering home mortgages and car loans, although they would not be able to offer checking accounts under current laws.

The proposal before the Maine Legislature would go further. It would prohibit commercial entities -- such as a big, Arkansas-based company that operates thousands of stores --Ýfrom engaging in banking activities, whether it's through a traditional bank or an ILC.

State Rep. Sean Faircloth, D-Bangor, said his bill would maintain the traditional wall between banks, credit unions and financial institutions and commercial operations, such as retailers.

He said his bill is not aimed at Wal-Mart specifically, but added, "they're just so darn big that they have the power (to change the market) as they have in retail. If they were to apply that same type of leverage in banking, one would worry about our smaller, local banks."

Banking industry leaders say that Wal-Mart should stick to selling clothes and appliances and leave the financial services to them.

http://pressherald.mainetoday.com/business/stories/070130walmartbank.html

[slackmaster]

2. Protectionism on the march

Heaven forbid we allow alternatives to compete with the sacred banking industry.

[TechBear_Seattle]

3. Consumer protectionism, that is

Heaven forbid we allow companies with provenly poor regard for people to do an end-run around banking laws that protect investors.

[slackmaster]

4. Giving consumers fewer choices protects them?

Interesting theory.

[sinkingfeeling]

5. OK, then let's just let Wal-Mart do whatever they want. Then we will no longer be burdened with

choices. There will be only one place to get your clothes, junk made in China, groceries, gasoline, and do your banking. Wally World will be the only game in town!

[slackmaster]

6. Nice straw man you have constructed there

:hi:

[Donnachaidh]

7. WHAT choices are you talking about?

Walmart, which already has ENOUGH money, wants to set itself up as a bank and also be able to issue credit cards? Especially NOW when they have that dazzling little rule that the credit card interest rate can be raised WHENEVER they feel like it?

Please! Allowing Walmart to offer these services will be like setting a ravenous fox loose in a henhouse. And they will be going after the people who can LEAST afford the credit they *offer*.

Consumers don't NEED *choices* like this.

[slackmaster]

9. If someone was going to be forced to use Wal-Mart banking services

You might have a point.

Please! Allowing Walmart to offer these services will be like setting a ravenous fox loose in a henhouse.

That has to be one of the weakest analogies I've ever seen. Since when are consumers held captive like chickens?

And they will be going after the people who can LEAST afford the credit they *offer*.

The real problem for chronically poor people is the legalized sharks who offer "advance" loans for payroll and tax refunds, at outrageous interest rates. People who can't afford to open a de minimis checking account at a real bank or credit union are already getting screwed beyond all reason. Allowing them one more choice isn't going to do a bit of harm. If you want reform that would actually help the poorest people, that would be the place to focus.

Consumers don't NEED *choices* like this.

It's nice to know we have your consumer finance expertise to help decide what people need and do not need. Heaven forbid we make available to people something that they don't have now and really don't need. People just aren't smart enough to figure these things out for themselves.

[AllegroRondo]

10. And when Wal-Mart says "the only card we accept is ours"

what will happen?

[slackmaster]

11. I guess they'll have to decide whether to go that route or shop elsewhere

But back to reality - There is no way Wally World is ever going to stop accepting cash, checks, and major credit cards.

The way the Visa and MasterCard merchant agreements are written, if one Wal-Mart store accepts the card they all have to.

[Omaha Steve]

17. Sam's (owned by W mart) only takes

The Discover Card currently in it's Council Bluffs store.

[AllegroRondo]

18. Not exactly - remember the big lawsuit from 2 years ago

Wal-Mart sued for the right to accept only the cards they wanted, and won. For a long time after that, they would not take debit cards if you ran them as credit. Then they would only take Visa debit, but not MC.

[DerBeppo]

12. use cash. -nt-

[slackmaster]

14. Yup, "Legal tender for all debts, public and private"

:nuke:

[Donnachaidh]

23. so how long have YOU worked for Walmart?

It's nice to know that you think the corporation who pays slave wages to people in China are goign to be *such* humanitarians to the poor in this country. :sarcasm:

[slackmaster]

29. I worked for a bank for many years

I know what they're about. Choosing them as your champions in an ideological struggle Wal-Mart strikes me as just plain silly. Banks are not your friends. They treat their own customers like dirt. They treat non-customers like amphibian poop.

I can understand the sentiment to want to kick Wal-Mart in the nuts at every opportunity, but that's not a sound basis for public policy decisions.

[high density]

24. Wal-Mart supposedly does not want to get into retail banking...

They want to save money on credit card processing fees. Whether or not they're being honest about that is questionable.

Where does this "people can't afford to open a bank account" stuff come from? I've seen it before on DU. How would a hypothetical Wal-Mart Bank improve that or the loan sharks? There are plenty of savings accounts with $25 minimums or free checking accounts with $50 opening deposits. Even people working at Labor Ready should be able to swing that, and the savings for them will add up fast without stupid $5 check cashing fees.

[Jeff In Milwaukee]

15. You're kidding, right?

Wal-Mart has proven time and again that its business plan calls for the destruction of any local competition. Give Wal-Mart an open door, and you'll find any and all local banks driven from the marketplace in a matter of a few years. Competition leads to monopoly. Only regulation ensures consumer choice.

[slackmaster]

19. Let me know when they take on Bank of America, Wells Fargo, etc

:rofl:

[Jeff In Milwaukee]

26. That's pretty much the point, here...

Walmart won't take on the major banks (not at first, anyway). The first thing they'll do is buy out or force out all smaller, local banks and savings & loans. So consumers will have a choice between Walmart and the other major players. Fewer choices, not more.

[slackmaster]

27. Is there any place where Wal-Mart is actually the only place to shop?

I try to avoid it, but on Sunday I ended up going to Wal-Mart because both the CVS and the Walgreen's drug stores in my neiborhood were out of an item that I need. Wal-Mart not only had it in stock, but had three different brands.

I live in a large city, so there really isn't any way Wal-Mart could put all the small realtors and neighborhood stores out of business. Maybe that can happen in small, isolated places. I haven't personally seen it.

[Jeff In Milwaukee]

31. Go to a rural town...

From the 1970's through the early 1990's, Wal-Marts were principally located in small and medium-sized towns. When they showed up in these cities, they sucked the retail out of Main Street in every town in the county. One study, by an economist at the University of Iowa, documented that these small towns lost nearly half of their retail businesses within ten years of Wal-Mart coming to town.

And the phenomenon is not limited to rural towns. The local hardware store here in my affluent Milwaukee suburb is going out of business, the victim of competition from Home Depot and Lowe's. In Cincinnati (where I used to live) all of my favorite Mom and Pop hardware stores went out of business for the same reason. For most hardware purchases, unless I was willing to drive halfway across town, I literally had no choice but to shop at Home Depot.

[slackmaster]

32. I've saved hundreds of dollars on my home electrical upgrade project

By buying cable, switches, receptacles, etc. at Home Depot as opposed to anywhere else in town. A 250-foot piece of 12-3 cable with ground costs about $80 less at Home Depot than it does at the well-loved small chain store Dixieline across the street, where I prefer to shop for hardware and tools.

As much as I dislike some of Home Depot's business practices, I'm not willing to martyr my finances just to help Dixieline stay in business.

Are you really worse off for being semi-forced to shop at Home Depot? Has your community been harmed overall by their presence?

[Jeff In Milwaukee]

33. Yes

Is this not obvious?! The big box stores (and Wal-Mart is the worst offender here), but pressure on their suppliers to provide products at the lowest price, creating a vast "race to the bottom" with regard to wages and benefits for their manufacturing workforce. That would include prison and sweatshop labor in asian nations, and an crippling loss of manufacturing jobs in the United States. You got a great deal at Home Depot, but your savings were underwritten by somebody else's misery.

On the retail level, because they pay such lousy wages and provide virtually no benefits, taxpayers end up picking up the cost for your $80 savings. Rep. George Miller released a study last year that showed the presence of a Wal-Mart in your community costs taxpayers $420,000 per year in government subsidies.

That $420,000 figure doesn't include any tax breaks your local government may have offered Wal-Mart for the "benefit" of having one of these stores in the neighborhood. Nor does it include other indirect costs, like the increase in medical costs for everybody that results from people going bankrupt from their uninsured medical bills. Nor does it include the fact, documented by the Los Angeles City Council, that the presence of a Wal-Mart in the community depresses wages paid to workers in businesses.

[brentspeak]

21. Considering that Mall-Wart has already monopolized so many sectors of our consumer economy...

...your feeble claim that this bill would "give consumers fewer choices" would make a horse laugh.

[slackmaster]

28. Please name some

Sectors of the economy that Wal-Mart has actually monopolized.

[brentspeak]

34. Pretty much the entire retail market

It's been documented many times over how companies have been forced to sign contracts with Mall-Wart to only supply Mall-Wart with their products. Just for one example, the entire Chilean salmon fishing industry is now constructed so that most of the salmon suppliers can only supply their wares to Mall-Wart. http://www.thewritingonthewal.net/?p=774

Does this help?

[Democrats_win]

8. Not a Wal-Mart fan, but DUer's need to explain why we should protect greedy bankers.

[DerBeppo]

13. because they rank higher on the DU continum of hate. -nt-

[Jeff In Milwaukee]

16. Because the law would also protect local credit unions

nt

[Donnachaidh]

22. that's an ENTIRELY different argument

There needs to be a defined line between banking and large corporations like Walmart.

[Name removed]

20. Deleted sub-thread

Sub-thread removed by moderator. Click here to review the message board rules.

[AX10]

25. The banking industry is bad enough. If Wal-Mart....

is allowed to get into this business, it will just become worse. Imagine these two powerful entities (Wal-Mart and Banking) together! :scared:

[slackmaster]

30. Remember when Sears tried to get into retail banking?

It didn't work out for them. Unless Wal-Mart can effectively compete with existing banks and credit unions, the same thing is likely to happen to them.