A Stitch in Haste

Question: What do General Electric, General Motors and Target have in common?

Correct Answer #1: They each have a bank as a subsidiary.

Correct Answer #2: They are not Wal-Mart.

In a highly critical letter to the acting chairman of the Federal Deposit Insurance Corp., obtained by Reuters, a group of more than 30 Congress members asked the bank regulator to reject Wal-Mart's application to open a bank in Utah.

"Wal-Mart's plan, to have its bank process hundreds of billions in transactions for its own stores, could threaten the stability of the nation's payments system," the lawmakers wrote.

"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."

This is, of course, utter nonsense.

What difference does it make whether Wal-Mart clears its financial transactions internally or externally? If Wal-Mart were to have some sort of financial implosion (how that could happen is not addressed by the "highly critical" politicians), then wouldn't it be better that it affect Wal-Mart and only Wal-Mart?

This would be akin to saying: "It's too risky for Wal-Mart to issue its own paychecks to its workers -- what if something happened? We should force it to use Paychex or ADP."

The idea that Wal-Mart poses any threat to our financial system, let alone a greater threat than General Motors, is so preposterous as to surpass petty politics and enter into the realm of mental instability. One can almost hear Howard Dean screaming in the background.

More:

Consider the consequences if Enron or WorldCom had owned a bank," the group said.

Is there a "Godwin's Law" for Enron yet? In any event, the "consequences" if Enron and WorldCom had owned banks would have been that those companies and their executives would have been more heavily scrutinized by more regulatory bodies and probably never would have turned into the disasters that they did. Go figure.

And remember, by "bank" we are not talking here about Citibank, Chase, KipTrust or Diamond Federal Savings. We're talking about a so-called industrial bank -- which by law can only operate in the state where it is chartered (in this case Utah) and typically serves a single, specialized function (in Wal-Mart's case most likely to run its credit card operations). Grandma will not have her Christmas Club or IRA with "Bank of Wal-Mart" (and would it really be so bad if she did?).

This is brazen, sensationalist anti-Wal-Mart bias, pure and simple. In the wake of the Maryland debacle, it's almost like a feeding frenzy, or a Salem Witch Hunt sort of mass hysteria. Anything that Wal-Mart tries, anywhere, must by definition be the devil's work -- even in supposedly devil-free Utah.

In reality, the devil's work occurs mostly in the halls of Congress, not in a Wal-Mart store and especially not in a Wal-Mart bank.