The Great Wal-Mart Wuss-Out

This isn’t going to be my usual Friday feel-good kind of article, I know.  Then again, writing what folks want to hear isn’t what has grown GonzoBanker’s subscriber base to nearly 10,000 in just five years.

OK, retail behemoth Wal-Mart applied for an ILC charter in Utah so it can process debit and credit card payments more inexpensively.  That much we know.  They run a handful or two of card transactions through Wal-Mart on the weekends, I hear. 

That’s where the facts stop and the conjecture and reactionary arguments from bank lobbying groups and even some bankers begin.  Let me submit now that the real reason the lobbyists are barking so loudly about Wal-Mart is because they are deathly afraid of competing with Wal-Mart.  End of sentence.  Do Not Pass Go. I’m talking about hide-under-the-desk-and-black-out-the-green-shaded-lamp AFRAID of going mano a mano with Wal-Mart.  Let’s run through the main arguments that the anti-Wal-Mart ILC contingent is throwing around:

1. Wal-Mart having an ILC charter will be a violation of one of banking’s guiding principles – banks should be separated from commercial activities.  Sounds great, but it holds zero water.  Target, BMW, Toyota, Volkswagen, Volvo, GM, GE, Pitney Bowes, among others, all have ILC charters, and they garnered nary a comparative whisper from the heavy hitters in Washington.  And at least a few of the aforementioned are Foreign Companies!  Holy cow!  Foreign commercial interests with a banking charter in the U.S. of A?  Barely a whisper from the lobbyists.
2. If Wal-Mart gets a banking charter, it might illegally steer credit toward its business partners and/or make bad loans.  This is really a corollary of #1 above, but let’s address it.  Is the argument that we should stop Wal-Mart from getting an ILC charter because it might some day in the future get into the more traditional banking business and then maybe break the law or possibly make a credit extension mistake?  It’s very noble and impressive to have such Here-to-Help vision.  I can’t believe they float that one out there without laughing out loud.
3. “Wal-Mart is exposed to substantial risk when there are fluctuations in the [Chinese] yuan.”  Giggle, giggle.  Well, I’ll be damned; deny the charter at once!  OK, this isn’t exactly a mainstream argument in the Wal-Mart debate, but of importance is that it was written among other anti-Wal-Mart arguments by former Senator Tom Bliley and published in the 1-27-06 edition of American Banker.  You know, THE Tom Bliley – of Gramm-Leach-Bliley fame.  We should expect better from the former lawmaker.  That statement should be listed under the “Grasping at Straws” heading of the Encyclopedia Britannica.
4. Wal-Mart will do to community banks what it has done to thousands of local retailers across the world – stomp them and put them out of business.  The fear of that happening is the only real issue here.  Never mind that Wal-Mart has specifically said that it has no interest in opening up banking branches in its stores.  Never mind that attorney-laden Wal-Mart is not even fighting at least eight state legislative initiatives attempting to ban Wal-Mart from opening bank branches in their states.  It’s easy to wholesale pigeonhole Wal-Mart as a conniving and morals-free industrialist pig, but let’s not kid ourselves into thinking that this demonization is being done for any other reason than Fear.

Wal-Mart might some day change its mind about branching and the Feds just might let it open branches one day and then Wal-Mart might be really great at banking and then maybe all of our local banks will fold like so many mom-and-pop hardware stores have done in the past.  That is the line of reasoning that is distracting our interests in Washington to the point of indignity.

Bankers – apple-pie-eating captains of American industry, lapel-pin wearing, flag-waving stalwarts of laissez faire economics – lobbying regulators to stop an ILC because they are afraid that possibly they might have to compete with a retailer in the banking world someday!?  For the preservation of our status as vertebrates, can we all just take a deep breath and chill out a bit on the specter of the great retail devil’s potential cutthroat plans to put us all out of business?   At best, it makes us sound like my friend who thinks grocery store loyalty cards are really a conspiracy by health insurance companies to monitor what we eat and drink.

Let’s hearken back to our industry’s long history of growth, performance and service and stop doubting ourselves. Wal-Mart isn’t going to put local bankers on the street.  It’s just not going to happen.  Not because Wal-Mart won’t try.  Hell, it just might try.  It’s because, like we always have, we will find a way to compete and win.  The end.  It would take some planning and changing and resourcefulness, but we’d get it done.

This myopic and paranoid scrutiny of Wal-Mart is making our industry look like a bunch of cowering, pasty schoolgirls.  You know, as I see it there must be at least 14 issues that the ICBA and its likeminded trade group attorneys should be worrying about instead of the Wal-Mart ghost threat……..

Credit unions taking your ground
Elliot Spitzer nosing around
Bank of America owning a Ritz
Customer trust that’s in the pits
State Farm Bank at $11 billion
Consumer regs by the trillion
Way too much consumer debt
BIF shortfall growing bigger yet
Client data breaches
Payday lender leeches
ATM denial fees
Nosy feds lurking in trees
The moving target of BSA
A real estate crash any day….

To say that Wal-Mart will maybe someday potentially put local banks out of business and render a death blow to the local economy is a slap in the face of both local banks and their customers.  Wal-Mart could only possibly win if it assembles a better value proposition than its community bank competition.  Customers won’t just leave their banks like sheep because Wal-Mart has free checking.  Give customers some credit.  And let’s not forget the banks the lobbyists represent.  In just about every way you can measure performance and growth, mid-size banks (community banks) outperform the large banks (the current scary competitor) by a long shot.  Don’t the banking lobbyists know that?  Do they have so little faith in their constituents that they are willing to make them look like sky-is-falling sissies to stop a phantom competitor?

Sure, banks should watch what happens with the Wal-Mart charter application and monitor how Wal-Mart operates IF it garners a charter.  But let’s not lose track of the fact that Wal-Mart would be a competitor.  Not a six-eyed monster with 18-inch teeth.  Not an omniscient, bloodthirsty, unstoppable force.  A freakin’ competitor.  A discount diaper dealer dipping its toe into banking.  Maybe.

Bank lobbyists, let’s have some faith in bankers and stop fretting and fighting this nonexistent fiduciary boogeyman. That kind of what-if nail biting is, well, wussified, and 100% contrary to the spirit and history of success that community bankers have been building for hundreds of years.

ICBA and ABA, I’ll leave you with the response to a question asked of banking executives from the American Banker/Insight Express Executive Forum 3Q2005 as published in the November 9, 2005 American Banker.  The study posed the question, “How effectively do you feel your company’s needs are represented in Washington?” 

• A combined 12% of the respondents said “Very well” or “Extremely well.” 
• 19.5% said “Not effectively.”

Respek – smh