Sunday, March 12, 2006
National Bank of Wal-Mart?
Living in South Central Kentucky, I'm familiar with a local company called "Dollar General." I also know (and use) Farmers National Bank which just happens to be owned by Dollar General. I'm not sure of the details though the director is Cal Turner of Scottsville KY according to the KY Secretary of State. (Listing for FNB FINANCIAL CORP.)
In my opinion, Mr. Turner was a genius to open his own bank to handle the AR/AP and CC processing alone. Toss in the payroll, internal financing and other uses for an in-house financial institution I assumed they were saving millions of dollars. They are a great local bank and even have a very competitive small business account offering as well.
Friday, Reuters ran a story about Wal-Mart trying to open their own industrial bank in Utah. (Why Utah? There must be a good reason because besides Delaware, I have noticed a concentration of banks in Utah including American Express.) I say "trying" because according to the Reuters report, there are some people who are not so happy about this idea. I think their arguments are valid but in the end, who can fault Wal-Mart for wanting to be more profitable and have more control over their finances? Not me... that's for sure.
US lawmakers:
Wal-Mart threatens US payment system
Fri Mar 10, 2006 10:21 AM ET
By Kristin Roberts
WASHINGTON (Reuters) - A group of lawmakers on Friday said an industrial bank owned by Wal-Mart <WMT.N>, the world's largest retailer, could threaten the stability of the U.S. financial system and drive community banks out of business.
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."
The congressmen said the losses to the FDIC, which insures deposits at banks and thrift institutions, could be staggering if Wal-Mart begins to have financial troubles that bleed into its bank's business.
"Consider the consequences if Enron or WorldCom had owned a bank," the group said.
I'm learning to look at these issues from a more political perspective. What I mean is, who is involved in the contention and why? What are the political motivations and who are they protecting? I don't know the answers but I do view the arguments as a little weak. With all the oversight in the banking industry as well as Wal-Mart's professional integrity, I think there's nothing wrong with them having a cash rich bank in the US. Just like Mr. Turner's bank, it just may end up being a good thing for the local communities and entire country.
