Wal-Mart
September 29, 2008 – 10:02 pm by BHWhile discussing the financial crisis at lunch today our discussion turned to the giant from Bentonville. You may remember that several years ago banks were freaking out that Wal-Mart might enter their marketplace (BW):
The retailing giant’s relentless push into financial services is starting to send shivers through the banking industry. Few believe Wal-Mart will stop with basic services as it applies its low-price, high-volume formula to yet another business category. And while other companies, from Nordstrom to General Motors, have bank and thrift charters or hybrid Federal Deposit Insurance Corp.-insured industrial loan companies (ILCS) in tow, no one trips alarms like Wal-Mart. Many community bankers are convinced the behemoth won’t rest until it has obtained full banking powers. “It’s not a question of if Wal-Mart’s going to be a bank, it’s a question of when,” says D. Anthony Plath, a finance professor at the University of North Carolina at Charlotte.
Wal-Mart was rebuffed when it tried to enter the banking market and it was rebuffed when it tried to offer hurricane relief to New Orleans and other affected areas (WP). But imagine for a moment the price discipline Wal-Mart might bring (MSN):
Wal-Mart’s relentless push for ever-lower prices has revolutionized retailing and is sometimes even credited for helping to keep U.S. inflation low. It’s not hard to make the leap into imagining the retailer bringing similar price discipline to an industry grown fat on escalating rates and fees. (Fee income now comprises half of banks’ total income, according to investment banker R.K. Hammer.)
Our markets currently need liquidity and stability and Wal-Mart could certainly add both. Critics also couldn’t claim that this is some sinister example of the government bailing out Wall Street since Wal-Mart’s customers mostly fall on the bottom portion of the income spectrum. It’s time for reform. It’s time for low prices.
