Wal-Mart relentlessly promotes the idea that organized labor generates almost all the negative publicity and opposition to the corporation, but federal hearings held in Kansas City this week demonstrated that a wide range of groups from across the political spectrum share concerns about the corporation’s threats to communities and democracy.
Outcry against Wal-Mart’s bid to enter the banking business led to the first-ever public hearings held by the Federal Deposit Insurance Corporation for a banking application. Wal-Mart is asking the FDIC to let it follow a handful of other companies, including several automakers and the Target discount chain, in opening an industrial loan company (ILC). These ILCs—which allow the companies to process their own credit and debit card transactions—are exploiting a legal loophole in laws that otherwise limit commerce and banking corporations to operating in one realm or the other.
Little controversy accompanied FDIC approval for those other companies.
It’s different this time.
Average citizens weigh in on pending bank applications as often as Wal-Mart donates to charity without touting its generosity. Yet the agency has been flooded with thousands of letters (overwhelmingly negative) on the company’s bid to launch an ILC, and more than 90 percent speakers at the Kansas City hearings opposed granting Wal-Mart the permit. Testimony at an FDIC hearing held earlier this month in Washington D.C. (where I spoke on behalf of the American Independent Business Alliance) also was stacked against Wal-Mart’s application.
Tellingly, even Wal-Mart’s supporters at the Washington hearings (many of whom have received hefty amounts of cash from the corporation) assumed the world’s largest retailer will not stop at serving its internal operations, as its spokesperson promised, but rapidly will evolve into Wal-Bank.
Among the broad lineup of organizations that testified to the FDIC were many that never have uttered a word against Wal-Mart’s policies and practices. Even many staunch supporters of unfettered free markets realize Wal-Mart’s size alone demands special treatment and that existing laws are not up to the challenge presented by the company’s power. Indeed, Ben Bernanke and Alan Greenspan—the current and past chairs of the Federal Reserve—have called for Congress to “review” the ILC loophole, and several states already are weighing bills to ban out-of-state ILCs in response to the Wal-Mart threat.
Naturally, Wal-Mart executives complain that it’s unfair for the Target Corporation to own a bank while they cannot, and they understandably are frustrated that Target largely escapes scrutiny for operating a business that emulates Wal-Mart in almost every manner. But just as many communities rightfully control big box stores more stringently than small businesses, Wal-Mart’s power demands we control it more stringently.
After eight years of helping communities and independent businesses organize against the threat of corporate chains, I don’t doubt the ability of well-run independent businesses to compete successfully against Wal-Mart or any other chain in a genuine market economy. But “free markets” in the U.S. exist only in economics textbooks. I’ve seen Wal-Mart’s economic clout translate into political dominance in towns throughout the country, undermining both market competition and democracy.
In this system of corporate/state capitalism, Wal-Mart has been extracting subsidies for hundreds of its facilities, including 90 percent of its distribution centers. Wal-Mart and other giant companies wield their uncontrolled size and power to distort free markets through these subsidies and by violating with near-impunity many laws theoretically protecting communities, workers and healthy living conditions.
In too many cases, America’s independent businesses are being out-lobbied, not out-competed, by Wal-Mart, and many other corporate chains.
Those who trust Wal-Mart will limit itself to a narrow range of banking activity misunderstand the nature of publicly-traded corporations, which by design are driven to grow perpetually. For a publicly-held company, there is no such thing as “big enough.”
Just as Wal-Mart constantly expands into new spheres of retail and services, so too it will seek to expand its reach in financial services. Given the current ease with which giant corporations convert monetary power into political power, why should we doubt it will succeed? Wal-Mart will not be content to continue leasing space to banks in its “supercenters” in exchange for a slice of the action when it can take the whole pie.
Wal-Mart naturally would use its bank to maximize shareholder profit, rather than serving the interests of communities in which it operates. And while many other banks are publicly-held companies, Wal-Mart’s size and scope again creates potential for harm that no other company is capable of inflicting.
If Wal-Mart is allowed to expand into finance, the company undoubtedly will use that power to eliminate ever more independent businesses, leaving many smaller communities frighteningly dependent on a single corporation. As one North Dakota banker previously asked the FDIC, will Wal-Bank lend you money to open or expand a competing hardware store, even if you have a sound business and marketing plan? Would you want to open your business’ books to Wal-Bank?
Size matters, and Wal-Mart’s necessitates clear and impermeable limits. The corporation’s bid to leap into the realm of banking should be stopped cold -- and that’s just a beginning.
Jeff Milchen is the co-founder of the American Independent Business Alliance, a non-profit organization helping communities form local Independent Business Alliances to sustain strong local economies based on independent, locally-owned businesses and prevent their displacement by corporate chains. AMIBA also counters entities like the U.S. Chamber of Commerce, which spins the agenda of transnational corporations as benefiting small businesses.
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