When I look at Wal-Mart, I see an American success story. The retail giant started in the backwoods of Arkansas and, over the last half century, has grown into the largest retailer in the world. Sam Walton, the company’s deceased founder, was a true visionary. He developed business methods that would expand his company while continuing to attract consumers with low-cost merchandise. As they did with virtually every other successful American business, liberals have targeted Wal-Mart for annihilation.

Angela Cesere
John Stiglich

Liberal complaints about Wal-Mart’s business practices are too many to detail here, but the latest objection is gaining some momentum: Wal-Mart wants to destroy American banks. After delaying its decision six months, the Federal Deposit Insurance Corporation is expected to decide this month whether or not to issue Wal-Mart a banking charter. In light of the growing fears over what the retail giant’s entry would do to the health of the American banking industry, the FDIC is likely to cave under the pressure applied by the anti-Wal-Mart crowd and deny the company’s application.

During the summer of 2005, Wal-Mart applied for a banking charter in the state of Utah to establish an industrial loan corporation. ILCs are commonly used by retail companies to offer consumers an in-house credit-purchasing alternative to the third-party debit and credit cards already on the market. Ideally, consumers would pay for their purchases with credit cards issued by the retail company’s ILC, making the cost of third-party credit transactions insignificant.

You might be asking yourself, “Why on earth would Wal-Mart want its own bank?” Well, in case you did not know, every time you pay for an item using your credit or debit card, the company you are purchasing from loses fractional amounts of money to your bank or credit card company. To a mom-and-pop operation, those losses are small, but for retail giants like Home Depot, Wal-Mart and Target, they are substantially more consequential.

While the anti-Wal-Mart crusaders are using the bank application as a soapbox for their usual whining, the banking industry’s complaints are at least economically based. It fears the company’s enormous size will permit any bank Wal-Mart operates to charge lower prices for services and lower interest rates, forcing smaller banks to exit the market. The concern is that once those smaller banks are gone, Wal-Mart could increase the costs of services and interest rates to consumers.

Wal-Mart’s principal rival, Target, received the blessing of banking regulators for its ILC in 2004 with nary a protest from the banking industry. The lack of concern over Target’s charter led Wal-Mart to believe banking regulators would quickly approve its ILC application. Unfortunately for Wal-Mart, there are many double standards in Washington.

Now that Democrats control both chambers of Congress, liberal policymakers can dictate the fate of Wal-Mart’s banking charter. According to The Wall Street Journal, the new chairman of the House Banking Committee, Rep. Barney Frank (D-Mass.), plans to introduce legislation that would ban retail companies from applying for banking charters. However, retail companies that already operate ILCs are allowed to keep their banks.

Frank’s legislation details how unfairly Wal-Mart is treated by the Left. First, if the presence of retail firms in the banking business really threatens the overall health of the industry, why allow previously established retail ILCs to continue operating? Second, Target does not employ union labor, yet its ILC charter was dealt with in a fair manner and subsequently approved. What gives?

Simply put, Wal-Mart is the New York Yankees of the retail industry – everybody loves to hate them, but they secretly hope their team could be just as successful. Through the years, other retail giants from Target to Best Buy have copied Wal-Mart’s business plan and implemented many of its labor strategies but experienced minimal criticism from retail watchdogs. Yet, when Wal-Mart develops a strategy to save its customers money, protestors line up to register their objections and their cronies in Congress voice their support. Never has the liberal vision for America been so clear – it’s OK to be successful, as long as you don’t be the best.

John Stiglich can be reached at jcsgolf@umich.edu.

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