Only Wal-Mart could turn a hearing at the obscure Federal Deposit Insurance Corporation into a media event. The corporation is asking for approval from the FDIC to 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 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 approximately 2,400 letters (overwhelmingly negative) on the company's bid to launch an ILC, provoking the first-ever public hearing on an FDIC application today. Many opponents suspect the world's largest corporation will not stop at serving its internal operations, but rapidly will evolve into Wal-Bank.

Wal-Mart seeks to portray opponents as representing narrow interest groups, but the broad  lineup  of organizations set to testify at the FDIC indicate something quite different. Many have never 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—Iowa's passed last week.

Naturally, Wal-Mart executives complain that it's unfair for Target Corporation to own a bank while they cannot, but just as many communities rightfully control big box stores more stringently than small businesses, Wal-Mart's power demands a higher level of scrutiny.

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'm testifying against allowing the Wal-Bank because 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, anti-competitive practices 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.

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?

Leading thinkers have long recognized the threats to our republic posed by allowing uncontrolled growth of corporations. Thomas Jefferson warned against an “aristocracy of our moneyed corporations.” James Madison urged, “The power of all corporations ought to be limited…The growing wealth acquired by them never fails to be a source of abuses.” These men did not oppose the existence of corporations, but recognized that, unless they are limited in both size and scope, they will grow to overwhelm democracy.

Size matters, and Wal-Mart's necessitates clear and impermeable limits. It's time to put a cage around this eight-million pound gorilla before it no longer can be contained.

The writer directs ReclaimDemocracy.org. he is a co-founder of the American Independent Business Alliance.

 

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