Friday, August 19

Labor Leader oppose Wal-Mart Plan to Set Up Bank

AFL-CIO labor federation's president, John Sweeney, wrote Federal regulators urging them to block Wal-Mart's plans to set up a bank because of what the labor federation called the chain's "long history of unethical, and often illegal, practices."

As the NY Sun points out, Mr. Sweeney forgot to mention that similar arrangements already exist in both the business and labor sectors. As usual, the pro-union people going on the war path against Wall Mart, while the company simply tries to bring down its costs, make a profit, and provide affordable products.

The NY Sun quoted Wall Mart spokesman, Marty Heires, who said, "The charter of this bank and the focus of this bank are very narrow. What we're seeking to do here is save money on transaction fees for debit, credit, and electronic checking. We can take the money we save by doing that and turn it back to our customers in the form of lower prices."
One of Wal-Mart's competitors, Target Stores, started a Utah-based industrial bank last year. Target Bank issues credit cards to businesses. Target also bought a South Dakota bank that issues consumer credit cards. Wal-Mart, which issues its credit cards through an affiliate of General Electric, has no plans to use the new bank for that purpose, Mr. Heires said.

An upscale department store chain, Nordstrom, also has an "industrial bank" to handle its credit card accounts. Many companies favor that arrangement because it does not bring the entire conglomerate under regular federal supervision.

Mr. Sweeney's letter, which was released yesterday, warns that the proposed Wal-Mart Bank could suffer from "a serious conflict of interest" if the bank made loans to the chain's suppliers. The labor leader did not mention that similar arrangements already exist in both the business and labor sectors. A New York-based bank that regularly loans money to unions is also owned by a hotel and laundry workers union, Unite-Here.

Not all consumer advocates think the idea of a Wal-Mart Bank is inherently suspect.

"It could turn out to be a good thing for consumers ... especially the unbanked or those who are suspicious of banks," said a consumer watchdog, Linda Sherry, according to the MSN Money Web site.
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