Greenspan Opposes Wal-Mart's Banking Plans

There are limits to Greenspan's free-market tendencies after all:

Greenspan Opposes Bank Loophole, by Bernard Wysocki Jr., WSJ: Federal Reserve Chairman Alan Greenspan is opposing a regulatory loophole that allows corporations to own banks, thrusting himself into the middle of an effort by Wal-Mart Stores Inc. to establish a bank. Mr. Greenspan's salvo, outlined in a 12-page letter to Congress ..., is the latest in a controversy over the separation of commerce and banking. ...

Wal-Mart officials say the Utah bank would be a back-office processing center, handling debit-card, credit-card and electronic check-transfer payments ... A third party currently processes the transactions ... and bringing the work in-house would save Wal-Mart money. Company officials repeatedly have said they don't plan to establish bank branches. Under current law, these state-chartered banks, many incorporated in Utah, may open branches in more than 20 states...

In his letter, sent Jan. 20 in response to questions from Rep. Jim Leach, ... Mr. Greenspan doesn't single out Wal-Mart's application for criticism but mentions it along with the names of other big companies that have established industrial-loan corporations -- or industrial banks, as these state-chartered financial institutions are sometimes called. ...

"The ILC exemption is now the primary means by which commercial firms may control an FDIC-insured bank engaged in broad lending and deposit-taking activities and thereby breach the general separation of banking and commerce," Mr. Greenspan's letter said. He warned that the growing use of the loophole is "undermining the prudential framework that Congress has carefully crafted and developed" to oversee financial institutions. ...

In uncharacteristically blunt language, Mr. Greenspan urged Congress to close the loophole, which he said "provides the corporate owners of exempt ILCs a significant competitive advantage over other types of banking institutions, and creates an unlevel competitive playing field among banking organizations."

In an interview, Mr. Leach, the former chairman of the House banking committee, said he considered Mr. Greenspan's letter significant. "It's ... a stark warning to the Congress" about the need to separate commerce and banking, Mr. Leach said. "This is not primarily a Wal-Mart issue. It is a 'nature of the American economy' issue."...

In coming out against the ILC loophole, and by implication against Wal-Mart's bid for a bank, Mr. Greenspan has parted company with some free-market advocates who believe that a Wal-Mart bank, if it did turn into a retail-banking powerhouse, would encourage competition in the financial-services field, and would ultimately lower costs to consumers....

A spokesman for the Fed said it couldn't comment on whether incoming Fed Chairman Ben Bernanke would endorse every word of Mr. Greenspan's comments. However, the spokesman said other Fed officials have made similar comments, as official Fed positions, during the time Mr. Bernanke was a Fed official...

[The Full Letter: Read Greenspan's letter to Congress.]

Comments

[Barry]

Mark,

Greenspan chaired the committee recommending massive SS tax increases, starting in the early 1980's, to help pay for the Baby Boom's retirement. In 2001, he testified in favor of a fraudulent tax cut plan, raising the spectre of Evul Guvmint surpluses. In 2005, he advocated cutting benefits due to the (Golly Gee! Who'd have thunk it?) massive Bush deficits that he helped to bring about.

That's a multi-billion (trillion?) dollar direct rip-off of taxpayers by fraud.

Sounds rather statist and anti-free market to me.

[save_the_rustbelt]

Does anyone remember the original Rollerball movie with James Caan? Great flick.

The world is owned and controlled by seven large corporations, "Food", "Transportation" etc. while the mind numbed citizens watch Rollerball.

Does this remind anyone of Wal-Mart or do I need to increase the anti-paranoia pills :)).

[bailey]

There have ALWAYS been limits to AG's "free-market tendencies". He consistently drew the line when & where it was in the best interest of his member banks & their direct business partners. Whether it was 1. time for his cronies to PAY for the inordinate risk they took, i.e. japan, mexico, ltcm, 2. their insatiable greed, i.e. the outright repeal of glass-steagall and lobbying for the final emasculation of the cpi as an economic indicator (the Boskin recommendations) over the objections of the consumate Gov't professional Katherine Abraham, the story's the same: AG was a 2nd rate academic who readily sold his soul for the bright lights, 3. towing the line on his own hard fought for ss recommendations or 4. SUPPORTING Bush's radically extreme fiscal policies. Bottom line, he politicized our "independent" Fed to effect the biggest corporate power grab in our country's history. But, that's old news; the question now is, who will Big-Ben be beholden to?