Wal-Mart attempts silent coup

Bankers are like gangsters, they work together when it's them against the rest of the world. But, they turn on each other in a heartbeat if one tries to operate on the other's turf. And so it goes that with one foot out the door...

Greenspan is urging Congress to close a regulatory loophole that lets companies own a certain breed of banks, including a bank Wal-Mart Stores Inc. wants to operate in Utah.

[Greenspan]'s remarks take direct aim at an exemption in federal law that allows any type of company commercial firm, foreign bank or other to own so-called industrial loan companies in a handful of states, principally Utah, California and Nevada.

When the exemption was adopted in 1987, industrial loan companies, or ILCs, were mostly small, locally owned institutions that had only limited deposit-taking and lending powers.

[By 2004, ILCs had] grown by more than 3,500 percent . . . from $3.8 billion to $140 billion.[!!!]

HOLY COW! What other business on earth can increase its assets at such an astronomical rate? And all this by collecting interest. Sounds more like they're robbing banks, not running them!

General Motors, General Electric, Pitney Bowes and BMW are among the companies that now own industrial loan companies under the exemption, Greenspan said. Wal-Mart, the nation's largest retailer, has filed an application to operate an industrial loan company in Utah, he said.

Greenspan's comments didn't make a specific attack on Wal-Mart's efforts but rather were a broader shot at the exemption itself.

The exemption allows the corporate owners of these industrial loan companies to avoid the regulatory requirements that apply to corporate owners of other types of insured banks overseen by the Federal Reserve, said Greenspan. He found this troubling.

Of course, he finds it troubling. As long as it's his buddies who are raking in the dough, no problemo. Now that a gigantic outsider is about to move into the neighborhood threatening to swallow it whole, it's time to impose regulations.

Don't get me wrong, I'd like to see the whole neighborhood dismantled; I just find Greenspan's hypocrisy amazing (though I should be used to it by now).

Greenspan's warning was addressed to Rep. Jim Leach, R-Iowa, a senior member of the House Financial Services Committee, who responded:

"We as a Congress cannot afford to do anything except promote prudential financial oversight" . . . The issue is not Wal-Mart's application but whether Congress has opened the way to a complicated web of financial and commercial cross-ownerships.

Yeah, right. Peddle the prudential banking nonsense elsewhere. Banking is and always has been the least regulated sector on earth and the only reference to prudence in banking that I've come across in my travels conveys an appreciably different meaning:

Bankers function by reference to prudence. It's imprudent for them to do anything until they have to.

--Brian Freeman, Executive Director, Chrysler Loan Guarantee Board.

Not exactly the same usage. Moreover, Congress launched "a complicated web of financial and commercial cross-ownerships" a heck of a long time ago, congressman. Why not just admit that when Greenspan tells you to jump, you proceed to do so frantically before even bothering to ask how high?