The Battle Against Wal-Mart:
Bankers Box Store?:
In "Piggy Banker" (2/12/06) the Washington Post reports that Wal-Mart is poised to use a legal loophole to enter banking "and potentially do in that arena what it has done to nearly every other consumer product and service it has touched."
"What's really at issue is the nature of the American economy," says Rep. Jim Leach (R-Iowa), who has fought efforts by industry to lift the ban for over two decades. "If such concentrations are allowed, you could have our largest banks combined with our largest retail companies and high-tech companies and create questions about how credit is allocated. It has enormous consequences for competition, and I think America would become less competitive in the world."
In one of his final actions, Federal Reserve Chair Alan Greenspan warned Congress that industrial loan corporations (ILCs) should be placed under supervisory requirements of the Banking Holding Act, as required by The Financial Safety and Equity Act of 2005 (H.R. 3882). The bill was introduced after a GAO report on ILCs called for Congress to revamp the regulatory oversight of ILCs. (See Leach's summary of the GAO's findings, as well as a related CRS report.)
Congress debated whether or not to allow commerce and banking to merge before passing the financial modernization act that bears Leach's name -- Gramm-Leach-Bliley. The bill stipulated that there be no merging of commerce and banking. (See Leach's letter to Alan Greenspan, 1/20/06)
For further information see Jonathan Brown, "The Separation of Banking and Commerce," Essential Information (1991).
Link to hearings held by House Financial Services Committee, July 12, 2006.
Wal-Mart's proposal is another example of the total failure of antitrust policies to prevent the formation of new conglomerates. The blind ideological drive towards corporate deregulation has freed some companies from traditional regulatory restraints that limited them to particular industrial sectors.
High-profile examples of the emergence of new corporate conglomerates have affected media ownership (GE/NBC, Westinghouse/CBS and Disney/ABC), tobacco accountability (Altria/Philip Morris) and other issues.
Aggressive deregulation of key sectors has also been fueled by deal-fee-driven mergers and acquisitions that later turn out to be inefficient (and often have to be unwound), or turn out to have destructive consequences for markets, investors and, for consumers, the consistent delivery of essential services.
Enron is a good example of what can happen. After gaining certain exemptions from the Public Utilities Holding Company Act from the SEC, Enron entered into new sectors outside its core areas of competence, including broadband services and water, where the company took a bath. The company's failure in these new areas was a significant trigger-point along the way to the company's collapse. Once returns from these new business divisions were not what they had been projected, top company executives began to "cook the books" to please Wall Street, especially by setting up "special purpose entities" to hide the company's increasing debt off-shore. Deregulation was key to allowing Enron to wander outside its core line of business (energy), as explained in this report by Public Citizen.
It is time to put strong structural restraints on cross-sector ties.
One way to do this is to restore the sector-specific provisions established under PUHCA and other New Deal-era statutes, including the Glass-Steagall Banking Act. Another approach would be to place direct limits on corporations through either federal or state charters.
Last Year Wal-Mart started a food fight with egg on its face. CEO Lee Scott said British authorities should investigate Tesco, whose share of the UK food market increased to a record 30.5% over the past three months. But what about here in the U.S., where Wal-Mart controls 24% of the American grocery market, more than double its next closest competitor and more than the next three competitors combined? Read more.
Did Wal-Mart Union-Busters Use Bribes to Infiltrate a Union?
When former Wal-Mart Vice Chairman Tom Coughin was forced to resign and his benefits were frozen after unexplained personal expenses were revealed, he claimed that the money was spent to benefit the company -- i.e. to bribe union activists as part of anti-union activities. The United Food and Commercial Workers union has responded by calling upon Wal-Mart to release related documents. On April 15, the Union filed a complaint against the company.
Wal-Mart Links and Resources:
Wal-Mart Watch is the new campaign to put the company's policies at the center of a national debate.
News and Media Reports on Wal-Mart:
Reports on Wal-Mart:
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