On March 17 I flew from New York to the Twin Cities. On the plane I read the New York Times and I noticed an intriguing juxtaposition of headlines. The NYT lede story on its business page was "Wall-Mart Abandons Bank Plans." The story right underneath it was "Lawmakers Aim to Curb Loan Abuses."
It's bad news that Wal-Mart pulled its application to get into the banking business. The implosion in the dark corners of the subprime market and growing evidence that lenders preyed on the poor do suggest that regulatory changes are in order. Among them is greater transparency and ease of understanding mortgage loans, payday loans, etc.
But regulation isn't enough. Why not also unleash the forces of competition? Let Wal-Mart into the banking business. Wal-Mart is a fierce competitor that knows how to deliver low prices to its consumers, many of them living below the median income. My guess is that competition from Wal-Mart would drive a lot of abusive payday lenders and subprime lenders out of business. Wal-Mart's customers would be the beneficiary. It's a disgrace that banks, so-called consumer activists, and other lobbyists managed to put enough pressure on Congress that the behemoth threw in the towel.