TEXT OF INTERVIEW
SCOTT JAGOW: Some of the country’s big subprime lenders will testify before the Senate banking committee today. So will federal regulators. Congress is trying to figure out who’s to blame for abuses in the lending business. Our economics correspondent Chris Farrell believes there’s someone who could help clean this up. It’s a company. They wanted to open a bank, perhaps get into the mortgage business. But last week, Wal-Mart gave up. Other banks and unions fought to keep Wal-Mart out of banking. OK Chris, make your case.
CHRIS FARRELL: Alright, let’s open up the market to competition. Let Wal-Mart into the banking business. Their customer base is below median income, we all know that. And the competition will drive out a lot of the abuses. I mean, imagine you get some regulatory reform and increased competition. I think that would dramatically change the subprime market and the concerns about predatory lending.
JAGOW: But why do you think Wal-Mart would be a good banking operation?
FARRELL: Everyday low prices. This is a machine. You can criticize Wal-Mart for many, many things, but one thing they do know how to do: Deliver a service at a cheap price. There’s a lot of gravy to be taken, there’s some fat profit margins in the predatory lending subprime market. Alright, so Wal-Mart’s gonna come in and that’s how it’s gonna profit is by just taking that away.
JAGOW: But how do we know that Wal-Mart wouldn’t fall into the same trap that the other subprime mortgage lenders fell into, which is handing out money right and left?
FARRELL: Do you think that there’s some people that scrutinize what Wal-Mart does? Do you think that if Wal-Mart were trying to do some of the footloose and fancy free wording that some of these subprime lenders got away with, that Wal-Mart would get away with it? No, they wouldn’t. It’s the most scrutinized company in America, maybe the most scrutinized company in the world. But again, I think it would help out the low-income consumer. Now I can understand why small banks are against Wal-Mart getting into the business. I can understand why big banks are against Wal-Mart getting into the business. But as far as the consumer goes, this was really a bad move. And what Congress should do is hold a hearing and it should say, ‘why shouldn’t we let Wal-Mart into the business?’
JAGOW: But Congress was gonna hold a hearing to say . . .
FARRELL: The opposite!
JAGOW: . . . ‘we shouldn’t let Wal-Mart into this business.’
FARRELL: Exactly. Right and because there was a lot of pressure on Congress to prevent the competition. I mean, look, it was an anti-competition bill. And by the way, I’m saying that would benefit the low-income consumer, but it would spill over to the rest of the consumers, because then all of a sudden people are going to go, ‘why should I be with Bank of America or Citigroup or Wells Fargo and all these high fees and they don’t really treat me very well and well maybe I’ll go to Wal-Mart.’ I actually think that it would change the dynamics of the banking business.
JAGOW: Well Chris, always one to stir the pot.
FARRELL: I like it.
JAGOW: Alright thanks a lot.
FARRELL: Thanks.
JAGOW: Our economics correspondent Chris Farrell.
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