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Wal-Mart announced Friday that even as rumors were swirling about its “real” intentions is applying for permission to open its own bank, it was withdrawing its application to the Federal Deposit Insurance Corporation (FDIC).

Wal-Mart said all along that it wanted the charter in order to reduce its credit and debit card transaction fees, though it came to light last week that the retailer seemed to be positioning itself for a much broader presence in the financial services business. It was reported in numerous places last week, including here on MNB, that Wal-Mart had been renegotiating the terms of its leases with a number of banks that have branches in its stores, reserving for itself the right to offer a broad range of financial services, including loans, lines of credit and mortgages.

All along, mainstream members of the financial services business had objected to Wal-Mart’s application, saying that it was just a stalking horse for what Wal-Mart really had planned.

The FDIC had established a one-year moratorium on considering banking applications from non-financial services companies, which put the Wal-Mart bid in limbo.

FDIC chairman Sheila Bair described the Wal-Mart decision as "a wise choice,” saying that it would remove the controversy surrounding their intentions.”
KC's View:
We’re sure that the FDIC is relieved by the Wal-Mart decision, because it takes the regulatory body off the hot seat of having to render a decision. Now, it can deal with applications from non-financial services companies without the polarizing political presence of Wal-Mart, and be at least some what shielded from charges that it might be carrying water for mainstream banks that did not want to compete with the Wal-Mart “always low prices” approach to business.

Ultimately, we tend to believe that Wal-Mart getting into the banking business probably would have been good for consumers, and might even have been good for competition in the financial services industry. But for the time being, we won’t get the opportunity to find out.

Fat cat bankers can breathe a sigh of relief. They dodged a bullet.

But only for now. We suspect that Wal-Mart is already trying to figure out other ways to compete with them…only now, the folks in Bentonville are ticked off.