Bullying Wal-Mart

THE ANTI-WAL-MART lynch mob has prevailed again, forcing the retailer to forgo plans to establish a bank. The mob has become a powerful force, bringing together the company’s usual big-labor antagonists, mom-and-pop Main Street merchants and the formidable American Bankers Assn. Recognizing that the company’s bid to create a so-called industrial loan company faced a hostile regulatory environment, Wal-Mart on Friday withdrew its 2-year-old application before the Federal Deposit Insurance Corp.

That’s a shame. Whether it’s a good idea for Wal-Mart to issue a credit card without partnering with other banks is one issue. A company being bullied out of pursuing its commercial interests is quite another -- and an alarming one at that.

When Target was given a license for an ILC in 2004, there was no similar ruckus, and that retailer’s application sailed through the state and federal regulatory process. But the FDIC kept delaying consideration of Wal-Mart’s 2005 application. Sheila Bair, the FDIC chairwoman, sounded relieved Friday, saying Wal-Mart “made a wise choice” by withdrawing its application and that its decision “will remove the controversy surrounding their intentions.” Come again? A federal regulator is supposed to assess the merits of a company’s application, not pass judgment on its intentions.

In this case, regulators have deprived Wal-Mart of a chance to offer similar financial products to customers as those offered by its competitors. Equally worrisome is the growing frequency with which politicians feel free to use Wal-Mart to score cheap points, whether by barring it altogether (to the detriment of their constituents) or by requiring it to provide a certain level of healthcare benefits or wages.

There is a broader debate about the extent to which the ILCs, which are a loophole to the long-standing separation between commerce and retail banking (and which offer credit but are not regulated by the Federal Reserve), could pose a threat to the health of the overall banking system.

That is something some members of Congress want to explore. But whatever the right answer is -- in terms of the services these companies can offer and the amount of regulatory oversight they should be subjected to -- there can’t be one set of rules for most firms and a separate set, made by political agitators, for Wal-Mart.