Wal-Mart savings account? Don't bank on it.

Colorado's intrepid elected officials are all geared up to protect its citizens, oops my bad, banks from the scourge of banking competition. The way I understand it, citizens elect politicians, and said citizens would clearly benefit from having Wal-Mart bring it's low cost model to the extremely profitable banking industry. However, Sen. Lois Tochtrop (D-Thornton) and Rep. Rosemary Marshall (D-Denver) both feel that they must protect those high margin banks and keep the scourge competition from helping the people of CO.

Here's what's interesting. Wal-Mart made it's name by servicing rural areas that lacked real competition. Most big-box retailers set their criteria for store openings, generally based on income level in a given area, at a level much higher than Wal-Mart. Back in the day, this formula gave Wal-Mart a huge hole in the geography to exploit, and they did. And while there is much caterwauling about the loss of small stores, they generally went out of business because Wal-Mart sold the same goods cheaper. Lack of competition allowed small stores to charge more for goods to the detriment of the customers pocket-books. Given that these were mostly rural folk who generally make less than big city slickers, a small savings from Wal-Mart meant a lot to the family's savings, so they shopped there.

So on to banking, where, "The community banks can not compete against Wal-Mart," said the wholly unbiased Barbara Walker, executive officer of the Independent Bankers of Colorado. But they can compete against large multi-national banks? Here's a secret, community banks exist to be sold to large multi-national banks. That's the game. It's like a feeder system. Set up a community bank, get customers, sell to larger bank, repeat. No real incentive for large MNC's to force prices down as they know that when they buy said community bank, and they will, they can charge the inflated price. Everyone wins (well, except for the customer). Wal-Mart blows the system. Wal-Mart doesn't buy the competition, they destroy them. And they do it by offering cheaper goods. Now everyone loses (well, except for the customers and Wal-Mart).

Even if you assume that MNC banks do actually push prices down in densely populated areas, you have to accept that there is little competition in rural areas (fewer customers, less expensive land, less expensive goods period, and fewer loan dollars). Again, this creates a large hole in the geography for Wal-Mart to exploit (to the benefit of the customers and the detriment of the community banks charging high prices). Personally, I think banking is an area where customer service counts, as does "trusting" who you're banking with. Trust and service aren't Wal-Mart's strong points. By the same token, anyone who's had a bank account over the last 15 years knows that banks are bought and sold constantly, and you never see the same people working in your branch for very long. They view us as a commodity, maybe it's time we did the same.

Quick aside. I was bidding out a business loan a few years back and it came down between a community bank and an MNC. The MNC had better terms, and I went with it. My contact at the community bank actually got upset and told me that I'd regret going with the MNC because, "You won't be working with the same person in a year, and I'll always be your contact. That matters." He was right about me losing my contact at the MNC (took longer than a year-but whatever). However, the transition to the new person was seamless and we never had a problem with them. My contact at the community bank? That bank was sold to an MNC, and he changed position in two years. My point? I don't know, probably something about the fact that community banks are largely myths and need about as much protection as the Loch Ness Monster.

Bottom line, there's no such thing as a "mom and pop" bank. Allowing Wal-Mart banking benefits CO citizens. Protecting inefficient banks hurts citizens. How does this fact escape a committee that passes the measure 6-1? Kudos to Sen. Jack Taylor R-Steamboat Springs for voting against and avoiding the knee jerk.