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Wal-Mart Loan Debate: "Predatory" Or A Low-Income Blessing?

Thursday, 15 Mar 2007 | 4:42 PM ET
Walmart
Walmart

On Thursday, a Wal-Mart Stores e-mail became public that detailed lease terms for banks that would rent space inside its locations. The "church and state" debate began again: Should the world's No. 1 retailer be allowed to dabble in loans? A banking expert and an ex-Reagan Administration advisor argued the merits and dangers of such an arrangement, on "Power Lunch."

Ron Ence, vice president for Congressional affairs at the Independent Community Bankers of America industry group, said the e-mail revealed "Wal-Mart's dark little secret": The lease terms say the discount giant can offer services including mortgages, consumer loans, home equity loans, investment and insurance products.

Mortgate-Mart?
After years of trying to enter the banking business, Wal-Mart may get into the mortgage business, as well, with Ron Ence, Independent community bankers of America VP of Congressional affairs; Peter Wallison, American Enterprise Institute resident fellow and CNBC's Bill Griffeth

Ence said there's evidence that "mixing banking and commerce is a bad idea." He points to Japan, which dabbled in a "grand experiment" of combining the two some "20 or 30 years ago" -- leading to a 15-year recession. Ence warns that permitting Wal-Mart to issue loans would result in "predatory lending prices" and a "tremendous concentration of economic power." It could financially gut communities as their "money leaves for Bentonville, Arkansas."

But Peter Wallison, resident fellow at the American Enterprise Institute and one-time White House counsel to President Ronald Reagan, insisted that Wal-Mart would not actually be mixing the two. Only an entity that takes insured deposits while making loans is in "the banking business," he said. Wallison declared Ence to be speaking for an industry "afraid" of competition, and decried moves that'd prevent "low-income customers from getting the loans they need."

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

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