Friday, Wal-Mart dropped its bid to establish a federally insured bank. It's ridiculous that they had so much trouble getting approved, because as the linked article noted:

Industrial banks have been proliferating in recent years — Target Corp., UnitedHealth Group Inc. and Harley-Davidson Inc. are among the nearly 60 that now exist. Critics say their growth dangerously blurs the line between banking and commerce, concentrating assets in the hands of a few big companies, stifling competition and hurting consumers.

I don't see where "critics," which I believe in this case really means "the unbylined author of the Associated Press article," have produced even the tiniest bit of evidence the current crop of industrial banks has stifled competition in any way, shape, or form. It's also pretty funny to see an AP writer worrying about "little guys" like Bank of America, Chase, and Citicorp, who are in an industry that itself is getting more and more concentrated (click on the "click to view data" box; the top 10 credit-card companies in 2005 had 92.4% of the business, up from 81.3% in 2004) getting some nontraditional competition.

That said, Wal-Mart's Plan B isn't going to make critics feel any better, and I don't see any "legal" or protest-driven basis on which it can be stopped:

News of Wal-Mart’s decision came a day after details came to light of leases that Wal-Mart recently signed with banks that operate branches in hundreds of its stores, reserving the company’s right to offer an array of future financial services in its stores. According to the lease terms, Wal-Mart can offer future services including mortgages, consumer loans, home equity loans, investment and insurance products and any other type of service or product that the company might develop.

So if Wal-Mart's customers get used to doing their banking at the stores, the retailer can apply pressure to their bank lessees to offer Wallyworld's financial products. If those financial products are aggressively competitive (can you say "Always the lowest rates. Always"?), that will drive even more banking business, and more customers, into the stores, turning the whole operation into yet another competitive advantage over other retailers. Oh, it will also siphon business away from traditional bank branches.

Wal-Mart's critics may end up wishing that the retailer got its way at the FDIC several years from now.

Cross-posted at BizzyBlog.com.

—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters