lfb | Banking industry insiders are upset with Amex and Wal-Mart, that
also is offering prepaid cards, because these prepaid accounts would
amount to uninsured deposits, according to Andrew Kahr, who wrote a
scathing piece on the issue for American Banker.
Kahr rips into the idea with this analogy:
“To provide even lower ‘discount prices,’ should Wal-Mart rent decaying buildings that don’t satisfy local fire laws and building codes — and offer still better deals to consumers? And why should Walmart have to honor the national minimum wage law, any more than Amex honors state banking statutes? With Bluebird, Amex can already violate both the Bank Holding Company Act and many state banking statues.”
Kahr is implying that regulated fractionalized banking is safe and
sound, while prepaid cards provided by huge companies like Amex and
Wal-Mart is a shady scheme set up to rip off consumers. The fact is, in
the case of IndyMac, panicked customers forced regulators to close the
S&L by withdrawing only 7% of the huge S&L’s deposits. It was
about the same for WaMu and Wachovia when regulators engineered sales of
those banks being run on. Bitcoin supporters, unlike the general
public, are well aware of fractionalized banking’s fragility.
Maybe what the banking industry is really afraid of is the Amexes and
Wal-Marts of the world creating their own currencies and banking
systems. Wal-Mart has tried to get approval to open a bank for years,
and bankers have successfully stopped the retail giant for competing
with them.
However, prepaid credit cards might be just the first step toward
Wal-Mart issuing their own currency — Marts — that might initially be
used only for purchases in Wal-Mart stores. But over time, it’s not hard
to imagine Marts being traded all over town and easily converted to
dollars, pesos, Yuan, or other currencies traded where Wal-Mart has
stores. Fist tap Dale.
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