This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Wal-Mart is No Bank of America: Street Whispers

Stocks in this article: GOOGAMZNWMTBACWFC

NEW YORK ( TheStreet)--The U.S. banking quadropoly of Bank of America (BAC), Citigroup (C), Wells Fargo (WFC)and JPMorgan Chase (JPM) has worn out its welcome with the public, but don't look for Amazon (AMZN), Google (GOOG) or even Wal-Mart (WMT) to offer a meaningful alternative.

Wal-Mart has long aspired to enter the banking business. While pre-crisis efforts by the retailer were shot down , Wal-Mart is back at it through a partnership with American Express (AXP) unveiled Monday called Bluebird.

While Rochdale Securities analyst Dick Bove argued in a note Monday that Bluebird does pose a threat to the established banks, it's hard to see Wal-Mart and Amex really offering a viable alternative to consumers.

While the partnership clearly wants to pitch itself as a white knight, arguing in a statement that it is "expensive to be poor," and that Bluebird "rights many of the wrongs that plague the market today," who do they think they are kidding? If Occupy Wall Street couldn't get people who hate big banks to switch to smaller ones--even sympathetic people like me--why should Wal-Mart or American Express be any different? The power of inertia is far too great, and it is aided by the fact that all the automatic deposit and billpay customers set up through their banks are extremely costly and time consuming to undo.

Amazon and Google, meanwhile, don't look to be trying to compete with banks at this point, even though they are entering the lending business to spur sales of existing products.

Rochdale's Bove points to private label credit cards by companies such as Home Depot (HD) and Sears Holdings Corp. (SHLD) to argue these efforts to boost sales by extending credit always end badly.

But not all private label credit card businesses have failed. Alliance Data Systems (ADS) has had success with its private label business, and General Electric (GE), which initially wanted to sell the business, now finds it to be one of the most profitable GE has.

What's more, Google and Amazon are offering credit to small businesses, not consumers. That ought to allow them to be more selective, since the supply of credit to small business is especially tight. Nonetheless, these efforts are modest in scope and so don't pose a threat to the big banks.

In fact, the same could be said of Wal-Mart. Getting around banking regulation proved so easy in the run-up to the 2008 crisis, many assume the next crisis will come from a similar exploitation of loopholes in the rules. Building a bank in secret, however, isn't likely to prove so easy for several years at the very least. That is especially the case if you are a giant like Amazon, Google or Wal-Mart. Regulators have broader powers that they did before the crisis, and they are likely to intervene before any new shadow banks get too big.

What Amazon, Google and Wal-Mart are more likely to accomplish is to give more nimble banking players like Wells Fargo some smart ideas they will then be able to properly exploit.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs