Don’t Expand Uninsured Banking — End It

By Andrew Kahr

Recent images highlight a dramatic contrast: Michael Corbat of Citi wears a suit and tie, representing hardcore banking—allegedly detested by tens of millions of consumers. Dan Schulman of American Express wears a collarless brown shirt to tout the new Bluebird card. That’s “shadow banking,” an alternative for what they call the “unhappily banked.” People who’ll open checking accounts at Walmart.

Of course, appearances aren’t everything. There are more substantive differences. Unlike Corbat, Schulman doesn’t deliver federal deposit insurance. He defends this, incredibly, as vindicating freedom of choice for Walmart customers!

Carry that a step further. To provide even lower “discount prices,” should Walmart 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.

Schulman says that for Bluebird, Amex has to “set the customers’ money aside” somewhere. Like MF Global did?

Or, maybe Amex, unlike Citigroup or Bank of America, just can’t run out of money. After all, it can print money (travelers checks).

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