Thursday, November 20, 2008

Food Retailing & Society Memo: Wal-Mart Steps in; Gives $12.5 Million Line of Credit to Group Trying to Secure Funding to Build King Memorial

Wal-Mart Stores' Wal-Mart charitable foundation stepped in today to help the group planning to build a memorial to the late civil rights leader Rev. Martin Luther King Jr. on the National Mall in Washington DC by creating a $12.5 million letter of credit to help complete the financing of the Martin Luther King Jr. National Memorial.

A disagreement between the U.S. National Park Service, which controls what gets built on the national Mall, and the group has delayed the start of the memorial to the late civil rights leader as well as added costs to the project.

The National Park Service has insisted that the King Memorial's design include security measures, identifying an unspecified security threat by extremist groups "spouting racist ideologies." But other agencies with authority over the capital's architecture have resisted security barriers, calling them an embarrassment to King's legacy of inclusiveness.

"It appears to us that we're the one caught in the middle, and that's an uncomfortable position," Ed Jackson Jr., executive architect of the King memorial project said today. "From our point of view, we are positioned and ready to initiate construction."

Organizers with the foundation working to build the memorial are asking for help from the Bush administration and Congress to get past the stalemate over security, Jackson said.

The financial backing from the Wal-Mart Foundation will help the memorial foundation submit required documents to the National Park Service to obtain a construction permit, a spokeswoman for the project said. Wal-Mart Stores, Inc. officials said they wanted to help jump-start the memorial building effort, in announcing the $12.5 million line of credit today.

In 2005, when the organization kicked off its fund raising drive to build the memorial to Dr. King, Wal Mart Stores, Inc. gave the group a $1 million donation.

"Our plan is to see them through to completion," Esther Silver-Parker, a senior vice president at Wal-Mart said today in a statement. "We thought that given that this is the 45th year since the 'I Have a Dream' speech, that this would be an appropriate time to start construction."

Silver-Parker added that the African American community is an important customer base for Wal-Mart, and that the contribution also is on behalf of more than 250,000 black employees among the retailer's U.S. work force of more than 1.4 million.

The organizers of the King Memorial said today they have raised $100 million of the needed $120 million to built the memorial. The Wal-Mart line of credit will get them about 50% of the way to raising the final $20 million. The group also said today former President Bill Clinton has committed to helping raise the remaining millions needed to built the memorial on the National Mall.

Since there's a severe credit crisis in the U.S., as well as globally, it's not likely the group could have received a line of credit from a bank, particularly one with the generous terms Wal-Mart has offered.

Ironically, in 2006 Wal-Mart Stores, Inc. began plans to enter the banking industry. However, after opposition was voiced by some members of Congress, the Bush Administration and anti-Wal-Mart groups, last year Wal-Mart announced it no longer had any intentions of getting into retail banking but would instead merely form its own credit card services company similar to what retailers like Target Corp. and Sears already have.

In the United Kingdom where Wal-Mart owns and operates the Asda retail chain, which is the UK's second-largest retailer after Tesco, it's common for retailers to be in the consumer banking business. For example, the nation's top-three retailers -- Tesco, Wal-mart's Asda and Sainsbury's all operate consumer banking and finance, as well as insurance, companies.

Perhaps in light of what's happened to the U.S. banking and financial services industry since Septemebr, the meltdown and resulting $700 billion bailout package, Treasury Secretary Hank Paulson and Senate banking Committee Chairman Chris Dodd should call Wal-Mart Stores, Inc. CEO Lee Scott and invite him to change his mind and get into the U.S. banking industry.

What a difference a mere year makes. Today one would think most reasonable people would welcome Wal-Mart into the banking and financial services sector. There are numerous failed and failing banks to acquire after all. Would it not be better for Wal-Mart to buy a couple of them rather than for the U.S. taxpayers to give more money to the Treasury Department to continue bailing out these institutions? We certainly think so. We also think the group planning the Memorial to Dr. King would support it as well.

In fact, we bet if Wal-Mart were to enter the banking industry on whatever level, and applied its retailing and logistics model to the banking industry, it would be a vast improvement over much of what is a banking today in the U.S.

Hank Paulson, Chris Dodd, if you're reading this we suggest making that call. What do you have to loose -- except more taxpayers money.

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