Little news can sometimes have hidden implications, as we should all know by now. Wal-Mart has just announced that they will be "helping" some of their suppliers by allowing them to use their AA credit rating. In the deal, Wal-Mart's suppliers can essentially "sell" their Wal-Mart invoices to Wells Fargo and Citigroup for basically instant cash. What a deal right? Well, the story is a little more deep, and perhaps indicative than that. A spokesperson for Wal-Mart, Theresa C. Mercado, reported in a letter:
"We know that many of our suppliers are dependent upon factoring and financing companies that are reportedly in financial distress."Well duh. What a good time to capitalize like Wall Street's elite? Think about the implications here.
- The supply chain is under stress from low sales by J.C Penny, K Mart, Sears, Macy's and other competition for Walmart. What happens when vendors cannot get paid? They either need to find other clients, or borrow money right?
- What happens to CIT when they lose vendors to Wells and Citigroup? They continue a downward spiral, correct?
- What can happen when the small business or vendor credit lines are narrowed to only banks like Wells and Citigroup? These businesses become vulnerable to their own insolvency, correct? Meaning, they cannot sell invoices for K Mart to get cash, and their delinquent obligations are grounds to be turned down, right?
- What happens if the only place to get money to do business with Penny's and other competitors to Wal-Mart, are resources largely in bed with Wal-Mart? They get turned down for loans, correct?
- With K Mart and other Wal-Mart competitors "in the soup" so to speak, with regard to cash flow and this potential supply side danger, who stands to benefit?
- With almost everyone losing, why is it that Wal-Mart is still winning? Is it because the poorer people get, the more the have to rely on Wal-Mart?
- Why is Wal-Mart aligned so closely with the two top banks implicated most in taking advantage of poor people?
