FDIC Chairman Sheila C. Bair issued a statement earlier today following Wal-Mart's decision to withdraw its bank application. According to Bair, "Wal-Mart made a wise choice. This decision will remove the controversy surrounding their intentions. They don't need an ILC to play an important role in expanding access to financial services, they can do so by partnering with banks and others. We look forward to working with Wal-Mart in meeting the need for low-cost financial services across all populations."

Adam Levitin has written a second paper examining rewards cards titled "Priceless? the Competitive Costs of Credit Card Merchant Restraints".

From the abstract: "Credit card transactions cost American merchants six times as much as cash transactions. Why, then, do consumers pay the same price for purchases, regardless of the means of payment? The answer lies in a set of credit card network rules known as merchant restraints. Merchant restraints forbid merchants from surcharging for credit and discounting for non-cash payments, while the framing effect, a well-documented cognitive bias, makes discounting for cash ineffective. Merchant restraints thus prevent merchants from pricing according to consumers' payment method and from signaling to consumers the costs of different payment methods. Accordingly, consumers never internalize the costs of their choice of payment system."

Aneace Haddad blogs about Adam Levitin's new paper titled "Priceless? The Social Costs of Credit Card Merchant Restraints".

From the abstract: "Who pays for credit card rewards? This article demonstrates that credit card rewards programs are funded in part by a highly regressive, sub rosa subsidization of affluent credit consumers by poor cash consumers. In its worst form, food stamp recipients are subsidizing frequent flier miles. The subsidization is created by a set of credit card network rules called “merchant restraints” that combines with a cognitive bias known as the framing effect to limit merchants' ability to price payments systems according to cost."

Wal-Mart Financial Services President Jane Thompson released the following statement today: “We notified the FDIC today that Wal-Mart has withdrawn the application we made in July 2005 for an Industrial Loan Company (ILC) charter. This action follows January’s FDIC decision to extend the moratorium on a number of pending ILC applications. Unlike dozens of prior ILC applications, Wal-Mart’s has been surrounded by manufactured controversy since it was submitted nearly two years ago. At no stage did we intend to use the ILC to establish branch banking operations as critics have suggested -- we simply sought to reduce credit and debit card transaction costs. Wal-Mart’s financial services already save customers over $245 million a year so they can live better. Since the approval process is now likely to take years rather than months, we decided to withdraw our application to better focus on other ways to serve customers. We fully intend to continue to introduce new products and services that champion those who deserve convenient, lower priced financial services.”

We heard yesterday about Wells Fargo's new MySpace profile for Cassie Hill, the bank's Stagecoach Island ambassador avatar. Wells Fargo's Stagecoach Island is an online virtual world where users can have fun, socialize and at the same time learn a bit about finance, such as saving money, earning interest, etc. By having a MySpace profile for Cassie, the bank hopes to drive increased awareness and usage of Stagecoach Island. Wells Fargo seems to recognize that participation in social media is more than hosting your own blogs, but also includes reaching out to networks of all kinds to make connections and to engage with the public.

• First Data to Acquire Instant Cash Services® Business from Wells Fargo
• Wal-Mart May Seek Wider Banking Options