Thursday, November 14, 2013

Even the SNAP ("Food Stamp") Program has a Wall Street Connection. Mind Blown...

This from the Wall Street Journal Today:  
"Wal-Mart estimates it rakes in about 18% of total U.S. outlays on food stamps, or about $14 billion of the $80 billion the U.S. Department of Agriculture says was appropriated for food stamps in the year ended in September 2012."
Food Stamp (now called SNAP, are not actual paper stamps anymore  but a Debit Card) benefits were recently "cut" by approx. 5.5%.  This means Walmart, ceterus paribus, will potentially lose about $770 million in sales.

This led me to wonder how other companies might be adversely affected by the cut in the program. Found this from HERE (list not exhaustive):

All of them made sense to me. They are in the wholesale/retail food or drink business.  BUT, what does JP Morgan have to do with the SNAP program?

Led me to this graphic of the SNAP hierarchy and how the program is administered (found HERE).

I learned that JP Morgan (a big financial institution) is a major "middleman" in the program and they contract with 24 States to administer the program. I did not know this and assumed it was directly administered by the Federal Govt (Ag Dept).

 It pays handsomely to be one of these contractors.  JP Morgan earns a monthly fee for EACH SNAP recipient is anywhere from $.65 to $1.45 (it depends on the State they contract with).  They earn additional revenues on the rental of the machines retailers use to process SNAP cards, as much as $14.95 per month,per point of sale machine.

I am not making a judgement about this relationship.

I just did not know about it before.  If you didn't, well, now you do.  Hope it helps. :)
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