Bank Lawyer's Blog

Drive-Bys: Not Just For Gang-Bangers

Colorado attorney Jennifer Gokenbach sounds a warning of a phenomena we've seen not only in Colorado, but in other states, including Texas: the dreaded ADA Public Accommodation “Drive-By” Lawsuit. She alleges that "since April of this year, 20 lawsuits (and counting) have been filed against Denver area businesses by the same Plaintiff who is represented by the same two attorneys from Florida, for alleged violations of Title III of the ADA, including things like lack of ramps, narrow doorways, missing signage, doorknobs that can’t be opened by a closed fist, and misplaced soap dispensers and coat racks."

I should add that such ADA-related claims have also been filed against banks in a number of states, usually alleging that the bank's ATMs or branches don't comply with Title III of the Americans With Disabilities Act.

Ms. Gokenbach explains the gist of these lawsuits.

The problem with these cases is that the vast majority are not situations where a disabled individual truly felt discriminated against and sought out an attorney to help redress an injury due to a lack of accommodation. Instead, it is the lawyers who hire investigators to identify local businesses that are not in technical compliance with the ADA, and then recruit plaintiffs from disability advocacy groups to serve as the front person. The investigators take pictures and build the case while the plaintiffs merely “drive by” the establishment, without any honest intentions of ever servicing the establishment.

Once the boilerplate suit is filed, questionable litigation tactics are then employed, such as serving immediate discovery in violation of the rules, asking the courts to order the parties to a settlement conference to force a quick settlement, and refusing to accept agreements or assurances of ADA compliance without monetary payments, even though the ADA itself does not allow damages to be awarded to plaintiffs (the ADA allows only injunctive relief and attorneys’ fees).

Yes, that's right: "even though the ADA itself does not allow damages to be awarded to plaintiffs," the plaintiffs are trying to squeeze money out of the banks and other businesses. In many cases, defendants, looking at the matter strictly from a cost standpoint (since paying litigation attorneys to defend you can quickly cost more than paying off the plaintiff and his or her attorney) decide to close their eyes, hold their noses, and consider a relatively small monetary settlement a nuisance cost. However, other defendants decide they want to make the point that they're mad as hell and they're not going to take it anymore. After all, if you buckle under the wings of the first vulture to land on you, can others be far behind?

Ms. Gokenbach asserts that those businesses that decide to stand up to the shakedown have plenty of ammunition to bring to the gunfight. In addition to advising businesses to check with an insurance professional to determine whether they are covered against such claims (or, if not, if they can get coverage for future claims), she notes that "in some cases, where business owners decide to fight back, courts have dismissed the suits, sanctioned the plaintiff’s attorneys for unscrupulous litigation tactics, and/or awarded attorneys’ fees to prevailing business owners." Of course, each fight-or-flight decision has to be made on the facts of the individual case, as well as on the defendant's appetite for engaging in butt-kicking contests with butt-heads. Nevertheless, rolling over and forking over cash is not the only alternative when hit with a cookie cutter drive-by.

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I'm speaking at, and otherwise haunting, the annual NAFCU Regulatory Compliance Seminar this week in Seattle. Therefore, I'll be off the air until next week. If you're attending the conference, and aren't enraged by either of my presentations tomorrow, or otherwise offended by my blogging or the fact that I represent commercial banks, feel free to say hello. I generally don't engage in concealed carry when I travel, so chances are. I won't be strapped.

A Double-Bonus Of Unintended Consequences, Courtesy Of Dick Durbin

When former FDIC Chairman Bill Isaac called the Durbin Amendment "pure and simple, special-interest politics," he obviously meant that Dick Durbin was a tool of big-box retailers, which are the businesses that benefit from cutting debit card interchange fees in half. It's "price control" in its most naked form, and the retailers who receive the price cut claim it will benefit customers by reducing costs of each transaction. If you believe that retailers will pass along the reduced costs to consumers in the form of lower prices rather than keep the savings for themselves, I guarantee you that for a very reasonable price, I can get you a date with Sophia Vergara. Just send me $500.00 in unmarked twenty-dollar bills and trust me. Hey, would I lie to you?

Lining the pockets of the those who line the political committee coffers of pols is a time-honored tradition in this country, yet it's not the most odious aspect of this piece of federal legislative sausage. Legislation like the Durbin Amendment (as well as the remaining 2300 pages of that steaming heap of bat guano popularly known as "Frank's Folly") has all kinds of unintended consequences (as opposed to the intended consequence of increasing retailer profits). One of those unintended consequences is inconveniencing consumers, as consumers in Houston, Texas, and elsewhere will discover in the near future.

International Bancshares Corp. this week said it plans to close 17 grocery store branches in the Houston area by the end of the year.

The branches are among 55 branches the Laredo-based bank holding company will shutter. IBC cited new bank regulations limiting how much banks can charge for stores for debit card transactions as the reason for the closings.

The bank operates most of its Houston-area branches in H-E-B and Kroger stores, according to its website.

“Our customers have always made it clear to us that free products and services are extremely important to them,” Dennis Nixon, IBC chairman and CEO, said in a statement. “To keep those free offerings in place, we will have to reduce expenses. This means we will close 55 of our smaller in store branches located in grocery stores.”

IBC (Nasdaq: IBOC) expects the move to affect about 500 permanent jobs over the next 90 days.

So, as an added bonus unintended consequence to customer inconvenience, 500 bank employees will hit the streets to find new jobs as IBC reduces expenses to match reductions in fee income. This little vignette is just one example of many similar consequences that are unfolding, and will continue to unfold, all over the country.

The post-Dodd-Frank world that's looming on the horizon is starting to resemble the world created by Cormac McCarthy in The Road. For those of you who haven't read the book or seen the movie, that is not a good thing.

 

Getting Where You're Going

I don't customarily use guest posts on this blog. In fact, I generally ignore the requests I receive to guest post here, since the overwhelming majority of such requests are from people trying to sell you something. However, I'm making an exception for former client and current friend Pat Dalrymple (who's also a blogger and who I've mentioned previously) because he's not trying to sell you anything, he just wanted to "vent," and there's nothing I like better than a good "venting." The following opinions are solely those of Pat, and I neither endorse nor disavow them. They just make me chuckle because, as a former US president once proclaimed, "I feel your pain."

HE WHO DOESN’T CHANGE COURSE WILL GET WHERE HE IS GOING

(Said to be a Chinese proverb)

By

Pat Dalrymple

There are a slew of community banks walking the road to extinction that are refusing to even consult a map, let alone considering making a right turn to avoid oblivion.

Their condition is compounded more by paralysis and denial than by confusion.  Many haven’t crawled out of the potentially fatal image of a community bank to even dither over survival options.

Before speaking further, I’d better make a few things clear:

I’m not very smart; if I were, the bank that I helped charter in 1990 and ran for 16 years wouldn’t have been compelled to sell for virtually nothing in 2008, after being hit with loan repurchases from secondary market investors (most of which aren’t around anymore, if that’s any satisfaction).  But I’ve been around banking since 1961, and I’ve seen things done very well, and very badly.  Because of my own recent experience, I’ve been both empathetic and, frankly, appalled by what I’ve seen in the last three years in my consulting business, which has targeted troubled community banks.

And I am smart enough to know that, if you’re heading east and don’t want to go there, you’d better go west fast.

I’ve noted that the malady suffered by small problem banks, from, say, $75,000,000 up to $1,000,000,000 in assets, is a form of paralysis.  Below are the causes and symptoms of the illness- and maybe even the treatment:

• Management and the board of directors say, “If we can just hang on until we get rid of our problem assets, we’ll be fine”.  No, they won’t.  Few troubled banks in this asset range are making money operationally, and virtually none have a viable business plan for profitability in the radically changed banking industry.  They believe that they can go back to making the kind of loans they made before the roof fell in.  These are the loans that got them into trouble in the first place.  Economic conditions preclude making these loans, the regulators won’t permit it, and the potential customers don’t qualify anyway.

• “Whatever we do, we have to preserve the franchise value of the bank”.  Today, the bank in a troubled state has no franchise value, and may never, under any circumstances, have much of a franchise vale if it can’t find a business model that can turn a profit.  Recently, I heard a CEO say, “Yeah, we’d like to sell, but we’re not going to give the bank away”.  He’s right as rain; nobody would want it.

• “I can sell a branch (or branches), shrink so I’ve got a well-capitalized core ratio, and make some money at the same time”.  Probably not; branches finally being perceived as what they’ve always been:  anchors encased in concrete that have an annoying tendency to drag the ship down.  They have to be very well located, and have the potential to generate profit, not just deposits.  Besides, those that want to expand can readily do so for virtually nothing by just cutting a deal with the FDIC on a shuttered institution.

• “We may have problem assets, but we’ve got a great management team, and loyal employees”.  Maybe: but it’s a management team that can’t move its arms or legs, a group that’s looking over its shoulder at the regulators, and isn’t managing to do much of anything, including making money.  The worth of a business’ human assets are in direct proportion to their ability to generate profit.

• “We don’t want to gut the bank, and upset our customer base by laying off people” (See “franchise value”, above}  Take a look at the quarterly financials of troubled banks on the FDIC website. Most of them haven’t reduced their employee count.  Many have increased the number of people.  The latter is often a result of regulators mandating a new positions, such as credit officers or compliance managers.  Banks have no choice but to acquiesce to this.  But they often are bound by inertia when they have discretion in reducing staff.  One reason is the feared community reaction.  It’s never as bad as expected, and news stories about the suits coming in on Friday night aren't exactly the best press either.

• “We’ve put our loan people to work managing problem assets”.  This is an oldie but goodie.  This mantra has been around long enough for the dismal results to become apparent.  Ask practically any CEO of a troubled institution, as Dr. Phil would, “How’s that workin’ for ya?”  and the reply invariably is, “Not very well”.  You end up with a lousy asset manager, and a terrible loan officer, especially if they’re trying to do both.

There is no cure for the Bad Asset Virus.  If it’s serious enough, it’s terminal, and about all that can be done is make the last corporate days of the bank, its employees and stockholders, as comfortable as possible.  However, if the case is merely serious and not terminal, there are treatments that can help mitigate the condition.

• First thing: make money.  Oh sure, easier said than done.  But, consider:  if management can’t figure out how to do it, the bank is done anyway.  The route to a profitable business model won’t be found by thinking in the customary community bank frame of reference.  Being what you were won’t make you what you want to be, and being what you were is why you’re where you are, so….

• Explore ways to use the bank platform to bring in revenue quickly, with a minimum of risk. One example:  there’s no business operation or financial entity that’s better positioned than most community banks to produce residential real estate loans in their market area.  Borrowers think of their bank first when seeking a home loan, and banks can originate the deals and pass them on to the secondary market.  If the loans are table funded, or directly funded by the end lender, there’s virtually no risk of repurchase. But banks are failing miserably to grab this opportunity, which can generate an impressive new revenue stream in a short time.  Many feel that not closing in the bank’s name will make them (whisper, and spell out the words) a m-o-r-t-g-a-g-e  b-r-o-k-e-r.  I assure you, Mr. or Ms. Community Banker, your customers don’t really care where their money comes from, they’re not immediately going to transfer their allegiance to Wells Fargo, and, yes, they will respect you in the morning.

• Seriously, really seriously, consider cutting personnel costs.  Don’t get high on your own supply by recycling amongst board and management the same canned routine that’s provided for the examiners' consumption. Don’t succumb to the temptation to keep people because you’ll need them “when things turn around”.  If your bank is still around  when things turn around, it won’t be the same bank. One way to do this is to….

• Eliminate branches.  Put them on the market, and if they languish with no takers, as they likely will, then close them down.  Recent studies have concluded that the cost benefit of maintaining expensive facilities and personnel to serve the least profitable customers, which are generally those who use branch facilities, simply doesn’t make sense.  Increasingly, the value of a branch network is being judged by its ability to produce revenue at a reasonable cost, and not just on its liability generation.  In banking, the easiest side of the the balance sheet to satisfy is the liability side.  Putting on good assets is the hard part.

• If the bank’s management team is seriously challenged to solve the profit generation problem, it can be surprising what can happen.  People continually shock themselves and others with their creativity.  But the impetus won’t come from the management group; it has to be external.  Community bank executives aren’t conditioned to suggest radical changes to boards and stockholders, because they feel that a radical course change smacks of blasphemy, especially in the community bank culture.  Regulators can, and do, scare the be-jesus out of everybody, but they can’t light this particular fire.  Somebody, maybe a maverick director, or perceptive chairman has to say, “Folks, we’ve got to change our direction, or we’ll surely get where we’re headed.  Put your heads together and come up with new business model options.  The bank’s survival, the investment of the stockholders (who may be friends and neighbors) and your jobs depend on it”.

• And finally don’t fear changing the makeup of the board, and replacing top management.  No CEO ever said to the board, “What we did was wrong, what we’re doing is wrong”.  Human nature almost surely precludes this.  A new team may be the only answer.

As I said, I’m not the brightest light in the chandelier, but I’ve done some things right, and some wrong.  And, finally, after half a century, I do have the wisdom to know the difference: one of the marketing blurbs for my consulting operation is=

“Hire the guy who’s made the mistakes.  He won’t make ‘em again”.

Wal-Mart Getting The Last Laugh

Last summer, Wal-Mart was scooping up small business borrowers through its Sam's Club unit. This summer (paid subscription required), Wal-Mart is stealing another march on bankers by focusing on consumers.

The retailer next week will begin rolling out automated versions of its MoneyCenter offices, which provide a range of financial services to shoppers.

The "MoneyCenter in a box" concept will feature ATM-like machines positioned in Wal-Mart stores that do not have full MoneyCenters, said Jane Thompson, the outgoing president of Wal-Mart's financial services unit.

According to TowerGroup's Brian Riley, bankers should quaking "[b]ecause if Wal-Mart starts linking their kiosks to doing reloadable gift cards, they have the power to move a lot of transaction money."

Ya' think?

Wal-Mart has more than 1,000 MoneyCenters throughout the country that provide check cashing, bill payment, wire transfers and other services. Manned by customer service agents, they are one of the most profitable areas in Wal-Mart stores, Thompson said.

Companies with a hand in financial services have been trying to encourage self-service as a way to control labor costs, while potentially keeping longer store hours. Kiosks are also a way to blend Internet banking and financial services functions with shopping in the physical world.

"If you take a Wal-Mart shopper, if maybe they want to buy a washing machine and they want to transfer funds online without having to get to their home computer, or maybe they don't have easy Internet access, they can do that now within a Wal-Mart," said James Van Dyke, the president of Javelin Strategy and Research. "It makes a lot of sense for a limited segment of the population."

As we observed two years ago, the FDIC may have done Wal-Mart a favor by derailing its application to acquire a Utah industrial loan company charter through Sheila Bair's passive-aggressive "moratorium." Unhindered by federal examination bobble-head dolls looking over its shoulder and second-guessing every move it makes in a regulatory world gone tight-sphinctered in the wake of Dodd-Frank, since it withdrew its application in 2007, Wal-Mart has been rolling out the bad news for banks in the area of cheap consumer financial services world faster than Lady Gaga changes extra-terrestrial outfits. With their size and pricing power, they are formidable when it comes to delivering cheap financial services to a mass market. Banks may have kept Wal-Mart from entering the banking business through the front door, but that hasn't slowed the Behemoth of Bentonville down much. The side- and back-doors look mighty friendly.

So much for the ICBA's "popping champagne corks" over its "defeat" of Wal-Mart in 2007. You should watch out when you do that, because the ricochet can put your eye out.

A-Venting We Will Go

Every once in awhile, I receive such an excellent rant from a reader who functions (or malfunctions) in the higher reaches of a community bank that I must take a knee, catch my breath, and say a quick prayer of thanks to both the Hairy Thunderer and the Cosmic Muffin. Today was such a day.

In an only slightly edited form (to protect the guilty), here was my first e-mail of today, thoughtfully composed and spewed by a frustrated senior member of the board of directors of a community bank lodged snugly in the heartland of America :

I can buy an ATM that takes deposits, images checks and delivers cash for $50,000. No health care, no workman's comp, no vacation, no 401K, no lunch break, no lawsuits, no whining. Regulation is making technology much more attractive despite the cost. Don't get me started on the 'talking' ATM's that will cost at least $10,000 each to upgrade (to comply with the ADA in case a blind person in a taxi needs money at midnight...it's a civil rights non-discrimination issue don't you know)

Two banks in our area of the country "agreed" to "settle" Fair Lending claims/investigations (or face daunting litigation) by opening branches in minority neighborhoods that, absent Fair Lending's required enlargement of MSA's to encompass entire county boundries, would not be in their market area. One can agree the areas are underserved by banks; two (minority owned community) banks in the areas failed. Unfortunately, community banks do not have the deep pockets of Boeing to litigate and each bank that settles makes it easier for DOJ to get the next bank to comply. The appropriation of community bank capital (in more ways than this) is stunning.

Why has 'banking the un-banked' become such a rallying cry? Maybe low to moderate income folks don't need a bank. Maybe they need access to their cash without paying high fees to get it. (Remember the cash payroll? An envelope with money in it. Our bank discontinued it decades ago. It was a sad day.)

 

 

I feel your pain. You can rant me a river any old time.

Stop Whining And Post A %#$*& Sign!

I suppose I'd be more sympathetic to banks that complain about plaintiffs who cruise bank branches, seeking ATMs that don't post the signs required by the Electronic Funds Transfer Act, and then sue banks for violating that particular requirement portion of the EFTA, if (A) the law hadn't been around for a decade and/or (B) plaintiffs or their attorneys were ripping off the signs when no one was looking, then suing the bank for not having a sign. The latter might be the case in a few instances, but I doubt any bank that actually posted the sign wouldn't prefer to get into a swearing contest before a judge than they would merely roll over and pay off the leaches who would pull such a stunt. No, I think in most cases, the banks have simply failed to comply with a basic requirement of applicable law.

We can debate the merits of giving private citizens, like the retired couple of Robin Hoods who are featured in the linked story, the right to squeeze money out of banks when the plaintiffs haven't been misled or otherwise personally harmed. However, a private right of action is provided by the law for just this purpose: to arm private citizens with the ammo they need to force banks to comply with the law. With all the other matters they have on their plates at the moment, I'm sure state and Federal law enforcement and bank regulatory agencies are happy to leave the harassment of banks to roaming legions of do-gooders without portfolio.

Bank counsels' complaint that these lawsuits amount to a nuisance may be correct. The law intends them to be a nusisance. They're intended to change behavior. If you don't like the nuisance, you've got a choice: change the law or comply with it. The latter seems to me make the most sense, and is certainly the most cost-effective course of action, but what doesn't make sense is to complain that there's something unfair about private citizens doing just what the law intended them to do.

In this case, I have to agree with the anti-bankers. As a modification of PJ O'Rourkes Memo to Gen X, I'd tell complaining banks to pull up their pants, turn their hats around, and get a sign.

Another Wrinkle In The OneUnited Affair

In last night's post, I made the heinous error of blaming the OTS for the shortcomings of the FDIC. That's like slapping a little baby when you should be having Chuck Norris roundhouse kicking the baby's adult uncle in the face. Or, as alternative to Chuck, you could sic Ken Thomas on them.

Ken, a banking consultant, economist,and professor of finance at University of Pennsylvania's Wharton School, was quoted in the article I linked to yesterday. He's a blunt critic of the favoritism he believes was shown to OneUnited Bank in its campaign to get TARP money out the Treasury Department. According to the South Florida Business Journal, It turns out that's not the only thing about OneUnited and federal banking regulators that gets Ken's goat.

Three years before a congresswoman faced an ethics investigation related to OneUnited Bank, banking analyst Kenneth H. Thomas was mystified that regulators did not crack down on the bank for minimal lending in South Florida.

The nation’s largest African-American owned bank had only 17 loans totaling about $3 million in South Florida in 2005 and 2006, even though it had $77 million in deposits in the region, according to FDIC figures and an analysis by Thomas.

The Boston-based bank was rated “in substantial non-compliance” under the community reinvestment act in South Florida by the FDIC. It got a “satisfactory” rating overall, but Thomas filed comments arguing for a lower rating.

The passing grade may have been crucial to helping the bank qualify in 2008 for $12 million in troubled asset relief program (TARP) funds.

“There’s no way the bank should have passed,” said Thomas, who is based in Miami. “At the FDIC, someone just looked the other way and gave them the rating that the bank wanted – and that’s a satisfactory – because if they didn’t, that would have hurt the bank.”

The complaints by Thomas to the FDIC in 2007 had the same effect that a water balloon has on a raging forest fire. OneUnited Bank continued to make almost no loans in South Florida while it continued to suck up deposits from branches in the area, apparently in order to invest the funds elsewhere.

OneUnited has granted just three mortgages totaling $419,000 in South Florida since the start of 2008, according to court records. None of those loans were in Liberty City or Lauderdale Lakes, where the bank’s branches held $59 million in deposits as of June 2009.

“Oh my gosh. That’s tragic,” Miami-Dade Chamber of Commerce President Bill Diggs said. “If they’ve got that kind of money in deposits and they’ve only made three loans totaling $400,000, that is troubling to me.”

Oh my gosh, you're right, Bill. What's more, opening or acquiring out-of-state branches to use primarily as deposit-generating devices while you fail to make loans to the local community where the branches are located is a violation of law. Too bad federal law doesn't apply when the main squeeze of a powerful member of Congress owns a piece of the bank that otherwise would be subject to it.

I'm going to love to see what else crawls out from under the rocks that are overturned during this ethics investigation. I'm sure the FDIC can't wait, either.

Wal-Mart Bulks Up On Small Biz Lending

With the same perverse fascination that compels us to watch Godzilla crush Tokyo, we can't tear our eyes away from the sight of Wal-Mart's inexorable march into the land where, lately, many banks have feared to tread: small business lending. Through a venture between Wal-Mart's Sam's Club unit and nonbank small business lender Superior Financial Group, Wal-Mart plans to offer small businesses loans in the $5,000 to $25,000 range. As DBJ Confidential blogger (and Dallas Business Journal associate editor) Chad Watt so aptly puts it, "The Bank of Wal-Mart has come a step closer to reality."

The Sam’s venture hits banks while they’re vulnerable. Wal-Mart says 15 percent of its small business members have been denied a loan in the past year, up from 12 percent in spring 2009.

[...]

The deal with Superior is for an online loan application. That’s something Superior does anyway, so what is Sam’s Club bringing to the table? Put simply, a 20 percent discount on Superior’s application fee and a 25 basis point discount on Superior’s finance rate.

That should free up some more money for coffee cups and creamer.

As I said in March when discussing Wal-Mart's plans to rapidly expand its in-store MoneyCenters, Wal-Mart is on a mission to beat banks at their own game, and without the psychological and emotional pain (and financial burden) of dealing with federal bank regulators, like those who denied it an opportunity to enter the banking business through acquiring an industrial bank charter. Not being able to leverage insured deposits is a funding disadvantage, but one with respect to which a giant retailer like Wal-Mart can always find a work-around.

Love it or hate it, you have to respect Wal-Mart's persistence and ingenuity. If Wal-Mart's "lucky," however, they'll continue to grow their financial services business until they eventually become a too-big-to-fail, systemically important nonbank financial company that is drawn into the web of the soon-to-be-created "Financial Stability Oversight Council," where it can be hounded by bureaucrats like most of the rest of the financial institutions in this country.

I'm such a glass-half-full kind of guy, aren't I?

Too Big Not To Dismember

"Break 'em up!" That's what independent community banks are crying about the "too-big-to-fail" giant banks, and Jerry Walker, CEO of the Independent Bankers Association of New Mexic,o tells New Mexico Business Weekly reporter Dennis Domrzalski why.

"This financial crisis started with the big guys, but the little guys have wound up paying a disproportional price.”

As the story discusses, consolidation of the banking business in New Mexico, which has seen the number of banks in the state halved in the last 25 years, mirrors what's happened on a national scale, especially since the enactment of the Gramm-Leach-Bliley Act in 1999. That law battered down the wall between commercial and investment banking and added racket fuel to the growth of the nation's biggest banks.

“Since the change in the law, the largest 20 firms have increased their control of the nation’s banking assets from about 35 percent to an astonishing 70 percent,” [Federal Reserve Bank of Kansas City President Thomas] Hoenig said. “Even more striking, perhaps, is the fact that some of these firms are now 30 to 40 percent larger than they were when this [U.S. financial crisis] began, and as you know, many of these firms were protected during the crisis.”

Banking consultant Joe Bidal expressed a view held by many community bankers, inside and outside of New Mexico, when he talked about how the federal regulators catered to and saved the biggest banks while lopping off the heads of local lenders like Charter Bank (previously discussed on this blog here and here).

“When you lose a Charter, which invested almost exclusively in New Mexico, it makes it more difficult for local businesses to finance their needs. You add that to the incredible pressure that federal regulators are putting on local banks to reduce their exposure to commercial real estate and you have a big problem.”

Yes, you have a big problem. And it's a problem that's growing with every seven-bank "Bank Fail Friday" like the one we had last week. A paranoid person might suspect that there's a method to this madness, that the federal regulators have decided to nationalize the entire commercial banking system of this country, in the same way that it's in the process of effectively nationalizing the residential mortgage lending business through its de facto nationalization of Fannie Mae and Freddie Mac and its dramatic expansion of FHA lending. The fewer the number of banks, the easier the system is to capture.

A cynic, on the other hand, would simply assume that the inmates are currently running the asylum, and that the damage they are inflicting is due to the fact that their reality and everyone else's reality are operating on mutually exclusive planes of existence, rather than from the execution of any grand conspiratorial plan. As for me, I'm a cynic.

Whichever view is correct, let's hope that the damage that is being done to the community banking industry is not so irreparable that it can't be fixed, staring with the off-year elections this November.

Wal-Mart's Revenge

Under the title "Wal-Mart Marches On," last November we profiled Wal-Mart's post-banking plan to capture retail financial services from traditional banks (and other financial service providers) through its partnerships with General Electric's Money Centers and Fiserv's CheckFreePay unit. Yesterday, the marching cadence increased to double-time.

Wal-Mart Stores Inc. will be opening another 500 Wal-Mart MoneyCenters this year. Wal-Mart has more than 25 stores located in the North Texas area alone.

As part of its current plan, Wal-Mart said MoneyCenters will be located in about 40 percent of Wal-Mart’s 3,763 stores nationwide, including 158 in Texas, according to a spokeswoman. A total of 102 stores in the Lone Star State will have a MoneyCenter by the end of 2011.

Love it or hate it, the Beast of Bentonville is becoming a force in retail financial services. Moreover, Wal-Mart's getting to expand at this rapid pace without dealing with growth-killing Sheila Bair and the rest of her crew at the FDIC. As everyone recalls, Ms. Bair slapped a moratorium on FDIC insurance for industrial bank charters when Wal-Mart filed an application and eventually stiff-armed Wal-Mart out of the realm of the FDIC-insured.

At the time, Wal-Mart expressed disappointment and community banks expressed joy. Now, Wal-Mart is going full blast forward, unimpeded by the gentle ministrations of FDIC examiners and social justice engineers like The Care Bair. Simultaneously, many community banks are being beaten about the head and torso by the FDIC and other federal banking regulators in ways that are making it difficult not only to make a buck, but, in many cases, even to survive.

Irony: it's often bittersweet.