Bank Lawyer's Blog

Governors Ask For Guidance

It's not merely Colorado marijuana-related businesses that are having a tough time finding a bank that won't kick them to the curb. A Texas businessman suddenly found that his Texas bank considered him akin to a Typhoid Mary when it discovered that he was hosting a marijuana business investors conference in Houston.

Stuart Maudlin, the Houston entrepreneur behind Marijuana Investment Conferences, has closed his account at Amegy Bank, a unit of Salt Lake City-base Zions Bancorporation (Nasdaq: ZION) and Houston's fifth largest financial institution with nearly $10 billion in local deposits, after receiving a letter that the account would be closed within 10 days.

Maudlin received a letter from Amegy Bank dated May 15, which he shared with the HBJ, that said, "Amegy Bank regrets to notify you that we will be closing the Amegy Bank account referenced above."

The account is listed as Silent Auction Services Inc., DBA Marijuana Investment Conferences.

"I can reasonably infer that they're worried about having drug money show up in my account," Maudlin said.

The bank declined to say why it was closing the account.

My guess is that if he'd had the foresight to name the account "Silent Auction Services Inc., DBA Hooters Investment Conferences," he would have been A-OK with bankers in Texas.

The ongoing failure of Mary Jane-centric businesses to obtain access to the banking system has prompted the governors of Colorado and Washington to, again, write the federal banking regulators and ask them for guidance. They did this last October. The regulators told them they'd take a look at the need for guidance once the DOJ and FinCEN responded with their concerns. FinCEN did that in February, but that "guidance" not only didn't help matters, it made them somewhat worse. Banks are more afraid of enforcement action by their primary federal banking regulator than they are of a criminal indictment from the DOJ, although they're worried about both possibilities. The bottom line is that banks need to know what the bank regulators might do to them if they bank a (state law) legitimate marijuana business, or a business that sells products or services to a legitimate marijuana business. By legitimate, I mean one that is legal under Colorado (and, in the near future, Washington) state law.

Some critics think that Colorado and Washington deserve to stew in their own juices, since they are arguably "outliers" in the drive to legalize the recreational use of marijuana. However, other states are considering similar laws, and 20 states have medical marijuana laws that also violate federal laws. Heck, even a stalwart conservative crank like Texas Governor Rick Perry is publicly in favor of legalizing recreational marijuana use.

[As an aside--can you imagine how even more daffy Perry might end up sounding like in a 2016 presidential primary debate if he starts toking?]

The point is, sooner or later, the federal banking regulators need to come to grips with this issue. They might as well do it sooner than later, because this reefer madness is not likely to abate, but only to snowball until this country becomes one stoned-out, unbanked mass of munchie-seekers torn between the need for Doritos and the fear that the fifty thousand dollars in cash they carry in their underpants makes it unsafe for them to venture outside to buy a bag.

Swift Justice

Three years ago, we discussed a study by a large law firm that speculated that federal prosecutors were taking their time building criminal cases against executives of financial institutions and other businesses that were involved in causing the subprime mortgage meltdown and related economic calamity that hit us six years ago. The issue at hand was the failure of many executives of large institutions on Wall Street to do "the perp walk," as a lot of the Occupy [Insert Location Here] crowd, as well as politicians and many other members of the masses, were calling for at that time. Three years later, we're still waiting for the then-predicted indictment tsunami to wash over Wall Street.

I imagine many in the Occupy movement would rather live in Iran. In that country, the legal system acts swiftly to punish bank fraudsters.

A billionaire businessman at the heart of a $2.6 billion state bank scam in Iran, the largest fraud case since the country's 1979 Islamic Revolution, was executed Saturday, state television reported. Authorities put Mahafarid Amir Khosravi, also known as Amir Mansour Aria, to death at Evin prison, just north of the capital, Tehran, the TV reported. The report said the execution came after Iran's Supreme Court upheld his death sentence.

The accursed had allegedly falsified documents used in connection with loan applications. Of the 39 infidels accused and (of course) convicted in the fraud scheme, four received death sentences, two life sentences, and the rest 25 years in a (I'm guessing) less-than-plush Iranian prison. Those sentences ought to be harsh enough to warm the cockles of even the most jaded revolutionary heart.

The hanged billionaire's attorney wasn't notified by the state of the execution until after it was over. Iran's Supreme Court denied the defendant's appeal, and the state hung him posthaste. "Justice" doesn't grind exceedingly slowly in Iran.

According to the lawyer, the state gets the added bonus of all of the deceased billionaire's assets. We're sure that result had no influence on the outcome, but when your economic collar's a bit tight, courtesy of a world-wide embargo due to the fact that you're hell-bent to build an atomic bomb a nuclear power reactor over the objections of billions of people outside your country who don't trust the bona fides of a a ruling elite that keeps referring to the United States as "The Great Satan," the deceased's billions myust be welcomed. I'm certain that the money will be put to good use by the state, as states always do.

It's a great inconvenience to ideologues that we live in a nation that was founded by men who considered themselves English, and were heavily influenced by the English common law system, the Roman legal system, and this idea that citizens must not be deprived of life, liberty, or property without due process of law, which includes the right to a trial by a jury of the defendant's peers, presided over by an independent judiciary to ensure that the rules of evidence and the rule of law prevail. There's also this notion of fundamental fairness requiring that the punishment fit the crime. All these things frustrate those who know what needs to be done getting the right to do it, now!

Apparently, these impediments don't exist in Iran. Most commenters on the story in The Washington Post seem to believe that in this respect, the United States needs to be a lot more like Iran. I would not be surprised if that attitude is typical among many of our more enlightened citizens.

Bitcoin Rebuttal

My recent post on Bitcoin generated a correction from a state bank regulator, who sent me the following email (I've removed the name and link to protect the offended):

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Your premise seems to be that anonymity is one of the core useful features of cryptocurrency, but I think you've been misled by the popular press.

The supposed anonymity of Bitcoin is a primary feature only to a certain tin-foil-hat-wearing segment of the population. Bitcoin has never been anonymous, only pseudonymous, and the really smart computer science folks have been saying from the beginning that you will someday have all your bitcoin transactions revealed because of this. Most everyone else thinks the primary reasons Bitcoin is attractive are the essentially free cost of transactions, the nearly instantaneous nature of the clearing process, and the elimination of intermediaries. Personally, I think of Bitcoin as a proof of concept model for creating unique and unduplicatable pieces of computer code, an essential attribute for attaching value to an electronic file. That’s what has experts excited.

Cryptocurrencies have a market capitalization of something like $9 billion, of which Bitcoin is around $5 billion. That’s far less than the market capitalization of baseball trading cards, but it is essentially the same thing, a collectible “thing” for which there are buyers and sellers. It may go the way of a collectible from a few years ago, Pet Rocks. When we (government) are constantly asked about Bitcoin by consumers, bitcoin dealers and the media, we have to respond. Our release on the subject served as a model for the later CSBS release. We believe it is appropriate to warn the public that cryptocurrency is like a risky and speculative commodity at this point, especially because it is not subject to financial regulation as so many seem to believe. You apparently believe we should stay silent and let fools be fools (and let the media and others call us names for staying silent).

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I stand corrected on the anonymous versus the pseudonymous.

In my defense, I did not state, nor mean to imply, that state regulators should remain silent on the dangers of Bitcoin investing. However, in light my history on this blog, making the assumption that I was directing snark toward the regulators was understandable. Rest assured, when I intend it, it will be less-than-subtle.

In the course of the followup conversations with my correspondent, however, they directed my attention to a recent interview in The Washington Post with Silicon Valley legend Marc Andreessen, who's a believer in Bitcoin and who's put his money where his mouth is. Although I've not had a chance to do more than skim it, my correspondent pointed out the following telling statements concerning my comments about the lack of anonymity:

Anybody who thinks Bitcoin makes it easier to do transactions that aren't tracked by the government is 100 percent wrong. The transactions all happen in public view. Anybody can look at the entire ledger and verify who owns what. So if you're a law enforcement agency or an intelligence agency, this is a much easier way to track the flow of money than cash. So I think actually law enforcement and intelligence agencies are going to wind up being pro-Bitcoin, and libertarians are going to wind up being anti-Bitcoin.

I guess the tin-foil-hat wearers are going to continue to shy away from Bitcoin. On the other hand, if a visionary like Andreessen is right, bankers would be foolish to ignore it. Whether they should do that with alacrity or with due deliberation is a subject upon which reasonable people can disagree.

Martha Tries A Carrot And A Stick On Mel

I'm not sure what Massachusetts Attorney General Martha Coakley thinks she's going to accomplish by simultaneously sweet-talking and threatening Mel Watt, but I doubt she's doing much more than engaging in political theater. Maybe she's setting herself up for a run for higher office and wants to make sure that the next time around, she doesn't get a butt-kicking like Scott Brown unleashed on her four years ago.

Massachusetts Attorney General Martha Coakley reiterated calls Wednesday for the Federal Housing Finance Agency to allow Fannie Mae and Freddie Mac to offer principal reductions to distressed borrowers and to participate in nonprofit home buyback programs.

Coakley sent a three-page letter to FHFA Director Mel Watt trying to persuade him that principal reductions could be crafted in such a way to prevent abuses, including what she called "the abstract fear of waves of strategic defaulters."

"Abstract fear"? You'd think that folks like Coakley, adherents to utopian progessivism that denies the reality of human nature and proposes that through the exercise of centralized state power, human beings can be perfected and justice achieved, here on Earth, would know all about "abstract fears," as well as "abstract joys," "abstract hope," and "abstract abstractions."

Nevertheless, in case the risk of strategic defaults might actually be grounded in reality, Coakley had an answer for Watt.

Coakley said one way to reduce strategic defaults would be to adopt clear modification underwriting standards, require a showing of hardship by the borrower and allow lenders to share in the home price appreciation.

Watts' predecessor, Ed DeMarco, adamantly opposed principal reductions. He felt that whole-sale principal write-downs would hurt mortgage bond investors which, in turn, would hurt Fannie Mae and Freddie Mac, which, in turn, would hurt the mortgage market. Coakley apparently thinks Mel is more sympathetic to a state chief law enforcement officer's sojourn into social policy, especially in the area of mortgage markets, where everyone knows a state attorney general is uniquely qualified to offer business-savvy solutions to thorny problems.

In case Mel is inclined to turn a DeMarco-like deaf ear to her entreaties to do the right thing, Martha whipped a big stick out from behind her back and threatened Mel with a beating if he didn't fall in line.

In the letter, Coakley even threatened to take legal action because the FHFA has refused to take part in buyback programs that allow nonprofits to purchase distressed homes at current market value and immediately resell them to the former homeowner.

"Our office also is considering all available legal avenues—including litigation—to ensure compliance with Massachusetts law, should FHFA fail to promptly amend its policies to allow the GSEs to participate in credible buyback programs," Coakley wrote.

Coakley is using as the basis of her threats the alleged violation by Aunt Fannie and Uncle Freddie of a 2012 Massachusetts law that forbids lenders from refusing to consider buyback offers at "fair market value" solely because the home will eventually be returned to the defaulting homeowner. I assume that DeMarco and Watt believe that a law that vague is likely to be held to be unenforceable against Fannie Mae and Freddie Mac, or perhaps they've just decided to become renegades and ignore the law because they take some perverse pleasure in lawlessness. I'm betting on the former, but I might be wrong.

At any rate, Watt hasn't publicly responded to Coakley (or if he has, the main stream press hasn't reported it). I wouldn't hold my breath waiting for the FHFA to cave on this one, although Watt is relatively new in the saddle, and you can't be sure which way he might ride. My guess is that Coakley will have to push her social engineering agenda in court. Pursuing it against a cash cow like the FHFA, which, with its charges in federal conservatorship, is not likely to be scared by the prospect to spending money on trial lawyers.

Bitcoin Wet Blankets

I may be wrong about this, as I have been wrong about many things (for example, that Senator Liz Warren is actually a 1/32nd member of the Wheredafugahwe Tribe). However, I'm getting the distinct impression that bank regulators are taking a dim view of Bitcoin. Maybe the fact that so may state banking regulators have issued "consumer warnings" about Bitcoin is tainting my enthusiasm for a currency based upon software code, high-speed "mining," and a fictional Japanese creator, which, in the world of combined currency/commodity/underwear/breath mint, is usually a surefire recipe for success.

The latest wet blanket was tossed by the State of Maryland, whose Division of Financial Regulation and Office of the Attorney General Securities Division "warned" consumers about the high risks of buying and selling the virtual currency.

“Virtual currencies, including Bitcoin, involve inherent risks that residents need to consider prior to deciding to transact with or invest in these currencies,” said Mark Kaufman, Commissioner of Financial Regulation. “The entities that accept and transmit, or exchange virtual currencies for U.S. dollars are subject to federal law, and may be subject to state law, including the requirement to be licensed as a money transmitter. While we are examining these issues with our colleagues in other states and at the federal level, it is important to be clear that currently, Maryland does not regulate virtual currencies.”

“As with any other financial transaction or investment, consumers should understand and check out both the venture and the people they’re doing business with before dealing with virtual currencies,” said Attorney General Douglas F. Gansler. “For now, there is little to no regulation and no safety net for consumers or investors who lose their money dabbling in virtual currency such as Bitcoin.”

As the linked press release points out, the warning was developed by the Conference iof State Bank Supervisors, and represents, I think, a general consensus among state banking supervisors that consumers need to be warned that all that glitters is not gold. Or even pewter, for that matter.

I have friends, people I very much respect, who are intrigued by and, in some cases, advocates for, Bitcoin. I'm not there yet, not merely because it's cutting edge and I'm a reactionary tool of entrenched capitalists and imperialists who want to thwart any innovation that might threaten their hegemony over the manna from heaven that fuels the lifeblood of the masses. That goes without saying, although I just did. No, I'm not there yet because the regulatory environment as it now stands appears to be at odds with one of the primary reasons that Bitcoin is attractive: anonymity.

As a recent article that discussed the first licensed Bitcoin ATM made clear, the regulators don't want Bitcoin users to remain anonymous.

But there's one way the bitcoin ATM is not like a bank: To buy or sell bitcoins there, a person will have to set up an account, create a PIN, enter a phone number, scan a government-issued ID, have their photo taken and do four palm scans. That's a list of requirements that is likely to put privacy advocates on edge.

"I will not be first in line at this machine," said Lee Colleton, a privacy and ethics enthusiast and member of the Seattle Privacy Coalition.

Colleton said banks and governments have been looking for ways to get people to convert their anonymous cash into cryptocurrency for decades so it can be monitored and tracked. But most people have been reluctant to convert entirely to such a monitored system.

"That’s why they’re seeking out a system like bitcoin," Colleton said. It feels anonymous, like cash. It feels like using a Walkman instead of Spotify — no one knows what you're listening to, where you are, who you are or when you're listening. But if you have to hand over your palm print, ID, face and phone number to access your money, he said, you're actually giving up more information than you would to a bank.

"What they don’t realize is that they’re doing the work of the banks, playing into their hands," he said.

"Doing the work of banks." I'm sure Mr. Colleton spit up a little in his mou8th when he uttered that phrase.

I'm not as much of a privacy advocate as is Mr. Colleton. However, I recognize that many of the people initially attracted to Bitcon were enamored of its use to quickly settle transactions in a manner that protected privacy. If using a Bitcoin ATM means you're palm-printed, strip-searched, and probed by aliens, that's going to take the icing off the cake for many.

There are many other pros and cons for Bitcoin and other virtual currency concepts. We'll be weighing them all as we see where this brave new world created by Satoshi Nakamoto.

Porn Stars Held To Be "Un-accountable"

Operation Choke Point, and the general attitude of the federal banking regulators toward businesses that they've picked (for reasons best known to themselves) as worthy of being branded with a Scarlet Letter, are causing cautious banks to drop customers who might be engaged in perfectly legal activities. Apparently, the latest victims are porn stars (paid subscription required).

A new war is brewing between banks and their customers, and the fight is going public.

PR black eyes of the past would have come from ATM surcharges or foreclosure injustices. Now, news reports are stacking up about angry customers — payday lenders, check cashers, telemarketers, gun dealers and even adult entertainers — who are complaining that their accounts have been, or could be, unfairly terminated.

[...]

The pornography sweep in particular only strengthens bankers' suspicions that regulators are forcing them to play the role of morality police. And it raises more practical questions for bankers: How do they balance public perception and compliance? What industry will they feel compelled to shut out next?

Look, porn stars ought to be banned from access to money due primarily to their utter lack of acting chops.

"Hi, I'm Eva. I'm from the maid service. I'm here to clean your house."

"Hey, Eva, would you start with cleaning...THIS?!?"

"Oh, baby! Yeah...yeah...oh...oh..uhh..uhhhh...OHHHHHHHHHHH!!!"

Yet, in this great country we call "The Land of the Free and the Home of the Horny," the "adult entertainment business" is legal. As is payday lending (in many states), check cashing, renting-to-own, deposit advances, tax anticipation refund lending, and being a "Pawn Star." However, all of those businesses have a "common taint": the DOJ and federal bank regulators don't like them. While the ostensible rationale for that dislike may be that they pose higher risks of money laundering or other illegal activities by some of their members than do other business (like insidre trading investment advisers to members of Congress), I've not seen the evidence that Teagen Presley is a crook, albeit you might argue, with some support, that she's a "bad actor."

Reporter Andy Peters points to a problematic FDIC report from 2011 that listed the current crop of the disfavored, and that may be a guide to "who's next."

Pornography is one of several potentially problematic industries listed in an FDIC report in June 2011 that warns banks about managing third-party payment processor relationships. Ties between banks and processors that handle transactions for the problematic industry sectors can expose banks to "greater strategic, credit, compliance, transaction, legal and reputation risk," the FDIC said.

[...]

In addition to pornography, the other high-risk industries the FDIC identified included ammunition and firearms sales, credit-repair services, drug paraphernalia, fireworks sales, dating services, racist materials and tobacco sales.

Dating services?

Peters quotes Bill Isaacs, the former FDIC Chairman who's been a fierce critic of Operation Choke Point: "Banks are left to guess who deserves access to the banking system and who doesn’t."

I'd say "deserve" has nothing to do with it. "Whim" appears to be the criteria being applied.

Is Vendor Risk Scoring Mandatory?

Notwithstanding the insistence of some inside and outside the federal regulatory agencies that regulatory "guidance" is not "mandatory," the cautious banker knows better. The headline in today's American Banker (paid subscription required) screamed, "Risk-Scoring Mandate Pushes Banks to Rethink Vendor Choices."

The word "mandate" may be thought a tad strong by some, and downright wrong by others. After all, the article referred primarily to OCC Bulletin 2013-29, which is officially merely guidance. However, as we've asserted repeatedly on this rag, a bank that doesn't treat guidance as mandatory is a bank with a strong streak of masochism.

The specific alleged "mandate" that reporter Penny Crossman is that banks "risk score" their vendors.

What regulators have been asking in their latest round of vendor management guidance is a far more detailed scrutiny of vendors: of their financial stability, debt, revenue, profitability, their cost structure, and product strategy, among other things.

In the past, a large, well-known vendor may have been a safe choice, but regulators are now saying it's no longer enough to choose a vendor because it's a market leader. They want to be presented with a scorecard that lets them review how banks evaluate their vendors in a consistent way.

"The regulators are forcing banks to sit down and say 'what if. if this vendor goes away, what are the risks to you?'" says Lawrence Kaplan, of counsel at the Washington, D.C., law firm Paul Hastings.

Along those lines, Bulletin 2013-29 also specifically provides that a long-standing relationship with a vendor does not negate the requirement that the bank do the "required" due diligence and evaluation on that vendor as it would on any comparable vendor, and make certain that it engages in ongoing monitoring of that vendor in an objective fashion.  Familiarity shall not breed comfort, is apparently the regulators' motto.

As Crossman points out, there's no one-size-fits-all risk scoring model. I've seen several, any one of which appeared to do the trick. However, it appears that some sort of numerical risk-scoring is becoming the rule rather than the exception for banks.

The regulators haven't even explicitly said banks must assign each vendor a numerical score, though they have implied it.

"Unfortunately a score for each vendor is an unstated expectation," says Paul Reymann, a partner at McGovern Smith Advisors in Washington.

[...]

"Examiners want to know how you went through that methodology," Reymann says. "How you measure that could be with numbers, 0 to 100, or red, yellow and green indicators."

Among the factors that could be included in such a model, the article mentions financial viability, ownership, scalability (ability to grow with the bank), concentration risk (vendor failure affecting a large number of banks), and compliance risk (can you say "online tribal payday lending? I knew that you could!"). Those are only a few. Consultant Walter Taylor has come up with a list of 30 of them. Obviously, the risk assessment becomes more important as the vendor becomes more "critical" to the bank, but the basic risk scoring ought to be done on all vendors to justify to examiners how you rated the vendor and why you made the decision to retain them (if you did).

A couple of quotes struck home, because they mirror my own experiences.

It's not that you can't use a startup, but the management of the bank will have to justify it to the board, which will have to justify to the regulators why they're using Larry's ATM Machines rather than Diebold," Kaplan says. "What benefit do we get out of that and why are we better off, other than price? It's going to be a critical issue."

[...]

"If you've got three people in a garage doing some type of real-time processing for you with deposits or credit cards, that's crazy," Taylor says."

It's not pretty when the bank officer's buddies, who, literally, are three guys in a garage (with a heck of a neat software code they've developed), have their spare balance sheet and income statement reviewed by the green eye-shades on the vendor oversight committee, who respond with a variation of "You're kidding us, right?"

With all the other stuff banks have to worry about, vendor management may seem like it ought to be small potatoes. It's not. If you treat it that way, you'll dodge the bullet for awhile, right up until the instant it carves a canoe in your skull. Vendor management is serious business these days. Take it seriously.

May 8, 2014

I am on the road this week but simply had to make a quick post to apologize profusely for having slandered Mary Dunn by transposing letters in an acronym that might lead a reader to conclude that Ms. Dunn was employed by the NCUA instead of the CUNA. My sincere regrets for having sullied Ms. Dunn's reputation.

Another criticism I received was that my justification for alleging that credit unions have competitive advantages over commercial banks when it comes to payday lending was not clear. I thought that it was clear.

NCUA Pumping Up Payday Lending?

What a difference a charter makes. According to the American Banker, the NCUA is encouraging credit unions to make payday loans while the FDIC, OCC, and FRB, together with the Department of Justice, are throttling banks in order to choke off payday lenders from access to vital banking and payment processing services. Sure, the FDIC would like FDIC-insured banks to make small-dollar loans to the underbanked. There's a bit of a problem with the FDIC's approach. They want those loans made on terms that don't permit the banks to make a sufficient profit to justify the risk.

As the article's author, Rachel Witkowski, notes, it's not only the fact that the NCUA's chief, Debbie Matz, has recently spoken favorably of credit unions getting involved in small-dollar lending that makes the loans more attractive to credit unions than to banks. Credit unions are non-profit mutual entities and not shareholder-owned. They don't have as much pressure to make sure they don't devote resources to unprofitable products. In addition, because credit unions don't pay income taxes, they have can make money at rates and terms that don't produce the same after-tax net yield to banks.

An additional negative factor for banks versus credit unions is that the NCUA restrictions on these loans are less onerous than those imposed by the OCC and FDIC.

The NCUA has put restrictions in place, including saying such loans can be for no more than $1,000, cannot be rolled over, cannot extend beyond a six-month term and have an interest rate no higher than 28%. Matz said approximately 500 federal credit unions are offering such a product.

The FDIC and OCC guidelines, meanwhile, say the customer must show a financial capacity to pay the funds bank and already have a relationship with the bank for at least six months. They also require a "cooling off period" of at least one monthly statement cycle before another advance can be offered. Customers with any delinquent or adverse credits are "ineligible" for such products, the bank regulators said.

Not exactly a level playing field, is it?

A number of commercial bankers are just fine with this disparity in treatment.

Not all bankers feel they are disadvantaged, however. Some suggested that it's difficult to make a profit on deposit advance products so competing in that space would be too risky.

"It wouldn't bother me" if a credit union expanded into this space, said Joe Goyne, chairman and president at $272 million-asset Pegasus Bank in Dallas. "It's difficult for a community bank or credit union to do these on a one-off basis because I know what the costs are to get into it" and "structurally, it's totally different than how a bank is set up."

And in a curious bit of backhanded support for her boss, the NCUA's Deputy General Counsel opined that even credit unions may not be jumping all over this "competitive advantage" any time soon.

"In more case than not, credit unions are not really making money on these," said Mary Dunn, the deputy general counsel of the Credit Union National Association.

It must be great to be in a regulated business where your regulator is encouraging you to do more business where the odds are greater than 50% that you won't really make any money. Most banking executives wouldn't be able to relate.

The Benefit of Not Being a Bank

Ever since the Care Bair and Company shot down Wal-Mart's attempt to enter the financial services business through the front door, the retailing behemoth has been charging full speed ahead through every side and back door it can cut into the wall, including foreign banking, store-based, check-cashing money centers, micro-lending, money transmission, and prepaid debit cards.   The latest door opens into the insurance business.

The nation's largest retailer said Wednesday it is partnering with AutoInsurance.com to provide customers with "a one stop shop" for their auto insurance needs.

Wal-Mart will not sell insurance, but its customers can click through a link on walmart.com, or go to autoinsurance.com directly to get competing quotes from several car insurance providers such as Progressive, Esurance and Safeco to choose the policy and price that best fit their needs. Wal-Mart will also promote the service via displays in its stores.

[...]

Wal-Mart said the service will save customers money. The company cited a pilot program survey it conducted last year in Pennsylvania, where customers who purchased policies from autoinsurance.com on average said they saved $1,168 a year.

"We are always looking for ways to reduce complexity, increase transparency, and give everyday low prices to Wal-Mart shoppers," said Daniel Eckert, Wal-Mart's senior vice-president of services.

Eckert also stressed the simplicity of the site, which is able to retrieve information from a customer's current policy and automatically fill in most of the necessary coverage information.

[...]

Much of Wal-Mart's financial service offerings are targeted at people who do not have access to bank accounts, because they either cannot afford the high fees, or do not have stable enough jobs to be able to keep a minimum balance.

The federal banking regulators claim to be focused on encouraging banks to find ways to "bank the underbanked," while simultaneously driving many of those who do service those folks, or who service the businesses that service the "underbanked," out of the business.

As we speculated five years ago, Wal-Mart may have "dodged a bullet" by not owning an industrial bank." Free of the gentle ministrations of an overseer who knows what's best for the consumer, especially the fog-brained poor, Wal-Mart seems to be able to give the underbanked what they want, rather than what the Nanny State decides they need.