Bank Lawyer's Blog

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.

Wal-Mart Marches On

Last week, the American Banker featured a story by Maria Aspan (paid subscription required) that looked at Wal-Mart's business of providing consumer financial services to its customers, two years after it finally gave up its quest to get the FDIC to move forward (as the law required it to do) on its application for approval of insurance of accounts for an industrial bank charter and withdrew the application. According to Aspan and expert observers she interviewed for the story, Wal-Mart has not only adapted well to a world without bank charters, it may have "dodged a bullet" by not owning an industrial bank at a time when the Obama administration and Democrats in Congress want to do away with that charter.

"...Wal-Mart's coming to the realization, 'You may not get the charter, but that doesn't prevent you from getting the consistency reputation in financial services,' " [Louisiana State University professor Joseph] Mason said. As for competition from traditional banks, he said, "Right now, I don't see that push-back, and of course the crisis is aging, so I don't think we're going to see anything hinder Wal-Mart from amassing a financial superstore even if they don't do it with a charter."

Wal-Mart appears to have done a "work-around" the lack of a charter through partnerships with "General Electric's GE Money Store which issues its branded credit cards and prepaid cards, and FiServ Inc.'s CheckFreePay unit, which provides its walk-in bill service."Even consumer advocate groups admit that Wal-Mart's prepaid cards have been a hit with the audience that matters most to the retail giant: its customers.

"There are things offered by Wal-Mart that banks are not able to provide, or it is going into places that banks are not willing to," said Linda Sherry, the director of national priorities for Consumer Action. But "the Wal-Mart brand is perhaps more trusted by individuals and people who shop at Wal-Mart than by consumer advocates and union types."

It's difficult to believe that consumers would ignore the warnings of those who know better than "the sheeple" what's in their best interests. What's next: Jesse Jackson stages a press conference for the next trumped up Duke Lacrosse Team "scandal" and nobody shows up?

It's interesting that Wal-Mart, by not being in the banking business, is side-stepping the public relations backlash that is tainting other bankers who had nothing to do with the causes of the current crisis, such as community banks that are dropping like lawyers on a dove hunt with Dick Cheney. Instead, Wal-Mart is using the avenue open to it (not ideal, but workable) to cement its relationship as a low-cost provider of financial services to working class Americans. The Beast of Bentonville refuses to be tamed.

To be perfectly fair to the community bankers and other segments of the conventional banking business that howled so loudly about Wal-Mart's real intentions in seeking to obtain an industrial bank charter, I think they were correct. Wal-Mart wanted to bring to the banking business the same Wal-Mart business model that it brought to the selling of cheaply-made pants for Americans with wide butts: give the people what they want at prices below the competition. They would have been a formidable force in traditional consumer banking. As some "lone wolf" critics claimed two years ago, that would have been a good thing for banking business, which tends to get fat and lazy when competition is restricted.

Of course, Wal-Mart still might become a formidable force, although not in through a conventional route.

Speaking of conventional routes, no mention is made in the article of Wal-Mart's decision to pursue a conventional retail banking business outside the United States, where the separation of banking and commerce is not, shall we say, a concept that causes governments to seize up like a Ford F-150 with a leak in the oil pan. As we noted a couple of years ago, Wal-Mart's announcement that it was entering the consumer banking business in Mexico  "lends credence to those of its critics who warned during the ILC debate that opening the door even a crack to Wal-Mart would have been a big mistake."

Industrial Banks: Take A Long Hard Look

While sitting around, exploring all the wonderful features and applications of my new I-Phone, I began to reminisce of days gone by, days of long ago. In other words, I was thinking of the week before last when I spent three days in Midway, Utah, among the most beautiful scenery and some of the nicest people this country has to offer. Considering those people were bankers, it was all the more surprisingly satisfying.

I attended and spoke to the annual convention of the National Association of Mortgage Bankers and the Utah Association of Financial Services. Although my particular topic was the off-beat intersection of social media and banks, most of the buzz at the convention had to do with the Obama administration's proposal to, in effect, destroy the state industrial bank charter, by redefining industrial banks (and industrial loan companies) as "banks" for purposes of the Bank Holding Company Act. The practical effect would be to require non-bank holding companies that own industrial banks to close them, surrender their charters, or sell them to a bank holding company. Most industrial banks are owned by such non-bank holding companies. Although Barney Frank and other "heavyweights" in Congress have promised the industry that any "reform" legislation would grandfather the existing institutions, they couldn't sell control and no new charters could be granted to non-bank holding companies. That merely means a slow death rather than a quick one. The industrial bankers were less than pleased with that compromise.

I don't represent any industrial banks and, therefore, have no financial skin in the game. On the other hand, I simply don't understand the sudden rush to slam the door shut on a business model that has operated successfully for a long time and, unlike their state and federal commercial bank and thrift brethren, did not contribute to the meltdown of the banking system that we are currently suffering. In fact, the industry as a whole not only remains remarkably robust, but is providing badly needed financing where commercial banks are not. For example, Harley Davidson owns an industrial bank and banks aren't falling all over themselves to finance purchases of classic American-made choppers, mainly due to the fact that federal bank examiners are currently making commercial banks write down the value of their commercial real estate and commercial loans and increase capital and reserves to the point where they are choking off the ability to lend. To take up the slack, those commercial companies that own industrial banks are providing the financing to keep those purchasers who are still out there with the means to finance their purchases.

Another thing that struck me was how well supported these banks are when compared to Mastodons like Citibank and Bank of America, whose parent corporations have required oodles of cash from Uncle Sam to keep on ticking, in order to keep paying fat bonuses to their investment bankers and to keep raising the fees on their consumer credit cards. I suppose if they were owned by Toyota or Target (which each own industrial banks), they would have been able to write a check out of petty cash to replace the entire capital base of their industrial bank subsidiary.

The last time I visited the subject of the industrial banking business in earnest on this blog, it was in connection with the 18-month moratorium the FDIC under Sheila Bair slapped on all new industrial bank charters and acquisitions of the same (which I roundly criticized). Wal-Mart's application for an industrial bank charter set the cockroaches scurrying in all directions, and federal regulators forgot that they were required by law to act on applications, instead of sitting on them so that their overlords in Congress could act to permanently shut Wal-Mart out of the business. Congress could never get its act together on that front (thanks in no small measure to Utah Senator Robert Bennett), but after many states piled on with legislation that would have prevented Wal-Mart from interstate branching (which it claimed in wouldn't do and which other industrial banks don't do) or from operating bank branches in retail stores (which, apparently, is something only commercial banks and thrifts are allowed to do), and after the FDIC extended an initial six-month moratorium for another twelve months, Wal-Mart finally decided to start banks in other countries and to work around the lack of a bank charter in this country. Although that decision (and Home Depot's decision to likewise abandon pursuit of an industrial bank charter) caused the furor to die down, the FDIC still hasn't opened the door to new industrial bank charters and Congress is threatening to take another crack at the business, this time with the support of the White House.

I understand arguments about mixing commerce and banking, and the fear that we'll have another Great Depression as a result. It seems to me we managed to have a near-Great Depression without the participation of industrial banks. In fact, the industrial banking segment is comparatively healthy, and much healthier than much of the rest of the banking business. The majority of industrial banks are located in Utah, and their average Tier 1 capital is 14.12%. Even Wilbur Ross and his private equity friends could purchase a boatload of bad assets from the FDIC with capital levels like that. If commerce and banking don't mix, how is it that the feared abuses that arise from such mixture have not appeared with industrial banks? Might it be that the effective regulation (and my hat's off to state regulators AND the FDIC on that score), not effective destruction, of the industrial bank business is the means to ensure that it does not pose a danger to the safety and soundness of the banking system? I'm just throwing it out there for consideration.

I don't know that I completely agree with free market advocates like Coleman Drake and John Berlau, who argued in a recent Washington Times piece that not only should we not ban industrial banks, we should encourage more of them. On the other hand, I might be persuaded. Thus far, the business not only seems to weathering the economic storm well, it seems seem to be pouring gasoline into an economic tank that needs all the fuel it can get. Ill-consider legislation that shuts that pump off is the last thing we need right now. Claiming that there's a "loophole" that needs to be closed without demonstrating why we need to close it based upon actual experience, or that the damage caused by the existence of the "loophole" outweighs the expected negative consequences of the closure, is not enough to convince me that this is a business segment that should be dismantled.

CRA Extension: Let's Focus On The Real Issues

We're waiting on pins and needles for the details of the next great idea for disposing of toxic assets on the balance sheets of big banks by enticing private investors to participate in working out those assets with a government whose word is no bond, and which blows with the prevailing winds. Let's hope the buyers get their money up front, then move to a country with no extradition treaty with the U.S. Otherwise, when Congress and/or the American people decide the deal was too good for private equity, they'll change it or punitively tax it retroactively

While we squirm with anticipation, we can't help but notice that Texas Rep. Eddie Bernice Johnson is pushing forward with a bill to extend the coverage of the Community Reinvestment Act to non-banks, such as credit unions and non-bank mortgage lenders. It's been something that liberal Democrats have been targeting for years, including Barney Frank. It's expected that Republican opponents will trot out the tired shibboleth that the CRA "caused" the subprime mortgage crisis. As we argued last December, that argument is simply not sustainable by anyone other than those who favor their Kool-Aid laced with cyanide. Even Sheila Bair and John Dugan agree on that point.

As The Washingtonn Independent noted last week, the Federal Reserve Board recently offered further support for our position.

Amid the ongoing debate over mortgage lending reform, a top federal regulator took a seat before Congress last week and debunked the myth — popular among conservatives — that a law encouraging loans to low-income communities has been largely responsible for the nation’s housing crisis.

“I can state very definitively,” Sandra Braunstein, director of the Federal Reserve’s consumer and community affairs division, said during a House Financial Institutions subcommitte hearing Wednesday, “that from the research we have done, the Community Reinvestment Act is not one of the causes of the current crisis.”

[...]

She cited a Federal Reserve Board analysis which found that, in 2006, CRA-covered banks operating in CRA-targeted neighborhoods accounted for just six percent of the risky, high-cost loans largely responsible for the housing crisis. Mortgage loans are considered high-cost when interest rates are at least three percentage points higher than those of conventional mortgages.

“So I can tell you,” Braunstein said, “if that’s where you’re going, that CRA was not the cause of this loan crisis.”

[...]

“Our analysis of the data finds no evidence, in fact, that CRA lending is in any way responsible for the current crisis,” Fed board member Elizabeth Duke said in a speech before representatives of the banking industry last month. “The CRA is designed to promote lending in low- to moderate-income areas; it is not designed to encourage high-risk lending or poor underwriting.”

Advocates are quick to point out that the CRA includes a safety and soundness provision that discourages bad loans. “It has a built-in check saying that [banks] have to lend in a way that’s good for the institution and good for the community,” said Danna Fisher, legislative director at the National Low Income Housing Coalition.

Of legitimate concern to banks, however, is that Johnson's bill would require regulators to determine whether lenders are adequately serving all minorities, not merely low income communities, as is the case under the existing CRA. The addition of new criteria will give extortionists consumer advocacy groups more ammunition to extract money concessions from banks that want to merge, acquire another institution, or branch. One more layer of cost of regulatory compliance at a time when pressures on banks' bottom lines are greater than ever. The fight should be over whether this extension of federal law is necessary in light of its costs, and the battle ought to be waged on statistical evidence, not on ideological cant.

There's plenty of fodder to feed a "healthy debate" about the extension of CRA to new areas and covered lenders. Raising straw men won't give credibility to the law's opponents.

Rolling Down The Road To Perdition With Barack & Co.

To many readers, this story is merely a routine business transaction between two banks. A New Mexico-based bank sells its Colorado branches to a bank with a larger footprint in Colorado. The seller nets a nice little premium (5.8%) for the deposits. Yet, toward the end of the article comes the kicker.

The move will boost First State’s capital levels, prompting the bank to withdraw its application for federal funding from the U.S. Treasury Department’s Troubled Asset Relief Program (TARP).

Get ready folks, but the list of banks bailing on TARP is only going to grow.

Also bailing out are those private equity investors who've been waiting on the sidelines to see if the US Treasury Department and the FDIC are ever going to get their collective act together and start offering deals that will attract the big bucks. One group I've been talking to, based in Europe, has had enough. They were nice about it, but when billionaires tell you that they're not confident that they'll ever see anything out of the Keystone Cops currently implementing Rube Goldberg concoctions that seem to spring forth full blown from the heads of The Three Stooges, and also tell you that they see more stable investment opportunities in the Middle East than in solvent US banks and in the assets of failed US banks, you lose the "easy, peaceful feeling" that things are going to get better anytime soon.

You want private equity to buy troubled banks and/or their troubled assets? Cover ALL the losses and finance the acquisition costs cheaply in such a way that the investor is guaranteed a minimum yield on the assets (can you spell "Y-I-E-L-D M-A-I-N-T-E-N-A-N-C-E"?). You'll have private money rushing in, recapitalizating the banking business,  and pulling assets back into private hands (which the government claims it desires) faster than Barney Frank can beat Nancy Pelosi to a TV camera.

Just sayin'...

This week wasn't a total waste, however. While I've been Rick Rolled before (Who hasn't been?), until this week, I'd never been "Barack Rolled."

Misdirected Criticism Of CRA

In yet another sign of the Apocalypse, Sheila Bair and I agree on something. Last Thursday, speaking before a consumer advocacy group (her favorite turf, other than any Congressional subcommittee chaired by Barney Frank), Ms. Bair "vigorously" refuted the allegation that the Community Reinvestment Act was a cause of the explosion of subprime mortgage loans that led to the current credit crisis and economic meltdown.

"Point in fact," she said, "only one in four higher-priced first mortgage loans were made by CRA-covered banks during the hey-day years of subprime mortgage lending.  The rest were made by private independent mortgage companies and large bank affiliates not covered by CRA rules."

And "Let me ask you," she proceeded. "Where in the CRA does it say to make loans to people who can’t afford to repay? Nowhere." The facts are simple, Bair said. The lending practices that are causing problems today were driven by a desire for more market share and revenue growth, not because the government encouraged certain lending practices.

Some conservative pundits and "intellectuals" have been promoting the idea that CRA "forced" lenders to make such loans.

Mark Hillman, a former majority leader in the Colorado state Senate tells a different tale. "Through CRA, banks were strong-armed to make risky loans and threatened with fines of up to $500,000 per violation if they didn’t reach government quotas," he wrote in an op-ed published in late October. "Banks were encouraged to hire 'community groups,' like ACORN, to find 'qualified' borrowers."

Bair said CRA has always recognized there are limitations on the potential volume of lending in lower-income areas due to "safety and soundness" considerations, and that’s why the CRA never set out lending targets or goals. However, the CRA isn’t without imperfections, and now is the time to put more emphasis on the qualitative aspects of lending in CRA examinations, she said.

OCC Comptroller John Dugan, who, unlike Ms. Bair, considers himself more of a bank regulator than a consumer advocate, made similar points in a speech last month. I tend to take Dugan more seriously than Bair on these issues, because he's got less of a pro-consumer, anti-bank bias and isn't so obviously angling to curry favor with Barney Frank and the incoming Obama administration.

I find the argument that the CRA caused, or even substantially contributed to, the subprime mortgage crisis to be not only unconvincing, but counterproductive to any movement to "correct" the real abuses of the CRA. I was an in-house counsel for a large thrift institution when the CRA was enacted, and had primary responsibility for considering its impact on the operations of the thrift. One of the expected impacts was that consumer advocacy groups would use it to hold branch and merger and acquisition applications hostage by unjustifiably challenging those applications until the applicant "paid off" the advocacy group with a "contribution" to some housing-related fund or project of the group. That expectation was shown to be justified.

That said, the CRA did not "require" a bank to abandon sound underwriting requirements and make loams to borrowers who had no hope of repaying the loans. I served on a loan committee during the first four years of the CRA's existence, and I can testify that such a consideration was never raised. As to the application of the CRA in the decade of 1995 to 2005, a period singled out by critics for much of the CRA "abuse," I've polled many compliance officers of commercial banks and thrifts on this contention, and every single one of them scoffed at the notion. Not that university professors and political ideologues with absolutely no experience in mortgage lending or consumer lending will be deterred by the views of those who have actually served in the trenches. Still, non-Kool-Aid drinkers might take note.

There's enough to dislike in the CRA, and there are sufficient legitimate reasons to seek to reform it, without raising bogus "problems" that do no more than rally supporters and discredit opponents. When you make Sheila Bair look like a disinterested observer, you're not doing yourself any favors.

Beneath The Bloviation

While the blogosphere bloviates breathlessly about the U.S. Treasury Department's blatant grab for unbridled power, the likes of which has not seen since Julius Caesar crossed the Rubicon, some bank law nerds have been diverted by more mundane aspects of the ever-expanding reach of federal preemption of state banking laws as they apply to the operations of national banks and federally-chartered thrifts. Hard on the heels of the US Sixth Circuit Court of Appeals decision that supported the OTS extending federal preemption of state licensing laws to a federal thrift's "exclusive agents," the US Second Circuit Court of Appeals has ruled that a Connecticut law that attempts to restrict the operations of "facilitators" who "facilitate" (e.g., take and forward to a lender loan applications for) "tax refund anticipation loans" made by third party lenders, does not apply to such "facilitators" when their "facilitation" is undertaken on behalf of loans made by national banks. Specifically, provisions of the Connecticut law that would limit locations where such loans could be made, or would restrict the annual percentage rate of such loans, do not apply when the facilitators are facilitating loans made by national banks. According to the trial court and the Sixth Circuit Court of Appeals, such state law provisions are preempted by the National Bank Act. With respect to annual percentage rates, the National Bank Act allows national banks to "export" the rate allowed by the state where they are "located" (i.e., where their main office or a branch office is located, or the state named in their certificate of organization). The Connecticut law attempted to restrict the annual percentage rate to a rate (or rates) lower than that that would be allowed by the state where the national bank in question was located.

We'll see how much power Congress eventually gives the Treasury Department, although if appearances on the Sunday morning talking-head shows are any indication, Democrats and Republicans in Congress actually appear to be cooperating with one another to give the new "Garbage Debt Czar" the power he needs to collect the waste generated by "just a few bad loans too many" and dispose of them to God-knows-who for God-knows-what-price at a time some time in the future (as long as the Czar hustles up and buys or commits to buy the garbage within the next two years). The details are still being worked out (not that has lessened the blather from all sides as to how this is the beginning of the end of life on this planet and, perhaps, the universe). We'll also be interested to see how and when the Democrats will exact their ton of flesh from the hides of the "fat cats" they claim are completely responsible for this present pickle, and how much largess for their core constituencies (non-profit consumer groups, trial lawyers, and those "common men and women" who had "a lot of junk done to them" by the fat cats). With the blogs in full bloom, rest assured that no thought about the matter, no matter how trivial or inane, will be left unuttered.

In the meantime, under the radar scope, the federal court system will continue its slow but inexorable work of consigning the Tenth Amendment to the dustbin of history.

H/t CSBS

Ford Comes Forward

There were no hats and horns in evidence last week when the FDIC's moratorium on approving applications for industrial loan corporations and industrial banks quietly expired. The week prior to the expiration, Home Depot joined Wal-Mart (paid subscription required) in pulling its pending application to acquire EnerBank off the table because, according to a Home Depot spokesperson, "the bank no longer fit its 2008 strategy of focusing solely on its retail operations." It's hard to believe that Home Depot might have decided after an application lay fallow for 19 months, to go in a different direction. Wal-Mart made that decision last year, and is well on its way to raping reaping the benefits of "microlending" to the humble peons of Mexico. I suppose we'll expect to see "Home Depot Bank" start payday lending operations in Bangladesh any day now.

Showing that it's filled with optimism of Panglossian proportions, has a card up its sleeve, or, perhaps, has top executives who smoke crack, Ford Motor Corporation filed an application for an ILC (paid subscription required) the day after the moratorium expired. It was the first commercial to do so. To be fair, the American Banker notes that BMW, Volkswagen and Toyota already have ILCs, and Chrysler has a pending application. Thus, it's not as if Ford is blazing a trail. Plus, it's been evident that even if Congress passes an ILC ban, there's a good chance that any such legislation will exempt the auto industry, through one express or implied loophole or the other.

Utah's Bob Bennett is still snorting and pawing the ground, threatening any such legislation, although some trade press reports have intimated that he might compromise to some small degree. Harry Reed of Nevada, another ILC-loving state, has been hiding in the weeds on this one, letting Bennett, a Republican, lead the charge. Expect Reed to surface if an unfavorable bill makes its way through the Senate (one already passed the House last year).

Although the starch seems to have seeped out of the debate, due mainly to the withdrawal of Wal-Mart's application last year, the whole controversy could heat up again. We'll see if the FDIC actually moves applications along with dispatch (of course, any movement would seem rapid after the FDIC sat on its butt for 18 months doing nothing). We'll also see if Senator Dodd, having failed miserably to become the next Barack Obama, actually propels this issue forward in the Senate.

How many people remember that Ford once owned a giant federal savings and loan association, First Nationwide Financial, which acquired insolvent thrifts in the mid-to-late 1980s, including some large failures in Ohio and Colorado? I wonder if Ford ever regrets selling that charter, knowing now that they would have been "grandfathered in" when Gramm-Leach-Bliley was passed?