Banking Law

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?