Dodd-Frank also "created an intermediate holding company, regulated by the Federal Reserve, to isolate the banking activities from that company downward and separate from the holding company's non-financial activities, which is more of a European model," according to Comizio, who says that this "may be a viable alternative."
Why bother with another ILC application?
Once the ILC moratorium ends next July, WalMart may try again to form an ILC, and this time around, the company could face less opposition. After all, how much more risk can a WalMart bank subsidiary represent to the U.S. financial system than the largest bank holding companies that received bailout funds through the Troubled Assets Relief Program, or TARP, or the 464 banks that have failed since the beginning of 2008?
Comizio says "you may see less objection from community banks, since WalMart has been leasing space to community banks across the country in their stores. WalMart will have to make the banks comfortable that those relationships continue."
There could also be far less of a protest from consumer groups, who would have a tough time arguing that WalMart is unfriendly to consumers, considering that it is easy to use Bluebird as an alternative to a traditional checking account, while avoiding any minimum balance requirements and easily avoiding any fees. "The practical reality is that Congress will kick the can down the road, or use the intermediate holding company," Comizio says.
The banking industry also shouldn't be counted out, according to Christopher Cole -- Senior VP and Senior Regulatory Counsel for the Independent Community Bankers of America -- who says that the regulation that WalMart "would have to comply with at this point would be significant under Dodd-Frank, since they would have to be a bank holding company and a source of strength for the bank and be subject to restrictions on affiliate transactions."
"Bluebird looks like a comprehensive deposit product, and they may stop with it," Cole says, but if WalMart presses ahead with the ILC charter, his organization will put up another fight.
"We had a lot to do with stopping WalMart from getting approved by the FDIC for an ILC charter," Cole says, and the Independent Community Banks of America "are still concerned about bib box retailers getting into the banking business... we have always thought that the commercial side would conflict with the banking side. There were concerns that the interest of the bank would not always be consistent with the commercial side."