NEW YORK, Jan. 21 — "Everybody's standing around the barroom, waiting for the fight to begin."
That's how Jack A. Norris, president of the Heller Trading Corp., characterizes the mood of the banking industry regarding the new commercial powers granted by the Export Trading Company Act of 1982.
Only last week the Federal Reserve Board released its proposed regulations to implement the new law, and already bank activities are heating up.
• Security Pacific Corp. this week formally notified the Federal Reserve System of its plan to form an export trading subsidiary.
• In Chicago, Walter Heller International Corp. — a $6.5 billion-asset international financial services firm — has incorporated an ETC subsidiary and plans to file its notification to the Fed in the near future.
• And BankAmerica Corp. officials say they have definite plans to form an ETC subsidiary some time in 1983.
The legislation's ambitious goal was to re-establish America's status as a world-class exporting nation, through the creation of large-scale export trading companies. And to make them effective, it modified the Glass-Steagall barriers between banking and commerce to permit banking companies to own or invest in ETCs.
If it accomplishes its aim, bank holding companies — through ETC subsidiaries — in a few years may be engaged in some startlingly different lines of business.
In 1990, for instance, a Citicorp or a Wells Fargo might be buying electronic goods in America, modifying them for export, holding them in inventory, shipping, insuring, and selling them overseas through its own sales and distribution network. A Chase or a Morgan might head an ETC consortium to build a new city in the Far East involving architects, builders, suppliers, insurers, and shippers.
"They called it the export trading company act," one former banker currently in the exporting business notes. "But what they should have called it was 'the commercial business experimentation act.'"
The new business opportunities granted to bank holding companies by the legislation are indeed sweeping. Activities permissible for ETC subsidiaries under the act include: exporting, importing, barter or countertrade, market research, advertising, marketing, insurance, shipping, and taking title to goods.
Another section of the act provides antitrust protection for joint ventures and business agreements. Although attorneys are divided on whether these provisions were needed and how well they will work, Congress' intent is clear: As long as U.S. businesses combine in order to export, and receive a Commerce Department certificate authorizing the activity, they will be protected from most types of antitrust action.
Banking companies are limited to investing 5% of their consolidated capital and surplus in an ETC subsidiary as equity. They may extend a further 10% as credit. But even under those constraints sizable subsidiaries are possible. BankAmerica, for instance, could theoretically start up an ETC with about $250 million in capital and $500 million in credit.
Reasons for Caution
When the Export Trading Company Act was passed in October, some exporters and other observers had anticipated a wholesale rush into the business by bankers, and they were dismayed when it did not materialize.
Many bankers, however, feel that caution is in order. Trading of goods and services — especially the authority to actually take title to merchandise — is an entirely new field for them, they note. Ancillary lines of business such as freight forwarding, customs brokering, and ocean marine insurance are also alien.
Bankers perceive other constraints as well. Those frequently cited include: The lack of trading expertise in the banking industry, along with the differences in "corporate cultures" between the two businesses; the bleak near-term outlook for world trade, and the current outcries concerning international lending; and the welter of new-business opportunities that will become available to banks in the deregulatory eighties.
