SAN DIEGO - If geography matters, the American Bankers Association ought to be in the catbird seat this year on Capitol Hill.

Daniel R. Smith, who became the trade group's chairman on Monday, hails from Michigan, the home state of Senate Banking Committee Chairman Donald W. Riegle Jr.

No Friendly Relations

Still, Mr. Smith, who is chairman and chief executive officer of First of America Bank Corp., Kalamazoo, cautioned bankers not to expect much from Sen. Riegle, who has in the past been viewed as an industry critic. "I don't think Don has a good relationship with any bankers at this time." he said.

Mr. Smith plans to do his best to improve the image of bankers among members of Congress and to put across the industry's message loud and clear. One thing the ABA has discovered, he said, is that outstanding bank sales people make the best lobbyists.

"We're identifying the people in banks that are best at it," he said. "It isn't always the CEO."

The banking industry has traditionally suffered from a bad image on Capitol Hill, especially in the wake of the savings and loan bailout, Mr. Smith said.

Individuals vs. Industry

Still, he said, he thinks that bankers - who are usually active and well regarded in their communities - can be effective with their elected representatives.

"It's like the way everyone hates Congress but likes their, own congressman," said Mr. Smith. "Members of Congress hate banking but love their own banker."

Mr. Smith's first test on the legislative front will likely come this week, when the Senate Banking Committee is to take up a bill that would authorize interstate branching but restrict bank insurance powers.

The banking industry will have a tough time stopping that bill at the committee level, Mr. Smith said, and he is nervous about its prospects on the Senate floor and in the House.

Insurance-Power Worries

"On products and services, we're worried about losing some powers, especially insurance," he said.

Mr. Smith represents the middle view on interstate branching, a view that appears to be shared by many of his members. To Mr. Smith, the issue isn't all that important. It would help a handful of banks but wouldn't affect the great majority one way or another.

His own institution is a $21 billion holding company with eight banks in three states. Even if interstate branching were authorized, he said, First of America would continue to run its banks as separate entities.

"We like having local directors and local banks," he said. If First of America loses anything through inefficiencies, he added. it is more than made up by the added business the bank books by maintaining its local identity.

New Product Powers

Thus, while he supports interstate branching powers as a matter of principle, he isn't willing to give up anything to get it - especially not insurance powers.

Much more important to most banks, Mr. Smith said, is the continuing quest for new powers - particularly insurance and mutual fund authority.

First of America oversees about $5 billion in mutual funds but pays fees to a third party to satisfy legal requirements that prevent it from underwriting. "We're so close to underwriting now," he said, "but we still have to pay out 10 or 15 basis points to someone who calls himself an underwriter."

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