Sometimes real life is stranger than fiction.

A group of U.S. government officials has volunteered to help the Russians develop an efficient, free-market financial system.

It would be fascinating to listen in on a conversation between Ted Black, president of the Federal Reserve Bank of Gotham City, and his counterpart in the Russian central bank, Boris Leninov.

Boris: There's so much to do. Where do we begin?

Ted: First, we need to divide the financial sector into components. We'll have what we call thrifts to make loans for housing. Then we'll have banks to make loans to businesses and consumers.

Next we'll have credit unions to make consumer loans. Then we'll need investment banking firms to supply capital. Insurance companies will underwrite people's lives and properties...

Boris: Excuse me, but that seems pretty complicated. Why do we need so many types of firms? Can't one company do all of those things?

Ted: Because we don't trust them. We don't want economic power concentrated ina feew hands. Plus, we're afraid that if we make the system too competitive, firms might make mistakes and fail.

Boris: But isn't that the way the free-enterprise system is supposed to work? I recall from my days at the university that the theory behind capitalism is that the strong firms will prosper and drive the weaker firms from the marketplace.

Ted: That's the theory, but it's best to take capitalism in modernation. We've devised all sorts of ways to limit competition. For example, we restrict entry into the business, and we regulate where banks and thrift can establish branch offices.

Boris: That's not quite the dog-eat-dog system I thought you had in America. All those controls must make your life as a regulator pretty easy.

Speaking of regulators, what should we do about that in Russia?

Ted: Well, in our country we have state banks and national banks.

National banks are regulated by the Comptroller of the Currency.

State banks are regulated by their respective state banking departments. If a state bank is a member of the Federal Reserve System, it's also regulated by the Federal Reserve. If it's not a member of the Federal Reserve, it's regulated at the federal level by the Federal Deposits Insurance Corp.

The FDIC also has some authority over national banks. If the bank is owned by a bank holding company ...

Boris: I'm sorry to cut you off, but I think that's a little too complicated for us. Would it be all right if we just had a commissar of banking or something like that?

Ted: Well, you'd be missing out on the strenght-through-diversity our system provides, but I suppose it could work so long as the commissar reported to the central bank.

Boris: What authority should our commissar have?

Ted: In our country, the regulators are the glue that holds the system together. We determine who can be in the business and whether they can expand their operations. We tell them how much capital they need. We examine each institution once a year or so.

If they misbehave, we levy fines, remove management, or take other enforcement actions. We make sure they invest appropriate amounts in their local communities. And ...

Boris: Whew, that's impressive. I guess our systems of government are not as dissimilar as I had been led to believe.

You've mentioned this FDIC several times. What's that?

Ted: The FDIC insures deposits at banks and thrifts so that when they fail, people are protected.

Boris: You mean no one loses money except the FDIC?

Ted: Technically, the insurance coverage is limited to $100,000 per depositor, but there are all sorts of ways to get around the limit. And whenever a large bank is in danger of failing, we protect all depositors in order to prevent disruption in the financial market.

Boris: I'm amazed. The more you explain your systems, the more similarity I see with ours. Of course, our system has failed miserably and our economy is in shambles. How's your doing?

Ted: Well, ah, you see, we've had a few problems.

Boris: Like what?

Ted: Well, we lost $200 billion or so in the thrift industry when about half of the thrifts failed. Our banks are under a lot of pressure, and the FDIC is broke.

Boris: That's most unfortunate. What have you learned from the experience?

Ted: We've recently enacted legislation to increase the government's authority over banks and thrifts. We're in the process of adopting over 60 new regulations to govern everything from the compensation banks may pay their executives to the way their boards must operate.

Boris: I don't want you to take this wrong. I really appreciate you giving me so much of your valuable time, but your system seems pretty much the same as the one we're replacing.

Now if you'll excuse me, I'm late for my meeting with the Germans.

Mr. Isaac, a former chairman of the Federal Deposit Insurance Corp., is managing director and chief executive of the Secura Group, a Washington-based financial services consulting firm.

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