There will probably never be a better time than now for the banking industry to declare a "bank holiday."

In its attempt to engineer social change, the federal government is commandeering the banking system. If bankers continue to let it happen, they will have only themselves to blame.

Suggestions are already being made to inject social engineering into other financial intermediaries (see "Treasury Mulls How to Make Nonbanks Aid Communities" in the June 29 American Banker).

Federal Reserve Governor Susan Phillips recently stated at the Stonier Graduate School of Banking in Newark, Del., that no bank can escape the growing perception that private companies should be more involved in curing social problems.

She also indicated that if banks do not anticipate and understand changed concerning social and cultural diversity, Congress will step in and tell them how to do business.

Regulatory Juggernaut

One must certainly ask, "When did Congress learn how to do business?" and "When did it become banking's business to direct social and cultural changes?"

Bankers have to have their heads in the sand not to realize that the already overwhelming regulatory burden will not stop growing. Contrary to all of President Clinton's promises about deregulation, relief is not in sight.

At the American Bankers Association's national regulatory compliance conference, Fed Governor Lawrence Lindsey said, "A service industry, like banking, which does not serve its customers or which operates in a vacuum of reason and judgment will soon find that the vacuum filled by legislative fiat."

Mr. Lindsey also indicated that the Clinton administration would introduce this year or next legislation broadening the Community Reinvestment Act.

Shut the Doors

I ask, who should determine whether the bank serves the customer -- the customer of the federal government?

After years of growing disenchantment with the way our federal government operates, particularly at the bureaucratic level, it is my conclusion that there is only one way to end all of the nonsense: The industry should declare a holiday.

Bankers would do themselves, their customers, American business, and the country as a whole a much needed service by halting unwanted and unnecessary government intrusion into the private sector. Just close the banks until reason and judgment return. Repeal of the Truth-in-Savings Act and other congressional abominations is a must.

Lack of Nerve

Unfortunately, most bankers over the years have shown little backbone and gumption. They have been content not to rock the boat and supposedly protect their job security.

Bank lobbyists have also failed in their efforts to eliminate or reduce regulation.

Bankers have one last chance to remain a private enterprise. To accomplish the objectives of a "holiday," a majority of banks must join with the ABA, Independent Bankers Association of America, and state banking associations to set a comprehensive agenda that adheres to the goal of getting the government out of the banking business.

Mr. Schumm is a senior consultant with Austin Financial Services Inc., Toledo, Ohio.,

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