when it passed the law on interstate branch banking last year. Members were appointed by Treasury Secretary Robert Rubin. The panel is scheduled to report to him by Dec. 29 on its views on what should be done to improve the financial services industry. I don't presume to know what the report will recommend. However, I believe it is imperative that we retain the stern regulatory discipline that has made the American investment banking industry the strongest and the most effective in the world. With capitalism in the ascendant around the globe and privatization rampant in many countries, U.S. investment bankers are clearly the leaders. An important contributing factor in this leadership is the aggressive enforcement of the rules that govern our investment banks. Banks, insurance companies, and securities firms - the three principal segments of the financial services industry - have traditionally been considered separate industries and regulated as such by various federal and state agencies. Over the years, Congress has enacted legislation making sweeping changes in one or another of these industries, usually in response to scandal, fraud, disastrous losses to investors or customers, or some other crisis. Sometimes, as in recent S&L crisis, there has been a bailout at taxpayer expense; sometimes not. All three segments of the industry have continuing business before Congress, as each tries to protect and extend its turf. They don't always get what they want; witness the burdensome Federal Deposit Insurance Corporation Improvement Act, enacted in 1991, the last time Congress mandated a hard look at the financial services industry. But the once clear lines separating the three are becoming increasingly blurred. Banks now sell mutual funds. Insurance companies provide investment services. Brokerage houses offer checking privileges. Thus there may be a temptation for the advisory commission, Mr. Rubin, or Congress to put all the pieces together and create a single financial services industry, governed by a single set of rules. The notion is appealing, but, as always, the devil is in the details. Which rules? The answer could be crucial to the health of the industry and the economy itself. Whatever else is done, we must keep the standards now applied to the securities industry. Nor is it mere happenstance that the top securities firms in the United States are also the acknowledged leaders of the industry worldwide. The standards are severe. *Securities firms must mark their holdings to market value every day. If bonds bought for $10 million fall to $5 million in street value, they must be valued on the books at $5 million. *If on a given day any firm is unable to meet its capital requirements, it is shut down - no matter how large and well established it may be. *In fact, government enforcers aggressively pursue firms they consider underfunded or otherwise shaky. This unforgiving "mark-to-market" approach has put many securities firms out of business over the years, hurting their shareholders - but not the taxpayers, and usually not their customers. However, the firms that have learned to survive in this tough environment are stronger financially, more tightly and prudently managed, and more agile in a volatile marketplace. Mark-to-market discipline may be harsh, but it provides a reality check to securities firms, making them smarter, more effective competitors in a strong, healthy industry. And it has helped them maintain their status as world leaders. Mr. Michaelcheck is chairman of Mariner Investment Group Inc., New York, a private investment company. He was formerly the executive director of Bear Stearns & Co., where he co-led all fixed-income operations.

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