Correspondent banking ain't what it used to be.
Gone are the days when the traveling representatives of the major money-center banks would come in droves to state bankers' conventions and treat any person whose bank kept even a tiny deposit with a correspondent bank to lobster, steak, shrimp, and all the alcohol a human could hold.
Gone also are the more useful but less dramatic hours a correspondent banker put in on the job.
In traveling around his territory (there were no women correspondent bankers in those days) the correspondent banker would come into the office of a respondent and be able to answer -- off the top of his head -- questions on operations, international banking, monetary policy, and everything else of importance to the community banker.
No Call Home Necessary
And at the same time he could look at credits to provide his bank's participation in an overline without even calling home for approval.
No wonder the top traveling men for banks like First of Minneapolis and Banco (Norwest Corp.'s old nickname), First of Chicago, First of St. Louis, and the like were better known in their territories than their presidents and why so many bank presidents came up through the ranks of correspondent bankers.
A good correspondent banker was like a president without a portfolio. And to go to a meeting like the Michigan Bankers Association's each June in Mackinack Island and proudly wear the correspondent's badge that said "Traveling Circus" was a mark of prestige respected by all bankers.
I'm a Hero'
Correspondent banking was accorded top status at some organizations.
I remember a rep who covered Georgia for a New York bank telling me, "If I brought in a million dollar deposit from a nonfinancial corporation, few would care. But if I bring in $20,000 from a new correspondent bank, I'm a hero."
One Boston banker told me that he had gone by train to Pittsburgh to close an account at a Pittsburgh bank because his bank felt it was no longer needed. He took the train home, by which time he found the Pittsburgh bank had sent a rep up by plane (something rare in those days) to get the account reopened, which had been accomplished by the time he got back to his desk the next day.
Booze, Banking, and Baseball
All old-timers have stories of how the correspondent bankers could drink with the best of them and then work the next morning, and how they were relied upon for "bull and baseball" -- theater tickets, ball game tickets, and fancy dinners when the community banker hit the big city.
But what must be remembered is that correspondent banking was the glue that held the industry together.
Because they could get needed information from correspondents, the smaller bank could thrive in a complex environment and do just as well as larger institutions.
Behind the Decline
As proof, the U.S. Savings and Loan League had to have many more professionals on the staff than the American Bankers Association did, because the thrifts didn't have the assistance of a correspondent network available in the way the bankers across the country did.
Why has correspondent banking declined in importance? Here's a list of reasons:
* New laws forced many banks to switch required reserves from correspondent banks to the Fed. The money-center banks then no longer had this giant pool of noninterest paving balances of the respondents to tap. This, of course, lessened the large banks' interest in serving the respondents.
* The Federal Reserve is now offering many correspondent services -- and doing so efficiently and with attractive pricing. This puts the Fed in competition for the fees and extra balances, above reserve requirements, that respondents use to pay for such services.
* Community banks have better staffs and need correspondent services less.
* Outsourcers and vendors are providing much of the service the old traveling banker's organization use to provide.
* The large banks started to compete in the towns of the former respondent banks. They decided that it was better to buy or open a bank and fight for the deposits of the entire community than to concentrate on getting the deposits of the community bank already there.
Still Out There
Correspondent bankers are still out there offering cash management, investment banking, bank stock loans, data services, and the other services that the traveling correspondent has always offered.
But the field is far more competitive, and no traveling man or woman today can single-handedly explain all these services, much less make bank commitments without first calling home.
So banking may be more professional and competitive. But there is still something romantic in thinking back to the old correspondent banker who could carry his share of booze at the same time that he effectively carried the respondent's portfolio in his head. And let's not forget those tickets to the ball game.