Dirty Doings Behind |Reform' Plan

The Bush administration, many of my fellow Republicans, and some key Democrats in Congress are joined in an unholy alliance to promote banking proposals hatched by Wall Street.

This common effort largely prevents either political party from making political hay over the other's selling out to the big, concentrated banking interests.

It might be more accurate to say that both parties could make political hay. But you can bet your next maximum PAC contribution that they won't.

When nearly everyone eats garlic, few are free to complain about bad breath.

Pernicious PACs

Certainly, not all who support the Treasury-Bush bill are on the bank-PAC hook. Without question, though, Congress would be looking at a much different version of bank reform if not for the pernicious influence of political action committee dollars on the lawmaking process.

Were there no PAC money behind the idea of nationwide branch banking, its chances of getting on the congressional agenda would have been slim at best.

Nevertheless many members of Congress, elected to protect their basic constituencies from the abuses of concentrated power and money, have signed on in support of this primarily Wall Street-hatched banking bill.

These members seem to confuse Wall Street with Main Street. Setting them straight will require action by organizations that represent organized labor, small business, farmers, ranchers, and America's small and midsize towns.

Glass-Steagall Illusions

Concurrent with the push for bigger and fewer banks has been a campaign to repeal the Glass-Steagall Act. Proponents claim that this would attract new capital for the ailing and errant giants of commercial banking.

Putting two heads together, proponents claim, would produce better business decisions. And the added profits resulting from banks being co-owned with securities firms, for instance, would rescue both from their current difficulties.

Some national figures of considerable repute - and with impressive credentials on these subjects - give short shrift to these claims. As they explain it, there is really no new capital out there; there is only capital that can be attracted away from some other investment.

A Bad Bet

To attract this capital, banks must be well managed, have adequate capitalization and reserves, and maintain reasonably clean loan portfolios.

It seems doubtful that any reputable, qualified corporate holding company would dig very deep into its pockets to gain control of a bank that failed to meet those criteria.

Furthermore, the idea of a banking entity and a commercial entity putting their business heads together is probably more idealistic than realistic. The stricter firewall proposal would drastically restrict any normal, mutually beneficial business relationship.

And it is well to remember that the securities industry has been operating on paper-thin margins, even without direct competition from commercial banks. Industrywide losses are quite common. When they occur, they must be absorbed, and capital must be replaced. This is hardly a panacea for the ailing commercial banking industry - nor, as a practical matter, for the struggling securities industry.

Roll Call of Villains

Let's look at who favors this so-called reform.

When one or more of the nation's 15 or 20 largest banks are headquartered in a district, its Congressional representatives should be expected to respond to their requests, as they would for any constituent. And, with rare exceptions, they do.

Add to that group lawmakers who received their seats on silver platters from special interests that were intent on dumping a previous incumbent. Notes held by special-interest groups come due at times like this.

Finally, there are the timid souls, Republican and Democrat, who cowered in the corner during the Reagan years. They feared being caught opposing the position of a popular President - who, due to a superficial grasp of the issues, was often wrong. The name of the President has changed, but the name of the game has not.

The Taxpayer as Victim

The ultimate threat in the huge power grab being attempted here is not to banking, but to the taxpayers.

Should the Treasury-Bush bill become law, some banks would be bought out, for a nice profit - and some would be bailed out, at taxpayer expense.

Americans would be most affected by the higher price tag on the much smaller number of banks banks remaining.

Average taxpayers would be the prime victims of the Treasury-Bush bill and would shoulder the biggest part of the cost.

Mr. McCrady heads McCrady/ Midwest, a business and trade consulting firm. From 1976 to 1988 he was executive vice president of the Independent Bankers of Minnesota.

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