WASHINGTON - Mergers among banks are not driving customers out the door, Federal Reserve economist Stephen A. Rhoades told a recent Consumer Federation of America conference.

"Consumers, and I include myself in this group, are not very price- sensitive in terms of banking services," Mr. Rhoades said. "The same people who drive 20 miles to save a couple of bucks on a pair of blue jeans put a greater emphasis on convenience than price when they're shopping for banks."

Mr. Rhoades, the Fed's assistant director of research studies, said a number of studies have concluded the industry has not been much changed by the 6,800 bank mergers that took place between 1980 and 1994.

Bank efficiency and customer service ratings have held steady, while bank employment levels have barely changed, he said. Competition has held fees in check and banks have even added branches, he said.

But Ken McEldowney, executive director of Community Action, said he's seen first-hand that bank mergers inevitably lead to branch closings and staff reductions that hurt consumers.

"I think that bank mergers have great benefits - for the holders of bank stocks and the companies that arrange the mergers," he said. "Other than that, I have really seen nothing but downsides."

Mr. McEldowney said the remaining banks are free to jack up fees because they have fewer competitors. "There always ends up being less competition if you have fewer players," Mr. McEldowney said.

Cynthia Glassman, a vice president at the bank consulting firm Furash & Co., said she thinks the marketplace will force banks to provide the services customers want, despite mergers.

"If banks didn't have competition, mergers might be a problem," Ms. Glassman said. "But they do have a lot of competition, not just from other banks, but from thrifts, credit unions, money market funds, insurance companies."

"If the banks don't continue to offer the products and services that their customers want, they'll lose their customers," she added.

Ms. Glassman believes that mergers may actually improve bank services. She says mergers increase efficiency, give small banks access to better technology and expand banks' service areas.

"Ultimately, in my view, bank mergers are good for customers," Ms. Glassman asserted.

Mr. Serb writes for Medill News Service.

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