What kind of a job is the banking industry doing on Capitol Hill?

"We are so ineffective in the legislative process that we do not even know what is being legislated," said Richard M. Kovacevich, president and chief operating officer of Norwest Corp., Minneapolis.

Harsh language, but Mr. Kovacevich thinks the industry needs a wake-up call. The 1991 banking bill did serious damage, he said, because the industry was too fragmented, uninformed, and unmotivated to fight it.

In a talk last week with representatives of Norwest's correspondent banks, he stressed the need for a new agenda the entire industry can get behind: regulatory relief, interstate branching, deposit insurance reform, and full authority over mutual funds.

Guenther Incensed

That's a good deal less ambitious than the deregulation bill proposed last year by the Bush administration, but is controversial nonetheless.

Kenneth Guenther, executive vice president of the Independent Bankers Association of America, was particularly incensed that Mr. Kovacevich's proposal for deposit insurance reform would set a lifetime $100,000 limit per individual.

That, he said "would wreak havoc on the deposit bases of the nation's community banks and drive funds to |too big to fail' banks such as Norwest."

But Mr. Kovacevich isn't bothered by the fact that some will disagree with him.

An Olive Branch

"I didn't put this out for everybody to rubber stamp," he said in an interview. "We may have to do some old-fashioned horse-trading."

To begin with, Mr. Kovacevich has an olive branch for Mr. Guenther's members: small-bank exemptions from some regulations. That just makes good common sense, he said.

"We need to move from a system that treats all banks equally to one that recognizes reality," he said. "And the reality is, it's impossible for small banks to comply with all the regulations out there. You have to ask: |what's essential and what do we really want small banks to do?'"

Mr. Kovacevich would go further. Well-run banks with good records on federal mandates such as the Community Reinvesment Act might also deserve more lenient treatment.

Norwest was part of a coalition of six large regional bank companies that worked long and hard this year to move legislation featuring full-blown interstate branching. But if that's too controversial, Mr. Kovacevich said, then maybe the coalition could settle for a bill permitting consolidation of banks already owned, but forbidding novo branching.

Mr. Kovacevich is optimistic that a unity agenda can be forged if trade groups stop arguing among themselves and start listening to their members. "I sense much greater agreement out there than thus far has been reported."

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