Push for interstate branching demonstrates that regulators are ignoring banks' best interests.

Critics have faulted the Clinton administration for lack of focus on many foreign and domestic policies, but this was not the case on the North American Free Trade Agreement, the national health care proposal, or the interstate branching issue.

The administration, led by Comptroller of the Currency Eugene Ludwig and egged on by NationsBank chairman Hugh McColl, wants to remove interstate barriers.

Mr. Ludwig has joined a rather long list of regulators who have spent more time promoting themselves and their jobs than dealing with the problems threatening the institutions for which they are responsible.

Part of the Problem

These "advocates in regulators' clothing" deserve as much of the blame as any other factor for the costly and stupid mistakes made by the financial industry, with the possible exception of greed.

Interstate branching, if enacted, would be anticompetitive. The large banks, self-proclaimed champions of small businesses and citizens in general, have a history of making only low-to no-risk loans while sucking up local deposits. They are quick to pull up stakes when the going gets tough.

While it is no secret that the banking giants harbor some contempt for Mr. McColl, they will put on a show of solidarity on interstate branching, running roughshod over states' rights.

Ironically, justice may yet be served. The shenanigans of the Clinton administration may in the end convince Congress that the current regulatory framework, with three separate federal banking agencies, is necessary to protect the integrity of the industry and of the regulatory system itself.

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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