Taking stock is something of a tradition at annual meetings, and delegates to the second annual convention of Savings & Community Bankers of America will be taking stock of their industry and their institutions from a variety of perspectives. By any rational measure, that process should produce satisfaction, if not euphoria.

Earnings continue to be strong. Capital levels have risen dramatically, and the capital markets continue to accommodate IPOs and secondary issues eagerly. Institutions which were virtually written off as recently as three years ago have successfully restructured, achieved capital adequacy and are reemerging as major players on an increasingly competitive field.

With obvious exceptions on both coasts, economic recovery seems steady, and the benign interest rate environment could increase the momentum once the employment picture brightens.

Comparing Costs

It's worth noting, too, that for all the furor over the costs attendant to the savings institution and bank losses of recent years, those dislocations cost the U.S. far less than what other governments, such as Japan, have had to invest as they intervened in the health of their banking systems. In fact, by the time tiny Finland is finished stabilizing its banks, it will have spent about $30 billion, some 7% of its gross domestic product.

But, we're far from out of the woods. As Federal Reserve Chairman Alan Greenspan and others have observed, the current bottomline strength of America's depository institutions should not deflect attention from their loss of market share to the growing universe of new, hybrid financial service companies operating with a lower cost structure and a more accommodating regulatory framework.

There is no level playing field between a large mutual fund whose all-in pre-tax costs might be 31 basis points and a bank or savings institution paying 25 basis points in deposit insurance premiums alone. Or between one of the funds and a $120 million thrift whose officers spent 500 hours gearing up for Truth-in-Savings compliance at a cost of more than $30,000 -- about 18% of the institution's annual operating budget.

Radical Changes

The radical changes taking place among financial services competitors represent a challenge not only for us but for public policy, because the type of financial system we have in the next century will be determined by the willingness and ability of industry leaders and public policymakers to understand the forces of change and to craft a system that will meet the needs of people, communities and businesses in an environment increasingly influenced by global forces.

How daunting a challenge is it? You don't have to be a card-carrying cynic to insist that the recent track record is less than inspiring.

It's difficult to draw confidence from a Congress which has been inclined to micromanage everything from capital rules to examination standards and which may view banking as just one more public utility. And while the administration has taken worthy initiatives to rationalize the regulatory process, it has been slow to fill key positions and to craft a full vision of banking's role in the economic and social fabrics of the nation.

The Best Answer

It might be that we should leave well enough alone on the theory that perhaps the most serious problems facing us involve cultural values and behavior not amenable to government solution. Many bankers tell us five years of being left alone by Uncle Sam is a worthy objective.

On the other hand, the best answer lies perhaps in our industry demonstrating that it has the initiative, the resources and the vision to guide public policy, instead of being its captive. Time and again, in communities throughout the land, our institutions and the men and women who run them are proving that there are vast resources of creativity and community spirit that can produce affordable housing, support for small business, and community investment.

If we look at the best and the brightest which abound from Portland, Me. to Portland, Ore., we may well see a banking system that is reinventing itself to meet society's needs in a manner that continues to reflect a system of values Americans hold dear.

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