Banks with large, interstate branch networks benefit most from mergers, according to four researchers. Joseph P. Hughes of Rutgers University, William Lang of the Office of the Comptroller of the Currency, Loretta J. Mester of the Federal Reserve Bank of Philadelphia, and Choon-Geol Moon of Hanyang University write that bigger banks are more at risk of failing than smaller banks.

But they find banks that expand across state lines offset this risk and actually become stronger financially. "Consolidation that enhances geographic diversity also improves bank safety measured by the risk of insolvency," they write.

For a copy of "The Dollars and Sense of Bank Consolidation," call 215- 574-6428 or visit www.phil.frb.org.

Bank mergers permit the industry to better serve consumers, according to a study by the Bankers Roundtable. "By merging, banks can expand their product and service offerings, broaden their geographical horizons, create the resources needed to be technologically proficient, and better manage and control risks," the group writes in its study.

"The result is a banking system that is better equipped for the future and better able to meet a demanding and increasingly sophisticated customer base."

For a copy of "Bank Mergers: Recent Developments and Trends," call 202- 289-4322.

Regulators and the securities exchanges need to modify the circuit breakers installed after the October 1987 stock market crash to prevent needless trading disruptions, writes Lisa K. Ashley, an associate economist at the Federal Reserve Bank of Chicago.

After reviewing the history of market safeguards, Ms. Ashley concludes that the exchanges should eliminate so-called intermediate circuit breakers. These include the New York Stock Exchange's "collar" rule, prohibiting arbitrage traders from using the exchange's automated transaction system if the Dow Jones industrial average changes by more than 50 points.

She argues that these intermediate breakers are tripped frequently, which means they are unnecessarily interrupting trading on the exchanges.

Ms. Ashley also recommends adopting a single, percentage-based standard for triggering a halt in trading on all exchanges. Currently the New York Stock Exchange halts trading after a 30-percentage-point drop; the Chicago Mercantile Exchange, after a 20-point fall.

For a copy of "Circuit Breakers: Back to the Basics," call 312-322-5111 or visit www.frbchi.org.

The Federal Reserve Bank of St. Louis has published proceedings from a recent symposium on Social Security reform. Included is a paper by Federal Reserve Board Governor Edward M. Gramlich, who calls for a cut in benefits for high-wage earners and a requirement that workers invest 1.6% of their pay in self-managed retirement accounts.

Other papers address whether and how Social Security could be privatized. For instance, Rowena A. Pecchenino of Michigan State University and Patricia S. Pollard of the St. Louis Fed recommend replacing Social Security with a private pension plan and annuities.

For a copy of "Reforming Social Security in Theory and Practice," call 314-444-8809 or visit www.stls.frb.org.

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