On July 1, Savings and Community Bankers of America named Robert R. Davis its chief economist and director of research. Previously, Mr. Davis ran Davis Financial Consultants, a New York-based financial consulting firm.

Before that, he worked for the New York Mercantile Exchange, the Commodities Futures Trading Commission, the Joint Economic Committee, and Chicago's former Harris Bank.

He tells Washington bureau reporter Robyn Meredith that the thrift business will become more consumer-loan driven.

American Banker: What do you see as the future of thrifts?

Robert Davis: I guess one of the things that I want to say is that the traditional core business is still a good business. Housing finance is important. The needs for housing finance in the future and the public policy for housing finance may adjust to fit the times.

As time goes by, housing will remain important, but it will probably diminish somewhat.

And what will replace that will be consumer and community banking. What we are going to see will not be a watershed change, but a relative shift.

You will probably see relative growth in the portion of consumer-credit-oriented transactions on the balance sheets of savings institutions.

I expect to see a greater diversity in the industry, and more institutions finding niches that have nontraditional components.

AB: You have talked about new products for the thrift industry, but in the future do you also see more consolidation, and in what form?

RD: There will be significant consolidation. There has been consolidation from the economic fallout of the last few years, and that is going to continue.

AB: Do you see more banks acquiring thrifts?

RD: I think it is going to be sort of an equal mix.

AB: Thrifts are highly profitable now, but what will happen when interest rates change?

RD: Part of the challenge is to run one's operations so that you do very well in the good years an do sufficiently well in the bad years, and there is no reason why a depository institution can't do that.

There is good management in this industry...those institutions plagued by bad management did not survive.

AS: What public policy will SCBA push for in the future?

RD: The public policy that the organization wants to see - and I believe will see - is one that continues to place an emphasis on organizational arrangements that promote home ownership.

It wants to see public policy that also is community oriented. That is already part of public policy. We have an interest in reminding policymakers of that policy.

That's the reason we're here, to ensure that that environment exists so the important transactions for families and individuals can continue. to be served by healthy financial institutions.

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