With many of the nation's biggest banks well on their way to developing businesses historically prohibited by the Glass-Steagall Act, repeal of the Depression-era legislation might seem just a formality.

But the chief executives of the leading banks are as insistent as ever about the need for a change. They view Glass-Steagall as an unnecessary and costly nuisance that can't be eliminated quickly enough.

Typical is Richard Thomas, chairman and chief executive officer of First Chicago Corp., who said the law barring banks from securities and other lines of commerce "has been in place far too long."

Conceding that repeal is not "an automatic recipe for financial success or profitability," Mr. Thomas stands on the principle of removing obstacles to competition.

"We feel we ought to be able to compete in any financial business so long as it doesn't adversely affect the safety and soundness of the banking system," said Mr. Thomas. And he is not alone.

"NationsBank is in favor of eliminating any barriers that deter us from providing products and services that our customers want," said chairman Hugh McColl. "If Glass-Steagall restrictions didn't exist, NationsBank could become the true financial services company we strive to be."

Said Douglas Warner 3d, chairman and president of J.P. Morgan & Co.:

"We've called for repeal of Glass-Steagall for many years. It's simply an outdated law that places artificial barriers between financial activities. The repeal of Glass-Steagall would let us serve clients without unnecessary barriers like revenue limits and firewalls."

Banc One Corp. chairman John B. McCoy also seconds the motion.

"I think the repeal of Glass-Steagall is a wonderful idea," he said in a telephone interview from his Columbus, Ohio, office. Repeal would allow Banc One to underwrite bonds for its middle-market corporate customers, for example, and it would make it cheaper and easier for the Ohio superregional to market mutual funds.

"If we'd been able to do mutual funds 10 years ago, there wouldn't be any Fidelities out there today," Mr. McCoy said. "We wouldn't have lost deposit share. And it would just make it simpler to do than the rigmarole that we have to go through now."

Mr. McCoy was referring to the Glass-Steagall requirement that forces banks to use third-party distributors for the sale of mutual funds. This adds several basis points per year to the cost of doing business, he said, and the expenses can climb substantially, depending on the amount an institution has under management.

Because First Chicago has only about $2.5 billion under management, the cost of using a third-party distributor runs anywhere from $300,000 to $600,000 a year, according to Tim Kelly, a bank spokesman.

But at Minneapolis-based Norwest Corp., with $7 billion of assets under management, the numbers get more serious. Chief executive officer Richard Kovacevich said the bank spends some $7 million a year because of this Glass-Stegall requirement.

"It's a technicality," Mr. Kovacevich said. "But it adds costs. It also delays our ability to sell mutual funds, because customers have to wait to receive (information) and then they don't understand why another entity with another name sends them something.

"We'd like to be able to offer mutual funds the same way our competitors do. For us the product is crucial. By the year 2000, we think investment products will account for 25% of our profits. Conservatively estimated, Glass-Steagall costs us 10 basis points. Who knows what it costs us in the minds of our customers."

Mr. Kovacevich and Mr. Thomas both made the point that Glass-Steagall supporters in Congress believe the underwriting of debt and equity is riskier than other banking activities. But they insisted that foreign exchange and securities trading, derivatives, and commercial lending are all extremely difficult businesses, each carrying a significant amount of risk that banks have managed.

"Riskiness is in the eye of the beholder," Mr. Thomas said. "It's a very highly politicized issue."

In Mr. Thomas' eyes there are few things more risky than the business of making commercial loans. "Yet Congress doesn't have the same fear of those kinds of risks," he said.

The big-bank chairmen are generally supportive of the repeal legislation introduced by Rep. Jim Leach. The Iowa Republican's bill would allow banks to engage in underwriting to a greater extent than is currently allowed. However, such activities would have to be placed in another subsidiary of the bank holding company to maintain a firewall between deposit taking and underwriting.

On that issue, the bank chairmen tend to prefer the approach to Glass- Steagall reform promoted by Comptroller of the Currency Eugene Ludwig and the Clinton administration. This model allows underwriting and insurance activities within the banks themselves.

"We need to strengthen, not weaken, the bank franchise as opposed to a bank holding company," Mr. Kovacevich said. "Securities activities that are currently allowed in the bank - and we've been doing it for decades - should not be required to be moved to a separate entity. This is particularly true for small banks, which may want to be involved in mutual funds but can't afford to set up these separate subsidiaries."

But these banking industry leaders, working as they do in a heavily regulated industry, are sensitive to the political winds of Washington.

They view the legislation of Rep. Leach, chairman of the House Banking Committee, as the most likely to succeed. Their strategy is to try to work with him to change the bill, particularly on the key point of where previously prohibited activities can be undertaken.

Legislation proposed by Sen. Alfonse M. D'Amato, R-N.Y., which would allow banks to merge with any other kind of entity, including manufacturing companies, has no significant support among the chairmen of the largest banking companies.

"We do not think it is politically doable to break down the current barriers between commerce and banking," Mr. Kovacevich said.

"It's so much more important that we be allowed to be in the securities business. We think commerce should wait for another day. We should concentrate right now on the Leach proposal for securities, insurance, and banks."

The executives are most concerned that any repeal legislation will have firewalls - stipulations that traditional lending and deposit-taking activities be separated from underwriting - that are so strict as to be prohibitive.

At the same time, the chief executives said they understand and believe in the need to protect customers and their own banks from massive losses.

"There needs to be clear disclosure that securities sold by a bank are not deposits of the bank," Mr. Kovacevich said. "They are subject to market risk. You can lose principal on securities, which you can't on deposits. We have to be sure the customer understands this is a different animal."

Once a law is passed, Norwest may be on the lookout to buy a brokerage business, which a repeal of Glass-Steagall would make much more attractive. But the Minneapolis-based company could benefit even more because of the legislation's anticipated impact on insurance.

"We are the biggest bank owner of insurance in the country, with $250 million in revenues per year," Mr. Kovacevich said. "Right now we sell life insurance, but only as a distributor, not as an underwriter. If we could underwrite, it would mean literally millions of dollars over time."

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