In our recent contest for the presidency of Schmidlap National Bank, our topic was "Should we cash 'on us' checks for noncustomers?"

Most respondents offered a vehement "No!" Their replies illustrated the fear that people who present such checks are attempting tax evasion or "have done some bad things" that make them unwilling or unable to maintain their own bank accounts.

Unfortunately, those respondents may be shortsighted.

Warren Heller, research director of Veribanc Inc., Wakefield, Mass., went much further than commenting on whether an "on us" check should be cashed for a noncustomer. He looked at the possible regulatory, legislative, and public relations impacts if a hard-line policy against cashing such checks becomes widespread.

Mr. Heller thought that refusing to cash "on us" checks would cause people without bank accounts to turn to other neighborhood financial institutions. He also worries-a fear also voiced by a banking regulator- that if banks don't ease up Congress could step in.

"We could get treated to a Truth-in-Check-Cashing-Policies Act and other associated pleasantries for which the cost and efforts of compliance most certainly would be deemed reasonable," he wrote.

The competition could also be ready to intervene.

Enterprising stock brokerages or insurance companies looking for low- cost funds could begin advertising that their non-FDIC-insured draft accounts work as "bank checking accounts did in the old days." These competitors could only require that people bring their checks with proper proof of identification to one of their offices.

To some readers Mr. Heller's predictions may seem far-fetched. But are they? I have had long discussions with Illinois' sharp and exciting banking commissioner, Jack Schaffer. And Mr. Schaffer's greatest fear echoes Mr. Heller's prediction.

"I worry that the legislature will mandate that I set rates and terms on banking practices that instead should be the responsibility of the individual banks," Mr. Schaffer said.

"Already the lawmakers are trying to get me to set the price of using an ATM and micro-manage our state's banks," he said.

Mr. Schaffer had been a legislator for many years and is a solid defender of free markets with minimum regulation.

So when he talks of the unpleasant possibility of even more regulation of banks, bankers should take heed-and do what they can to avoid that scenario.

They should examine the impact of practices like categorically refusing to cash "on us" checks, with no exceptions or establishment of reasonable rules.

We know the punishment is often worse than the crime. The government moves in when the private sector fails. And once it is in, it almost never leaves. u

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