What if Citicorp Simply Agreed with Dingell?

If Citicorp went to the mat with Rep. John D. Dingell over the "technical" question of its solvency, the bank might lose.

Fortunately for Citicorp, being "technically insolvent" has no immediate harmful impact on "too big to fail" banks.

But that doesn't change the fact that the Michigan Democrat has a point.

And the Citicorp alliance knows it.

Black Is White

The Citicorp alliance is the entire cast of big-bank apologists, including a number of federal regulators, Treasury Secretary Nicholas F. Brady, and the rest of the administration.

They would teach us that Glass-Steagall is anticonsumer, concentration is a virtue, and fewer banks means more competition.

The official Citicorp line, closely adhered to by the company's customary corps of columnists, economists, and camp followers, will continue to be that the situation is nowhere near so bad as Rep. Dingell infers.

Experts Favor Dingell View

Federal regulators, circling their wagons around the Bank Insurance Fund and the U.S. Treasury, will agree without reservation.

Yet most experts seem to agree that if Citi had to mark its assets for purposes of determining their true condition, the picture would not be pretty - and Rep. Dingell's claim of their "technical insolvency" would probably be sustained.

Further, Charles Peabody of Kidder, Peabody & Co. was quoted in The Wall Street Journal as saying (about Citicorp plans to sell off some businesses and tap the equity market): "The longer they wait, the less attractive price they get."

A Window of Opportunity

It would be a tough bullet to bite, but Citicorp could come clean about the mess it is in.

Regulators, the administration, Mr. Brady, and responsible editors of prominent financial and business publications could all point to the need for a prompt and orderly resolution of this serious problem, especially as it pertains to the company's capital, which Citicorp consistently argued was not important.

The focus that has resulted from the Dingell-Citicorp flap could serve as a forum for discussing the glut of money-center banks and how to reduce their numbers with minimum disruption to commerce and the public.

Alarming Plans

The public interest would be well served by a candid presentation of the valid concerns expressed by many over proposed legislation that would permit commercial firms to own banks and banks to own commercial firms.

Such a presentation could bring to the public's attention the potential for disaster should securities, insurance, real estate, and commercial banking all be allowed to be owned by a common holding company without impenetrable firewalls in place.

The Citicorp problem is relevant to the current merger rage that has the proconcentration, promonopolist, anti-antitrust crowd shouting for more.

The Citicorp problem is relevant to the foreboding legislation that would foist interstate branching on the states, setting a precedent that would soon eliminate what remain of states rights.

A Double Standard

Perhaps it is naive to think federal regulators will come down hard on Citicorp for bad management decisions.

"Bad management" was a standard comment from the Federal Deposit Insurance Corp. when smaller banks hit the skids in the 1980s.

Citicorp's banking operations won't be rated by the same regulatory standards used to rate the hundreds of smaller banks shut down or forced to marry over the past decade or more.

One might recall when those banks were eliminated by regulatory fiat during the agriculture crisis, money-center economists, big-bank elitists, and Wall Street experts argued there were more banks of that variety than needed, anyhow.

Today it is poetic justice that the expendable category is the money-center banks - Citicorp's category.

Mr. McCrady heads McCrady/Midwest, a business and trade consulting firm. From 1976 to 1988 he was executive vice president of the Independent Bankers of Minnesota.

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