A common feature of beach resort boardwalks and summer fairs is the wheel of fortune. Folks are fascinated by this apparent game of chance, although the pros know it's not purely luck. How American banks fare as their own wheel of fortune spins is determined by their charter, by their competition and by the regulatory framework under which they operate. There is pending legislation addressing all these components, and the jockeying is incredibly complex. At stake is our diversified economic and financial structure - the underpinning of our nation's strong, resilient economy and political stability. Where the wheel's marker stops will determine the winners and losers in the financial services industry well into the next century. High stakes, indeed-and for the nation's financial regulators, as well. This is the time for aggressive positioning of one's political chips.

[Expanded Picture]The spinning legislative wheel blurs the issue. At play are the Glass-Steagall Act, the Bank Holding Company Act, the demise of t separate thrift industry, long-overdue regulatory relief and even a rewrite of the banking charter itself.

The term "Glass-Steagall repeal" has almost become a euphemism, only partially revealing what is really at stake. Congress is reviewing the entire legal structure what presently determines ownership relations between commercial banks and other financial entities and even commercial firms. The abolishment of Glass-Steagall, as promoted by House Banking Committee Chairman Jim Leach, would permit the common ownership of large commercial banks and securities underwriters for the first time since the Great Depression. An amendment offered by Rep. Richard Baker, which was tied to the vital regulatory relief bill in the House, would extend these ownership ties to insurance underwriters and has sparked fierce opposition.

Driven by the passage of the 1994 interstate banking and branching bill, the American banking industry is undergoing an historic consolidation. We are rapidly approaching a new threshold - the creation of a $300-billion-asset commercial bank. if banks of this size were to combine with large securities underwriters, institutions with half a trillion dollars in assets are possible - even before adding large insurance underwriters and, possibly, commercial firms.

Such financial conglomerates will force a continuing high level of government regulation and involvement, since their failure would present systemic risk to the American financial system.

There is another possible legislative path to the shrine of vastly concentrated economic and financial power. Congress is looking at the elimination of the thrift charter. The scalp being demanded by the big bank lobby for their constituents' help in solving the financial problems of the thrift insurance fund is a new banking charter and the extinction of a separate thrift industry. However, the big bank lobby is interested in maintaining one aspect of the thrift charter - the unitary thrift holding compary's power to own insurance and commercial firms.

High-Stakes Battle

As in any high-stakes battle, vast armies are being mobilized to fight the Baker amendment. The confrontation is a classic one, pitting Wall Street against Main Street. The forces of Main Street - who are defending their turf - will make up in sweat what they lack in PAC dollars.

The Main Street Coalition opposing the Baker amendment includes the independent Bankers Association of America, the National Federation of independent Business, the National Association of Home Builders, the Independent Insurance Agents of America, the American Farm Bureau, the National Grange, the National Farmers Union, the National Association of Life Underwriters and the National Small Business United

On the other side looms the American Bankers Association, the Bankers Roundtable, the Securities Industry Association, the Investment Company Institute, the large thrift lobby and the American Financial Services Council, which includes Sears, Roebuck & Co. and American Express Co.

A House floor vote on the Baker amendment is expected in early, fall. This will be a key battle in the ongoing war to determine the future structure of our nation's financial system. Stay tuned.

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