The drive toward consolidation of the nation's banking industry has recently seemed like an irresistible force of nature.

Last year's boom in major mergers was stoked in part by concerns about industry overcapacity and the "revenue wall" banks are said to face.

Indeed, the orthodox view is that relentless competition and the rising cost of technology are goading banks to combine - and the resulting banks will be stronger and more efficient, and serve customers better.

It is a compelling notion. But not everyone agrees that fewer, larger banks is a panacea.

"It certainly isn't an automatic argument that bigger scale means more efficiency and more profits," said Robert Fitch, an economist at New York University.

"Other places in the world we see banks operating on a more stupendous scale than anything we've dreamed of in America," he said. "But they don't seem to crank out such great efficiencies."

Nancy A. Bush, regional banking analyst at Brown Bros. Harriman & Co., also isn't convinced. "At some point, which we may soon reach, banks are going to be so big they will be unmanageble," she said.

"They may well find themselves in too many lines of business in too many places, and end up being mediocre at what they do as a result," she said.

Wall Street also may not be enamoured. "These banks will be so large that there will be no longer be any 'regional kicker' in their earnings," Ms. Bush said.

And, if things go wrong, Ms. Bush wonders "who will bail out these megabanks? Who will bail out the economy?"

The analyst said she suspects that within a few years some big banks may begin breaking themselves up. And one big reason may be technology.

"The costs of technology are falling rapidly," she said. "You don't have to be a $125 billion institution to be able to use leading-edge technology." Contrary to current assumptions, Ms. Bush thinks technology in banking "will drive smallness, not bigness."

Indeed, the advance of technology clearly favors smallness in other sectors of the economy.

In telecommunications, for example, the once-monolithic American Telephone & Telegraph Co. is entering a second stage of breakups. Meanwhile, cable and satellite television has obliterated the oligopoly of the three national television networks.

A Northeast community banker, Anthony S. Abbate, believes that part of the drive toward consolidation in the banking industry results from bank managers' "being paid by the level of their assets, not sales."

At the same time, Mr. Abbate, president and chief executive of the $500 million-asset Interchange State Bank, Saddlebrook, N.J., believes large- bank managers are too far removed from reality.

"Their constituency turns out to be the Wall Street analysts and institutional investors rather than the communities or customers they are supposed to be serving," he said.

"The 'Giannini formula' for banking may be getting lost," he said, referring to A.P. Giannini, founder of San Francisco's Bank of America.

Mr. Giannini, who died in 1949, is still regarded by many as the greatest innovator in modern banking. While he ultimately ran a large bank, he stressed service at the local level to small savers and borrowers, and emphasized the virtues of small shareholders.

Of course, the United States still has as many banks as the rest of the world combined, and it likely will always have more than any other country.

Most nations have banking systems comprising no more than a few hundred banks, with a coterie of large banks at the top. Some countries, including neighboring Canada, have but a dozen or so banks.

Suspicion of large banks and concentrations of banking and economic power has deep roots in the United States.

The most famous example is President Andrew Jackson's rejection, in 1832, of a renewed charter for the Second Bank of the United States. It may have been the most consequential veto ever made by a President.

Nor have such sentiments been limited to populists like Old Hickory. John Adams, the nation's second President and a charter member of the Eastern Establishment, said he would "die abhorring" the excesses of concentrated banking.

But perhaps things change.

"It seems to me that the United States is changing its traditional hostility to big banks, as banks frankly become less powerful," said David O. Beim, professor of finance and economics at Columbia University.

"There was a time earlier in our history when banks wielded a lot more power," he said. "If you wanted to borrow money you had to kiss the feet of big bankers. That's not true any more. We have efficient alternatives in the marketplace, such as commercial paper.

"Banks now have to compete very hard for the attention of customers," Mr. Beim asserted. "It is a mature, consolidating and contracting industry. Its proportionate claim on financial assets is a lot smaller."

"We don't need as many banks as we once did, and as a result the banks just aren't frightening in the way they once were," he said. "Especially, big banks are not as scary any more."

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