Mahatma Gandhi demonstrated that passive resistance can be effective. In recent years, bankers seem to have favored a comparable technique, which might be called "passive advocacy." They sit still and stay out of sight as others debate their future.

Many bankers wonder what the Clinton administration will come up with in the way of an industry modernization plan. Remarkably few -- even in the nation's largest banks -- are trying to influence the shape of eventual legislation.

This is not unlike the way the industry approached the Bush administration's 1991 effort to restructure banking. One might hope the present passivity won't lead to the same unfortunate results.

Waiting for Miracles

Few other industries and organizations await their legislative fate with so much trust. Most intervene aggressively when they believe their interests are at stake.

Banking's competitors often muster significant resources -- managerial as well as financial -- when they see a threat or opportunity.

Every major insurance company has an office in Washington, even though the industry is actually state-regulated. But only two U.S. banks believe it worthwhile to maintain a full-time presence in the nation's capital.

Part of the problem is that many bankers define "influencing legislation" as vigorous lobbying after a bill has taken shape.

Given this always-late, hardly-ever strategy, banking loses a lot. And these losses lead to the self-defeating expectation that banking can never win.

Other industries, in contrast, often see lobbying as early, interactive development of the issues behind the legislation.

They understand how hard it is to persuade public officials to retract positions once publicly announced, and how easy it can be to persuade these same officials to change their minds before the battle is truly drawn.

Identifying Key Issues

A good example of early, effective issue identification is the way key financial interests (many of them nonbanks) operated during the debate over loan guarantees for the airline and aircraft industries.

They recognized that a congressionally appointed commission on the airlines was dominated by industry interests, and that a federal loan and lease guarantee program could well be the commission's key recommendation.

They also knew how susceptible Congress is to anything that looks like an off-budget bailout.

Their policy analysis -- a process related to but separate from the legal analysis on which all too many banks depend -- calculated the costs of a federal guarantee and its impact on the outstanding value of their loans and leases.

They determined that they had to oppose such a program, at virtually any cost.

Had the congressional commission recommended a loan guarantee, the finance companies could, of course, have fought it in the Congress. However, that would have been very difficult, once the idea had been blessed by so distinguished a panel.

As a matter of fact, even as the airline commission began its meetings, a senior senator had already introduced loan guarantee legislation, and the position of key administration officials seemed to suggest a predisposition for the quick fix of a guarantee.

Moving Quickly

Recognizing the threat, the antiguarantee forces mobilized quickly. White papers pointing to the implicit costs of a guarantee were drafted and widely circulated.

These proved critical in dissuading key officials from the view that guarantees were cheap. The financial industry went to work to persuade airlines and aircraft interests that a guarantee was not in their interest either.

As a result of all this work, the commission did not recommend the creation of a new guarantee program. The bills to establish one are far less likely to pass.

This shows the clear benefit of recognizing risk early and countering it effectively.

Defining the Debate

The message in the loan guarantee story is, first, to define the debate. This is done, in part, by ensuring that the opposition cannot dominate public discussion so thoroughly that policymakers hear only its views.

All too often, the banking industry waits until a proposal has advanced far beyond initial discussions even to decide its own position.

Although some might think it a comic exaggeration. bankers sometimes recognize a legislative problem at about the same time the bill is being readied for presidential signature.

If this is husbanding political capital, the banking industry should be the richest interest group around.

Another fundamental rule of effective advocacy is that something cannot be beaten with nothing.

Bankers often are immobilized as adverse proposals are enacted because they do not make constructive counter-offers.

Sometimes, of course, there is no choice but all-out opposition. But far more often, a middle ground can be found.

Relying on the opposition to define that middle ground is, of course, problematic.

The Cost of Consensus

One frequently cited explanation for the banking industry's relative ineffectiveness in Washington is the fact that bankers from big and small institutions so often hold diametrically different positions.

Each sees the other as a culprit rather than a colleague. A common view is that if the banking industry could only unite on this issue or that, then Congress and the administration would move on it.

It is difficult to refute the assertion that a united front is better than a divided one. However, the odds are not stacked as much in favor of a unified lobby as one might think.

Virtually every other industry group is racked by the same internal divisions as banking. Big oil, for example, has a distinctly different point of view than the independent producers. Insurance underwriters differ markedly on some points with insurance agents, and so on.

The key difference between banking and these other groups is not that bankng is divided, but rather that individual interests within the banking industry are unable to influence public policy despite these differences.

Far too much effort is wasted in an elusive search for an impossible consensus. Those institutions or segments of the industry that know what they want will do far better pursuing their own goals than wooing unlikely allies.

Taking on Reform

Many in the banking industry have been arguing for modernization for so long that if they finally go what they wanted, they would only replace one set of rules wiht another only slightly less out of date.

Thus the first challenge for those who want genuine change in the financial services industry is not to trout out the old arguments and proposals for restructuring.

Instead, it is to evaluate those arguments in light of the marked changes that have taken place in the industry in just the past two or three years, and then to define new objectives targeted to new needs.

The banking industry has complained about international competitiveness until it is blue in the face, but Congress remains unmoved.

The Real World

New arguments -- based on domestic economic growth and, even more unusual, on improving access to financial services for communities now poorly served both and nonbanks -- will be keys to any successful campaign for industry restructuring.

What is more important, however, is that those who want change must define the change they want. Waiting for a heavenly hand to move across the face of the debate and divide darkness from light is appropriate in some arenas, but acts of faith are very rarely rewarded in the real world of politics.

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