Parley of banks vs. thrifts leaves financial bill in limbo

Nobody banged a shoe on the table, and there weren't any references to ''world hegemony'' or ''brinkmanship,'' but there was a summit meeting in Washington last week between rival powers - the banking and thrift industries. When it was over, the prospects for passage of major banking legislation were as cloudy as before.

With the sudden rise of the financial supermarket - Merrill Lynch cash management accounts, the Sears-Dean Witter combo, etc. - traditional financial institutions will soon have to fight even harder for depositors' funds. Stir in high interest rates, and you have a situation becoming more acute every day, with more and more shaky savings-and-loans forced into mergers and bankers anxiously watching their profits dip into the red.

Last year Sen. Jake Garn (R) of Utah, Banking Committee chairman, introduced a bill intended to make banks and thrifts more competitive by giving both institutions broad new powers. But the legislation stalled while the intended beneficiaries, who have historically viewed each other with suspicion, squabbled among themselves.

Banks, for instance, objected to S&Ls' getting commercial lending powers. Thrifts, at first, were cool to the idea of losing their interest rate advantage on consumer deposit accounts.

In December Mr. Garn said, in effect, ''You guys get together, or I'm dumping this thing and you'll have to fight Sears with one hand tied behind your back.''

Summit participants said their meeting was not called as a specific reaction to Garn's request, but it was widely viewed as a first step toward the amity Garn is hoping for. When the meeting was over, the participants sat in a gilt hotel ballroom and described the proceedings with impressive vagueness. Apparently, substance lay in the fact they were all being vague in the same room.

''This is a process leading towards intentions'' - Charles J. Zwick, chairman of the government relations committee, Association of Reserve City Bankers.

''The real substance of the meeting was that the meeting itself was held'' - Richard L. Thomas, Association of Bank Holding Companies.

''There's a very good chance of eventual agreement'' - Robert O'Brien, president of the National Savings and Loan League.

Does Congress think the summit brought banks and thrifts closer to a consensus?

''We heard they agreed to disagree, but that the disagreements were less profound than before,'' says an aide to Senator Garn.

There are a few signs of friendship. In December, the US League of Savings Associations, main trade group for thrifts, sent Garn a letter saying they would gradually give up their quarter-point interest advantage in return for phasing in commercial loan powers.

At the time, Garn hailed the development as the first glimmering of a ''significant consensus.''

But the American Bankers Association, in an earlier missive, had remained opposed to letting S&Ls make commercial loans. After last week's summit, an ABA spokesman said Garn may have ''overstated'' the case, ''to keep pushing at both groups.''

In general, bankers seem more divided over the issues than S&L officials. The industry is very diverse: Money center institutions such as Citicorp have far different concerns than small town bankers.

''There doesn't seem to be any consensus,'' says Harold Levine, a banking analyst at E. F. Hutton. ''The small banks are still worried about thrifts. Big banks are certainly aware of who the real competition is (Sears, etc.). Small banks are still concerned about territorial issues.'' Mr. Levine adds, however, that smaller banks are just beginning to realize the present danger of competition from nondepository institutions.

S&Ls, on the other hand, have presented a united front in Washington this year - witness the passage of All-Savers certificates. But as their situation grows more desperate, they lose the ability to hold out against bankers.

''I don't think thrifts have much bargaining power anymore,'' Levine says.

In any case, it will be difficult to get any major banking legislation through Congress this year.

Early in February, Sen. Alfonse D'Amato (R) of New York, chairman of the subcommittee on securities, will hold hearings on a Treasury Department proposal that would empower banks, through ''bank securities affiliates,'' to underwrite mutual funds and revenue bonds. In late February or early March, Banking Committee staff members estimate, the full committee will being marking up the whole Garn bill.

But some sources claim Garn's huge piece of legislation will be sundered into smaller bits, easier for trade associations to reach agreement on and for Congress to digest.

''I don't think Garn ever expected to get the whole (bill) out (of committee) ,'' says a staffer working with the legislation.

A bill letting both banks and thrifts offer securities might appear. A law preventing ''assumable'' mortgages might be passed. Interstate S&Ls might be approved, or separate legislation might strike down state usury ceilings on consumer loans. All these things are now included in Garn's bill.

But the main stumbling block will be the House. The House Banking Committee is planning to take a more leisurely look at restructuring the financial industry, with a series of general ''discussion'' hearings continuing into March.

''Restructuring the entire financial industry in a few weeks can't be done,'' a House staff members says.

Some experts says that with the whole House up for reelection this year, only minor banking bills will make it through in '82. Major changes may have to wait until next year.

As a result, banking analysts says, Congress may eventually adopt a piecemeal approach to banking legislation - despite Garn's attempt to stay one step ahead of industry problems.