Nationwide banking poses pros and cons that concern us all

YOU are going to be hearing more about the coming of nationwide banking, as the story on the right indicates. But does it really matter to anyone besides the bankers? Yes, it should matter to all of us. Most adults have a checking account and a savings account in some bank. Most people borrow money from time to time, and the relationship they have with their banker can be crucial. What many individuals may not recognize as easily, however, is that the relationship of the companies they work for with their banks is also vital to their own economic well-being.

And the question they might be asking is: Will a banking system that is increasingly controlled by management hundreds or even thousands of miles away be as attentive, informed, or even interested in local business conditions and the role of local financial institutions in working with local economies? (Local in this sense might mean a whole state or even geographic region.)

Last week the House Banking Committee decided that any state allowing limited interstate banking would have to open its doors to allow full interstate banking by 1990. This is a far cry from being law and may not reflect the sense of even the full House. But the nation does seem to be nudging its way, bit by bit, into a rationalization of the banking system.

The United States has a two-tier banking system, with some banks having a federal charter and some a state. It also has some 14,000 commercial banks (this doesn't include the savings-and-loans, which much of the public lumps in with banks). This is far too large a number for long-run efficiency. Many states that formerly prohibited any kind of branch banking have changed their laws to allow bank holding companies. The need to cut down on overhead, particularly the need to make full use of computers in banking, has given an economic push to changes in the law.

But the push for ever larger units of banking has also come from the top. The biggest US banks have wanted to keep up with the growth of the large banks in other industrial countries, most of which have literally only a handful of banks. If these banks could combine their assets with other large banks, they would obviously look more powerful in global terms.

Thus, Congress and the public are left with a situation in which pressures both from technological change and global economic development argue for a smaller number of banks and a very few quite huge banks at the top. But they must also deal with the history of regionalism in America and the specific history of the dual banking system.

There is clearly no desire in most of the rest of the country for the large New York banks to dominate the entire domestic banking scene through megabuck bank mergers. In fact, the present trend, of several states in the same region allowing each others' banks to merge, is probably about as far as many business people would like to see things go. The days of the friendly local banker who made a loan because he knew someone's character are almost gone. But there is some comfort in feeling that the management of even a large metropolitan bank is personally committed to the stability of the region it serves, and doesn't regard it as just another profit center.

Congress will be wrestling with this issue. The House Banking Committee is where New York bankers get heard. The Senate listens more to smaller states. Consolidation of the US banking system will continue. But the public must be heard as to just how far it wants this to proceed -- and how fast.