Vol. 1999-1

1998: A Year Without "Closure"

     Long-time readers know that it is my custom at the beginning of each year to take a contemplative look back at the year just ended.  The purpose is not to present a list of major events that affected banking in 1998 -- the financial press, particularly the American Banker, does this quite well.  Nor will I offer a cluster of predictions on the nature and timing of future events, particularly those growing out of the relationship between banking and government.  Rather, I use this opportunity to re-examine some things that seemed important in 1998 and consider whether they deserve continued attention in 1999.  Equally of interest are developments or issues that were ignored (or even overlooked) that now seem to call for a close examination during the year ahead.  In a sense, therefore, I use the year's first report to lay before readers a tentative and partial agenda for reports to be prepared during 1999, along with the reasons for selecting or discarding various possibilities.  My hope is that, as in the past, I will tempt some readers to offer additional suggestions or comment, either positively or negatively, on my criteria for selection.

     In the title for the present report, I refer to 1998 as having been "a year without closure," having in mind one of the definitions of closure, which is "to bring to a conclusion." I can recall few if any prior years during which so much of importance was being considered but so little was actually decided.  In banking -- and I guess in presidential politics as well -- the year ended with a host of important matters likely to be debated again in 1999.  Most of these were part of H.R.10 which, as readers know, was a typical congressional effort to wrap up everything but the kitchen sink into a single piece of reform legislation.  It was left dangling, as were a few closely related items.   For example, the proposed application by the Federal Reserve of Sections 23A and 23B to the operating subsidiaries of national banks, to say nothing of the effort to expand the reach of CRA powers, an effort that finally killed H.R.10 in the last Congress, are still to be resolved.   Moreover, there is the continuing argument over the so-called "safety-net subsidy" enjoyed by banks, a theory devised and supported almost solely by the Federal Reserve and employed as a way of protecting its bank regulatory turf.  But it still plays well among the unsophisticated in the Congress, particularly the anti-bank contingent, and therefore will continue to receive more time and attention than it deserves. 

     With all of this in mind, I plan to deal briefly in the sections that follow with the perennial effort to obtain legislation that will supposedly "modernize" banking and financial institutions law (Section I); the possible fall-out from the LTCM bailout arranged by the Federal Reserve last fall (Section II); the changing role and influence of bank associations (III); and a cluster of other matters that may (or may not) influence banking in the U.S. in important ways (Section IV), before wrapping things up in Section V.