Vol. 1999-6

When I began writing this report on August 7, 1999, Congress was packing up to leave town, not to return until after Labor Day. Like the half-time break in football, the summer recess offers an opportunity to take stock; to review what has been happening in the never-ending effort by government and the financial services industry to rationalize the irrational, and to see whether a reflective pause can produce a glimmer or two of light on what may lie ahead.

There are many subjects from which to choose. The most obvious, and the one with which I begin, in Section I, is the status of the so-called "financial modernization" legislation, which in fact is something much different than the title suggests. Once best known as H.R.10, it has been renumbered and reclassified, traveling now under the alias of S. 900. However titled, it has been, and likely will continue to be, the greatest show in town. But the noise it produces and the attention it receives interferes with keeping track of what else is happening in the banking world.

In the past I have mentioned my practice of taking a day or so each month to read fairly thoroughly the American Banker and a few other financial publications that have accumulated over the prior four to five weeks. I am convinced that doing so makes it much easier to identify the forest and ignore the trees. Having just finished "July," I was struck by how many seemingly unrelated items came together to paint a picture of a global banking world that is becoming much smaller. A few of these signs – such as the recent acquisition of Bankers Trust by Germany’s largest bank – are identified in Section II.

Not only is the global financial world shrinking, but so too is the U.S. banker trade association world. The announcement several weeks ago that the American Bankers Association and America’s Community Bankers have agreed to explore merger possibilities was fascinating. Association mergers are not unknown; a few months ago, for example, the Bank Administration Institute and the Institute of Financial Education agreed to merge, with the latter becoming a division of BAI. The ABA-ACB announcement touches a different memory chord. For those of us who spent most of our working lives believing that an immutable law in the financial association universe was that commercial banks and thrift institutions would forever be separated, a new day has dawned. Actually, such mergers have been taking place at the state level and there seems no good reason why they should not happen at the national level as well. A few reflections on the implications of this event are found in Section III.

Section IV is the usual wrap-up section, in this instance of a decidedly mixed bag of developments that struck me as worth discussing during the summer "half-time," granted to us by the Congress.