One of the great ironies of deregulation is that it has heightened the need for political consensus among financial institutions at the very time it also is fragmenting the industry.
The advantages of political unity to commercial banks, savings institutions, and credit unions is fairly obvious. The next phase of deregulation is going to be decided by Congress. And if financial institutions can pool their political firepower, they have a better chance of influencing this change. If each lobby heads off on its own, the industry's impact will be diminished.
This is not new. Life has always been more comfortable both for the politicians and the industry when the lobbies united behind legislation proposing change in the banking system. What is different this time is that there is just a heck of a lot more at stake. Here's why.
During the 1960s and most of the '70s, when change was infrequent and negligible, all parties could afford to sit around and wait for this consensus to evolve. And if it didn't -- so what? Back in those days, it wasn't that big a deal. The customers, the Congress, and the industry were fairly satisfied with the way things were. The status quo was not all that bad. Change No Longer Leisurely
Not so today. Since 1980, events have forced the industry to accept massive innovation in a fairly short time. We have survived the worst explosion of interest rates since the Civil War, and the most serious threat to the thrift industry since its inception.
Now a third crisis is in the making. This time, we are seeing wily entrepreneurs exploiting the ambiguity in bank chatering laws so skillfully and methodically that some fear they may redesign the system before Congress can stop them.
Thus, the hazards and tensions of our present deregulated world have elevated the need for speedy political consensus. Future change in the system will be influenced by those who can unite their constituencies and generate the pressure to force Congress to do their bidding. It's as simple as that. If you want to control your destiny, your agenda will have to be backed up by an army.
So why should achieving consensus be more difficult in a deregulated climate? The reason goes to the most important consequence of deregulation--it makes available options where they did not exist before. and as the choices for banks and thrifts multiply, so do the points of view within the industry. Every institution -- from the smallest country bank to the largest money center conglomerate -- has been forced to accept some aspects of deregulation. Each has tailored its response to its own best interests, which more often than not it considers a matter of survival.
So, we have this multiplicity of views in a charged environment adding a new element of divisiveness at a time when political unity is so important. Debate in the Industry
One example of this is the big debate among savings institutions over the future course of their industry. Some institutions believe that the terrible trauma of the late '70s, when the value of mortgage portfolios collapsed, proved the need for future diversification of savings institution investments. They advocate aggressive use of commercial lending and other new powers approved for thrift institutions in the 1982 Garn-St Germain act, and are lobbying for additional authority in securities, insurance, and other fields.
this point of view is being vigorously contested by others in the industry who say thrifts should continue to concentrate on housing. "It's the field we know best," is the argument you hear so often. More important is the argument you don't hear--mainly, that almost all of the thrift industry's preferential regulatory and statutory positions have been granted by Congress over the years because of the industry's close ties with residential housing. So, why take the chance of lessening …