Banking reform has been before Congress in various forms for nearly two decades. But the subject is so complex and has been so divisive that very little has been done. Now, finally, one major reform has been approved by almost everyone concerned and is on the fast track to final approval.
The House has passed a bill by voice vote that would permit banks to set up nationwide branch networks. The legislation was recommended by the House Banking committee by a 50-1 vote, and has cleared the Senate Banking Committee unanimously. Hence, soon the heart of the nation's banking structure will undergo significant change.
Currently, banks are not allowed to set up nationwide branches. The rationale has been that branch banking would put small banks out of business. This would sever the close relation between local business and local banks that has been responsible for much business development. Branch banking would also supposedly imperil rural and small-town interests, which would be obliged to seek loans from distant - and indifferent - banking giants.
But the structure of the banking system has changed. Local banks have grown larger, while medium-sized banks have grown even more powerful. …