Academic journal article ABA Banking Journal

What Has Changed and What Shouldn't: Jim Culberson, 1995 ABA President, Expects Community Banks Will Thrive, but Shouldn't Expect Less Regulation

Academic journal article ABA Banking Journal

What Has Changed and What Shouldn't: Jim Culberson, 1995 ABA President, Expects Community Banks Will Thrive, but Shouldn't Expect Less Regulation

Article excerpt

When I joined Wachovia in 1960 as a management trainee" the bank was described as the biggest bank between Philadelphia and Dallas with assets of about $700 million. By today's standards it was really just a big community bank. It was a major correspondent and check clearing point for smaller banks, especially for non-par banks (such banks don't exist anymore) in its region.

Most banks did not make residential mortgage loans for their own portfolio, but placed them with insurance companies. All banks liked to maintain a loan-to-deposit ratio of 55-60% so they limited themselves to short-term lending. This left the mortgage market wide open for the savings and loans. Credit unions as possible competitors were not on the horizon. That was pretty much the picture in my early years at First National Bank of Asheboro, N.C., as well. I joined that bank as president in 1974.

Things began to change dramatically in the '80s as technology began to expand rapidly. ATMs were a huge step (the cash machines were at the time, like magic), computers became available through service bureaus and cooperatives at prices that were affordable.

Meantime the S&Ls were given bank-like powers such as checking account authority. They priced up deposits to allow them to make more and more loans including out-of-area development loans, began to sell loans to Fannie Mae and Freddie Mac.

At the same time, in a quiet sort of way, the credit unions received expanded powers, especially liberalization in their field-of-membership requirements, and they began to attract traditional bank customers with higher deposit rates and lower loan rates.

As the bank financial industry entered into the '90s, interstate banking became a reality helped by the need to bail out troubled banks by large regional banks. At the same time everybody and his brother became some sort of banking institution, for example insurance companies, the auto industry (GMAC), mortgage brokers, stock brokers, Farm Credit Banks, and expanded powers for the credit unions.

All this brought along a conglomerate of various regulators, both national and state, each with his own piece of the pie to protect. The Congress was so overrun with lobbyists for each group that they did not do much to change the status quo. …

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