A jingle of banking changes
There's more change in the banking and thrift industry that is found in teller' tills. "Change is going to be part of our business . . . for years to come," predicts Lee Gunderson, current president of the American Bankers Association (aba). "There are going to be many innovations."
William F. Ford, president of the Federal Reserve Bank of Atlanta, states,". . . we are in a very turbulent period of change -- one in which old products are disappearing, and new products are popping up and succeeding very rapidly."
Here are few examples of change:
* At the start of this year, banks nation-wide could offer interest-paying checkable accounts -- the NOW accounts that had their start in the New England area. By July consumers had opened over 1 million new NOW accounts, and altogether NOW accounts contained some $69 billion. There was only $28 billion in them in December 1980.
* Money market funds soaked up some $160 billion by the end of September. That's roughly twice the size of the credit union industry, which took over 100 years to attract that volume of deposits.
* At the start of this month, thrift institutions could offer tax-free All-Savers Certificates with a yield of 12.61 percent. The goal of Congress in permitting this tax loophole was to rescue the thrift industry from its financial squeeze.
* Federal banking regulators decided Sept. 22 to permit an increase of one-half of a percentage point in the interest rates paid to an estimated 40 million Americans who hold passbook savings accounts, starting Nov. 1.S&LS and mutual savings banks will be able to offer 6 percent on the $180 billion in such accounts; commercial banks 5 3/4 percent on the $160 billion they hold in these accounts.
Beyond such easily visible changes, there are several significant trends stirring the industry and more to come.
There is a homogenization of financial institutions taking place. The affluent American household, dealing with perhaps 20 different financial vendors nowadays, wants one-stop financial shopping. Banks, often through holding companies, are broadening their scope. Thrift institutions are invading the banking field. So are securities firms and insurance companies.
One of the nation's largest steel companies, National Steel, is acquiring its own savings and loan institutions in three widely dispersed states -- New York, Florida, and California. Under federal legislation, banks and their holding companies themselves cannot acquire thrift institutions. Grumbled Richard D. Hill, chairman of First National Boston Corporation, New England's largest bank holding company: "If National Steel were so much as to acquire the Fourth National Bank of Gravelt Pit, Arkansas, it would become a bank holding company. That's how inconsistent the whole thing is."
Sears, Roebuck & Co. has become one of the most important financial services companies in the US. It has more consumer loans outstanding than most big banks. It owns a large insurance operation and a savings and loan association. Recently, Sears announced it would establish a money market fund.
Electronics is rapidly changing the business. With 25,000 automatic tellers around the nation already, banking is becoming more a self-service activity. Banc One's senior vice-president, John E. Fisher, figures automatic teller machines will do half of the transactions in the banking industry by the end of the 1980s. The ABA's Mr. Gunderson predicts:
"The bank card you have is going to be as good on the East Coast as on the West Coast." It will not only charge expenditures to an account, it will enable the consumer to make cash withdrawals nearly anywhere. At some point, individuals will be able to do most of their banking from home, using the telephone or cable television system and a TV set.
In effect, banking is becoming a communications business with a bookkeeping attachment.
Moreover, various banking activities are spending interstate. The McFadden Act is holding the line modestly well on banks setting up deposit-taking institutions across state borders. But loans, international business, credit cards, and much other banking business flows throughout the nation.
Banking has come a long way from when, as Treasury Secretary Donald T. Regan noted last month, "In some areas shoe boxes were more popular than banks. People were paid in cash. The closest thing to moneymatic transfer was from one person's hand to another."