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What bank failures say

THE 138 bank failures in the United States last year, a post-depression record, are a cause for some concern - but not panic. We can't expect the banking system to be healthier than the general economy. Last year was not a bad one for the nation as a whole, but it was not without its rough patches, either. The oil and farming regions had a particularly tough time, and that is where many of the failures were: 26 in Texas, 16 in Oklahoma, 14 in Kansas, 10 in Iowa, and 9 in Missouri.

Bank failures have given rise to expressions of concern about financial deregulation, but time and again, failures are traceable to poor management, not to deregulation.

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Some banks may have been run like public utilities rather than competitive businesses, and some bankers have had some learning to do. But a bad loan is a bad loan. Indeed, some of the most serious problems have been failures of overregulation, notably in states that restricted the ability of banks to branch, acquire other banks, or otherwise diversify to protect themselves.

The Federal Deposit Insurance Corporation still functions, of course, and comfort can be taken in that. And there remain nearly 15,000 banks protected by the FDIC - to say nothing of thrifts, credit unions, non-bank banks, and other institutions meeting the needs of customers ranging from ordinary private citizens to multibillion-dollar corporate borrowers.

Given the sheer size and diversity of its market, the US is unlikely to go the route of smaller, much more homogeneous countries like Canada or Australia and end up with just a handful of nationwide banks. And most observers feel that there will always be a place for the small local bank that knows and serves its community well.

This is not to say that some judicious consolidation of the industry might not be in order, however. If bank examiners and other regulators are on their toes, they will spot problems while they are still manageable and generally help keep whatever consolidation is needed relatively painless.