price of unity, The

Northwestern Financial Review, Oct 4, 1997 by Bengtson, Tom

Like the elusive Holy Grail that attracted so many people in the time of castles and knights, unity beckons so many bankers. Have you ever attended an industry meeting where a trade association leader did not deliver a speech on the importance of industry unity? I haven't.

In an age when the rest of the world is celebrating diversity, I wonder if bankers shouldn't for a moment think about the cost of unity? The speeches I've heard generally only deal with the benefits of unity. The costs, however, are quite high.

The costs are rules such as the Community Reinvestment Act, the Expedited Funds Availability Act, Truth in Savings, and now it could be limits on ATM fees. It was only a few financial institutions that were redlining in the 1960s. Yet, Congress considered the banking industry to be one unified entity and created CRA for everyone. It was only a few banks that were holding up checks for several days that led to the creation of Reg CC that now applies to everyone. And only a small number of banks were using deceptive interest rate calculations, yet lawmakers and regulators created Reg DD.

THE TRUTH IS, banks come in all shapes and sizes: big, small, wholesale, commercial and retail, urban and rural, publicly held and privately held. Some serve farmers, others serve builders; some serve young people, others are geared to serve retired folks. Why ignore this splendid variety every time bankers go to Capitol Hill? Focusing on the diversity of the industry would clarify the point that consumers have an enormous array of options in the financial services arena. It would help bankers make their point that if one bank is doing something wrong, the solution is for that customer to go to another bank, not for Congress to impose a new rule on the entire industry.

I'm not saying industry unity is not important. On issues where there truly is industry-wide consensus, it's productive to go to Capitol Hill with one voice. But on how many issues do all the nation's bankers truly agree? Not many. Where there is variety of opinions, reflecting the variety of circumstances under which bankers across this country deliver financial services, bankers should talk about that variety. In fact, in the one area where bankers talked about inter-industry differences, it resulted in the tiered CRA exam-a far more fair approach to CRA exams than regulators previously had been using.

Is it worth it to work for industry unity? Before answering that question, consider the cost of unity.