Local Fed retiree helped keep bank mergers in check

Gazette, The (Colorado Springs), May 13, 2007 by WAYNE HEILMAN THE GAZETTE

Anthony Cyrnak spent 31 years as an economist with the Federal Reserve Board, serving under some of the board's most respected chairmen.

He didn't help set interest rates, the Fed's most well-known work, but instead spent most of his career working on anti-trust reviews of bank mergers. During his tenure, the nation's banking industry has been through waves of consolidation, shrinking the number of banks by more than half.

A native of Whitehouse, N.J., Cyrnak earned a bachelor's degree in business administration and a doctorate in economics, both from West Virginia University. Cyrnak, 61, retired from the Fed in 2002 and first moved to Steamboat Springs, then later to Colorado Springs.

His wife of 17 years, Rebecca Romney, is a local physician. Daughters Jennifer and Claire work for Chevron Corp. in Nigeria and the Government Accountability Office in Denver, respectively, and son Thomas attends the Colorado Springs School.

QUESTION: What sort of reviews did the Fed perform on bank mergers?

ANSWER: There has been a tremendous movement to merge in the banking industry for the last 20-25 years. With the relaxation of branching restrictions, the industry has pursued mergers aggressively. We processed 200 mergers a year in some years, including those involving Bank of America, Bank One, Chase Bank and Citigroup. Sometimes these mergers would have serious anti- competitive problems, but through divestitures we could solve those problems.

Q: Has the consolidation of the banking industry through mergers served the public interest?

A: Generally speaking, they have. Mergers have produced greater convenience, efficiency, a wider scope of products in more widespread locations and have served to reduce the overall risk to individual banks and the banking system as a whole.

Q: Have mergers reduced competition?

A: Banking has become more concentrated at the national level, but careful scrutiny has kept concentration from increasing at the local level. Concentration has actually declined at the local level because of the creation of new banks. The Fed doesn't look at national concentration as an issue because banking is looked at in the law as a local activity.

Q: Is the banking industry still ripe for consolidation?

A: Even after declining from more than 14,000 institutions in the late 1980s to 7,400 last year, there is probably still more room for consolidation. The same factors that have driven consolidation in the past remain -- the need to maximize shareholder value, a strong stock market that allows banks to finance mergers through their shares, and the continued relaxation of restraints on geographic expansion and product availability. Global competition will make banks continue to feel they need to get larger.

Q: Will the United States end up like Canada with just a handful of banks?

A: There will always be many small banks in the United States. They have demonstrated their ability to compete with larger institutions that move into their markets. The local community relishes local banks. Many small institutions will never merge. They are perceived as offering a better quality of service than larger banks.

Q: Is the subprime-lending crisis a threat to the economy?

A: From what I understand, the potential losses from subprime lending are more than minimal, but not enough to pose a serious threat. The extent of potential spillover to reach other companies is less known. Most regulators don't believe subprime losses will not seriously impact the banking industry. My informal opinion is that the housing market's woes won't be sufficient to trigger a recession. It will slow growth, but growth will remain positive.

Q: Who was your favorite Fed chairman?

A: I served under four chairmen -- Arthur Burns, G. William Miller, Paul Volcker and Alan Greenspan. I had the greatest respect for Volcker because he did what was right at the right time despite political and public opposition -- to reduce double-digit inflation to near zero at the cost of a severe recession. He was a civicminded person whose sense of duty was very strong. He lived like a monk, chomping on cheap cigars, wearing cheap suits, eating at an inexpensive Chinese restaurant and living in a tiny apartment when he could have millions on Wall Street.

ONTACT THE WRITER: 636-0234 or wayne.heilman@gazette.com. Answers are edited for space and clarity. Send suggestions for a Q&A subject to joanna.bean@gazette.com.