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A Banking Book That Pays Little Interest




The Next Generation

By Martin Mayer

Truman Talley Books/Dutton 514pp $29.95

Since 1974, when Martin Mayer wrote his best-seller The Bankers, banking has undergone a revolution. As Mayer observes in his sequel, The Bankers: The Next Generation, the pinstripe crowd has had to adapt to a fast-changing environment where nonbank competitors have snatched away business and where customers' demands have moved far beyond plain-vanilla loans and checking accounts. Now, he says, banks are on the edge of a brave new world: Electronic payments and smart cards will replace cash, and computer banking will displace branches and bankers. Mayer wonders "how banks are to make a living in an information-soaked economy where none of their franchises are stable." Indeed, he wonders whether banks will be needed at all.

Intriguing questions--but Mayer, author of 16 previous books and a former columnist for American Banker, doesn't offer many answers. Anyone using a bank today knows that the system is undergoing dramatic change. What we don't know is what purpose banks will serve in the future, which banks will survive and why, and how customers will use them. But don't expect profound revelations about the future here.

Instead, Mayer's new book is very much about the recent and not-so-recent past. The 514-page, anecdote-laden account will have the general reader alternately engaged and dismayed by the level of detail. More knowledgeable readers will likely be underwhelmed.

The first two chapters discuss the history and use of money: An anecdote about how Liberia accepts as legal tender coins produced by Viacom Inc. and bearing faces of Star Trek characters is followed by tales of past efforts to define the proper ratio of gold to silver currency. The Federal Reserve, we learn, controls the U.S. money supply, but ever less securely because of global markets' power--not a big surprise.

Then comes a long section on the route that checks take through the banking system. Describing the journey of a 1973 check from payment to clearing, the author shows how little has changed. He describes the obstacles to electronic streamlining--chiefly, he says, the Fed itself, which wishes to keep its large role in check clearing.

At least here, and in subsequent chapters on "the computer age," Mayer turns to the "new worlds of money, credit, and banking" that he promised. Americans, we learn, cling far more tenaciously to checking accounts than do Europeans: By 1992, 81% of Switzerland's bill paying and 50% of Germany's took place through credit transfer, vs. only 1.8% in the U.S.

In an age of electronic money, Mayer says, cash lives on as the payment system of choice largely because of another gizmo, the automated teller machine. But with smart cards beginning to gain acceptance, cash may properly be regarded as an endangered species. "The stored-value card is the natural substitute for cash," says Mayer, who, of course, then gives us an anecdotal history in which we learn that the first such cards in the U.S. were issued by San Francisco's Bay Area Rapid Transit, whose planners hoped the cards would be used not only for subway fares but also for other purchases. Today, he says, there are about 50 million rechargeable smart cards in consumers' hands, 30 million of them in France.

The industry's accelerating consolidation trend is also the subject of a chapter of The Bankers. But here again, the author's proclivity for looking backward mars his book. For example, Mayer's account of the activities of aggressive acquirer NationsBank Corp. focuses on NationsBank's predecessor, failed NCNB Corp., and its 1988 takeover of banks from Texas' First RepublicBank Corp. And he offers a steady stream of factual errors: Midlantic Corp. was bought by PNC Bank Corp.--not, as Mayer says, by City National of Cleveland (perhaps he means National City Corp.?). First Chicago Corp. did not merge with Michigan National Corp.; that bank was bought by National Australia Bank Ltd.

Nor will readers looking for juicy gossip or intimate detail be satisfied with The Bankers. About as up close and personal as this book gets is to call Charles S. Sanford Jr.--born in Savannah, Ga., and the former CEO of Bankers Trust New York Corp.--a "deceptively Southern gentleman." It also calls Hibernia Corp.'s beefy CEO Stephen A. Hansel "roly-poly." Some descriptions are downright offensive: Former Chemical Banking Corp. executive Darla Moore, a pioneer in the lucrative field of lending to companies during bankruptcy, is described as "Chemical's beautiful South Carolina blonde vice-president (who greatly enjoyed coming to the office every day as a sight for sore eyes)." A few paragraphs later, Moore is "batting her eyelashes."

What will banking look like in the future? In the last 30 pages, the author gives us his vision. Survivors, he says, will include a number of small niche players giving customized service along with a further 20 giant nationwide institutions--including banks, brokers, and data processors--that serve customers electronically. Mayer represents these extremes with Founders Bank, a small branchless bank in Bryn Mawr, Pa., and California giant Wells Fargo & Co., but he does not actually predict survivors. Indeed, Mayer seems as vague about the future as everyone else. The author remains most at home when dealing with days gone by--so much so that he should have called the book The Bankers: The Past Generations.By ALISON REAReturn to top

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