Less communication, less unity
When I first started following the Minnesota legislature in the mid-1980s for NorthWestern Financial Review magazine (then called Commercial West), the banking trade groups used to host huge receptions and dinners. It seemed like most of the legislators came, Republicans and Democrats alike. The lawmakers mingled with bankers and other lawmakers. We all got to know each other, at least a little bit, through these kinds of gatherings. I am told that most industry groups hosted at least one such event during the legislative session every year.
Somewhere along the line, however, a law was passed that made it illegal for a legislator to accept a free meal from a constituent or lobbying group. This put an end to those grand social events. While I can understand the purpose of the law from an ethical standpoint, I also recognize one of the sad consequences: we have lost opportunities for everyone to get together and visit. This is particularly notable among the lawmakers themselves. Republicans and Democrats visit with each other on a social basis far less today than they did years ago. We see the result: a polarized legislature where party differences are greater than ever and partisan rhetoric seems harsher than ever.
I think something similar has happened in banking. Years ago, bankers from the largest institutions used to visit frequently with bankers from smaller institutions. The large banks were serious correspondent banking services providers. They used to host events where they would invite representatives from hundreds of small banks to listen to a speaker, enjoy a meal and visit with one another. Representatives from the large banks used to spend all kinds of time with the folks from the smaller banks, all under the guise of correspondent banking. This promoted a certain level of industry unity.
But throughout the 1990s, things changed. Bankers at the smaller institutions grew increasingly concerned about competition from those larger banks, so they turned to bankers’ bank for correspondent services. The bankers’ bank movement grew so much that today, a good portion of the correspondent business that large banks used to provide is now being provided by bankers’ bankers. This means that the socializing that used to take place between those large bank representatives and the folks from small banks has dropped way off. And one of the results: a greater divide in the industry between the industry’s largest players and its smaller players. There is less industry unity.
Too big to fail, of course, is the issue that really separates the super-big banks from the smaller banks, but I suspect the divide is exacerbated by a diminishing level of communication between folks from large banks and folks from smaller banks.
Same thing has happened in the credit union industry. Community charters have turned most credit unions into competitors that aren’t too keen on helping each other out anymore.
Comment by Jeffry Pilcher — February 24, 2010 @ 11:13 am
And this is so sad. You’re never too big to learn or to get ideas from the smaller fish in the pond nor should you be so fearful as a small fish that you miss learning tactics from the sharks. I am all for collaboration between FIs. It creates a breathing ground for innovation, shared knowledge, and increased revenues. I heard a comment recently from a CEO. He said we should strive to “out teach our competition” - food for thought.
Comment by The Garland Group — February 25, 2010 @ 9:10 am