Good Morning:

I am Walter Wriston, Chairman of Citicorp.

I appreciate this opportunity to comment before the committee on Senate bills 1720 and 1721.

But I appreciate far more the fact that this Committee, under the leadership of Senator Garn, holds out the promise of enabling the nation's banks to participate in the modern delivery of America's financial services. It proposes to bring the structure of our depository institutions, virtually untouched for fifty years, into contemporary reality, through this year's proposed legislation, which the Chairman described as a first step, and in subsequent steps contemplated for next year.

I would also like to associate myself, Senator Garn, with your indignation toward those who would seek more freedom for themselves to compete, while retaining or increasing controls on any who would compete against them. You will hear no such testimony from me.

I am also happy that we are substantially and strongly aligned with the administration, as represented by Secretary Regan, in this determination to produce the level playing field that will best serve both our country and its people.

We have heard arguments that despite banks' protestations, regulation has not caused them to become a shrinking or less important part of the financial and credit markets, and regulation therefore little needs reform.

I find this an astonishing perception of reality.

Banks bear serious competitive disadvantages, like the cost of reserves and insurance, and the impact of outdated legal and regulatory constraints, in their serving large corporate customers--"big business," if you will. Literally billions of dollars of business are bypassing the domestic banking system--not because banks are unwilling to compete, but because regulatory burdens often make alternate sources less expensive and more adequate.

Yet, it is when it comes to individuals, consumers, and small business, that the laws really cripple the ability of banks to compete, and in this we are falling far behind.

In consumer financial services, the only ones suffering more than the banks that are prevented from delivering services they're best qualified to deliver, are the individuals and small businesses that are prevented from enjoying these services.

We have also heard that inflation is the underlying cause of the crisis engulfing traditional consumer banking institutions, and that when inflation returns to normal, so will the industry.

This overlooks several conspicuous changes. One is the creation of revolutionary technology that the banking laws of the 30's could never have contemplated, but that society today expects and demands.

Another is the fact that for the past dozen years, "normal" inflation has been a series of skyrocketing rises and precipitous declines, with each decline setting a higher base for the next rise.

No, curing inflation will solve many problems, but will not solve the problem we are discussing here.

The causes of the revolution in the delivery of consumer financial services today--and I say this with respect and no little envy--are sitting with me at this table.

If and when inflation goes away, they stay.

If I may spare a thousand words, I would like to picture my message on a chart. This chart, which appears in a tongue-in-cheek booklet you have received, is not a legal document, with elaborate footnotes and exhaustive qualifications. But it does the job of illustrating today's competitive picture as we see it.

It shows, in the vertical column, a list of services offered by the commercial banks and 25 non-bank businesses shown in the horizontal column.

As you see, commercial banks are permitted to take money and pay interest, to offer check writing, loans, mortgages, and credit cards to consumers.

If these are the services that more or less define consumer banking, let's look at what other companies meet this definition.

They include, of course, the companies represented at this table: American Express, Merrill Lynch, Prudential Insurance, and Beneficial Finance.

As you know, Sears, which also fits this definition of banking, had hoped to be with us today, but could not. Because it is in the process of buying a securities firm and real estate company, which other banks, of course, are prohibited from doing.

As you see, other companies that offer all the consumer services of banks include household finance, gulf and western, and national steel.

I will not read the whole chart to you, Senators. That would be not only superfluous from your point of view, but painful from mine. I will, however, point out several of its more poignant features.

You will note that the vertical line titled "Commercial Banks" terminates after the fifth entry, while the others continue long after.

The horizontal line titled "Interstate Branches" has only one empty space, under banks. Sears may sell money funds nationwide, but if Citibank puts one of our computer terminals that accept or dispense cash in jersey, we're in violation of the law.

Four lines are devoted to forms of insurance: life, property, casualty, and mortgage. Fourteen companies shown--not counting prudential--sell all four kinds of insurance. Of the 25 companies shown, only two sell no insurance at all, and that's by choice, not law. Large signs in windows of savings banks in New York advertise Savings Bank Life Insurance, prescribed to commercial banks.

This raises a disturbing point. In a bill whose fundamental thrust is to remove restraints on competition, one solitary provision--the prohibition on insurance--flies in the face of this intent. In a bill designed to reverse the 1930's pattern of statutory business prohibitions and protected markets, one provision would reanimate that spirit.

The effect would be simply to restrict banks from offering their customers a service all these companies and others already offer theirs, depriving consumers of a broader range of services, and banks of the ability to compete more fully.

In accordance with our oft-expressed belief that the free market serves the consumer best, we could not support such a provision in an otherwise excellent bill.

In conclusion, may I repeat my gratitude and relief that we are finally taking the first steps in addressing this crucial situation, and let me express the hope that the legislation that you will enact this year and in the years ahead will finally fill in all the blanks in this chart, not just for banks, but for all.

Thank you.