The temptation to believe that yesterday's facts still obtain today is a natural human trait, but not very helpful in forming contemporary policy. Almost unnoticed, the position of America's commercial banks has been steadily eroding as financial markets have been invaded, and in some cases preempted, by commercial corporations supplying financial services. Since our economic system is based on the premise that the public benefits from free competition, whoever proposes to limit that competition must bear the burden of proof for demonstrating that the public has more to gain from the limitation than it loses.

No such demonstration has been forthcoming, but the areas in which commercial banks can compete have nonetheless been sharply circumscribed. Indeed, much rhetoric and many regulations are based on the assumption that banks have some kind of a monopoly on money and credit.

This is the same kind of dangerous misconception that dominated the regulators of railroads long after the traffic had been diverted from the railroads to the trucks, the barges and the airplanes. The facts are that banks no longer have a monopoly on money and credit if, indeed, they ever did. The list of nonbanking companies granting credit is getting longer every year, and so is the list of those accepting money for deposit.

The results of all this are unmistakable. While state and federal banking regulators continue arguing about who should be allowed to write checks, pay interest on deposits—and how much interest—and whether a computer terminal is a bank, the customers have been taking their business somewhere else, just as shippers and passengers took their business away from the railroads. The erosion of the banking business is substantial. At the end of World War II, commercial banks held more than 57% of the financial assets owned by the financial services industry. That percentage has dwindled to less than 40% today.

The financial services business is no different from any other: Either you provide what the customer needs and wants, or he or she looks for another supplier. The biggest problem facing commercial banking today is not the new competition, but the old regulations. We are being forced to operate under rules designed for making horse collars while the fellow down the street is selling horseless carriages.

To describe the complex and diffuse structure of government regulation of economic activity in the United States would be an impossible task for any one book or, for that matter, several dozen books. This slender volume makes no such undertaking. It does not attempt to analyze, or even to enumerate, the myriad laws and regulations that over the past half-century have been accumulating in America's financial marketplace. It endeavors, rather, to demonstrate that the net effect of these regulations is now anticompetitive, and harmful to the interests of producers and consumers alike.

Its author, Will Sparks, is an officer of Citibank and writes with a special emphasis on what regulatory barriers to competition have done and threaten to do to the nation's commercial banking industry. He draws, however, on his own years in government, including service as a White House advisor to President Lyndon Johnson, in asserting that "as a public policy concern... the really significant question is not merely the adverse effects of the present regulatory situation on American financial institutions, but on the American public."