If You Ask Me: A Global Banker Reflects on Our Times

Wriston, Walter B.


An Expensive Luxury


How come the Fed is losing so many member banks these days? What's going on there?

The penalty for belonging to the Federal Reserve System is now so high that everybody's getting out. It cost the shareholders of Citicorp a hundred million dollars last year for the privilege of belonging to the Fed. That's the opportunity cost[23]  on one billion two hundred million of reserves at, say 10 or 11 percent.

Smaller banks across the country, even though their numbers are lower, just can't afford that kind of hit. So the Fed's membership is shrinking every morning--it's the lowest ever now--and they're trying to legislate a way to hold an uneconomic system together.

Sure, the prestige is great. But there is a cross-over point. The way to get members back, of course, is to pay interest on reserve balances, but then the Fed might cease to be the most profitable corporation in the world.

Last year they made $7.9 billion. That would make Tom Murphy of General Motors happy. You and I could make that kind of profit, too, if we didn't pay anything for our inventory.

One of the Fed's important functions is clearing checks. But with automated clearing houses and the bank wires and the electronic funds system, you really don't need that anymore.

So, this will become a hot topic: Should all financial institutions have reserve requirements and, if so, how much? And how much interest is to be paid? The industry is widely split on it. If regulation follows its customary course they will exempt all banks under $100 million. That's about 80 percent of all the banks in the country. Then they'll hit the bigger banks. That's what usually happens.


[23] The amount of interest earnings foregone on the portion of deposits that member banks are required to keep unused in reserve.

  • The document was created from a compilation of interviews and question and answer segments with Walter B. Wriston which was later compiled into "If You Ask Me: A Global Banker Reflects on Our Times" in 1980. The original speech is located in MS134.001.034.00018.
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 Title Page
If You Ask Me: A Global Banker Reflects on Our Times
I: Getting Down to Fundamentals
The Big Cop-out
You Can't Go Bail for Everyone
Risk Is What It's All About
II: Some Basic Ills of the Body Politic
Lincoln Wouldn't Have Made It
Unpredictable Is a Dangerous Country
The Pitfalls of Single-issue Politics
Expect To Get Zapped
The Perils of Legal Pollution
The Injustice of Our Tax System
Those Wonderful People Who Bring You Inflation
Stop the Presses
Silly Premises Lead to Nutty Conclusions
Easier Said Than Done
III: New York, New York
New York City Is Alive And Well
The Road Back
IV: Careers
Rx for Happiness
Good Forward Planning
Dull Job?
A Simple Matter of Survival
Making It at Citibank
What Fast Track?
No Hiding Place
V: Once Around the World Quickly
South Africa
China: A Matter of Timing
The Real Significance of Iran
Iran and the Money Markets
Fashions in Country-criticizing
VI: The Global Financial Scene
The Elusive Eurodollar
De Facto Payments Mechanism
Too Big To Move
The Foreign Exchange Game
They Can't Leave the System
Baskets of Money
Swiss Francs
The Value of a Dollar
Not a Loss Since 1897
A Rational View of LDC Loans
Free Trade Benefits Consumers
The Destructive Costs of Regulation
The Big Rip-off
A Real Entitlement
Can Regulations Prevent Bum Loans?
The Insidious Side of Controls
Competition in Regulation
VIII: The Shape of Things To Come
Not As Big As You Think
What Lobby?
Armageddon Is Late, as Usual
Some Simple Facts about Interest Rates
An Expensive Luxury
How Big Is Big?
What We Did Yesterday Won't Work Tomorrow
A Matter of Semantics
Unpredictable Is a Dangerous Country
Privacy: A Serious Problem
The Unseen Revolution
Things Are Going To Be Different
Take the Handcuffs off Everybody
The Gray Areas of Lending
No Mouse under the Rug
Thank God We Don't Have National Banking
Competition Keeps You Awake
Accounting for Loan Losses
Not a Utility
People Like It
Computer Frauds
Some Final Words on Responsibility
About the Author