I have come here today to describe to you the outlook for banking and finance.

It's uniquely appropriate that I attempt to picture the world of banking and finance in this particular venue.

This location is ideal because it's the cradle of the motion picture industry. Any serious study of the world of finance about us today leads to an inescapable comparison between it and Hollywood.

Hollywood and today's banking regulation, after all, spring from the same genus: the world of fantasy.

Following this strict logic, I will endeavor to describe this financial world with the most appropriate illustrations.

The structure of our modern banking system was firmly established a long time ago[1]  in the 1930s.

One of its principal ornaments was the Glass-Steagall Act, a law devised by[2]  a senator named Carter Glass and representative Henry Steagall. These lawgivers drew up a strict list[3]  of what banks might and might not do.

The list was fairly short, because the technological capabilities then available to banks[4]  were pretty limited.

This era also produced another stern regulator of banking[5]  Representative Louis McFadden, who passed the McFadden Act, which said that banks might not branch across state lines.[6] 

These laws circumscribing what banks might do were based on the theory that it was both desirable and possible to keep banking isolated from industry.

They were just plain determined that banking and commerce would not get[7]  into business together.

They regarded banking as one, unique, distinct activity unto itself[8]  and strictly isolated from the [9]  wheels of industry.

They had a horror that any marriage of banking and industry would simply be too fearsome[10]  too fearsome to contemplate.

As we all know, however--at least, as most of us know--many changes have taken place since those days when America's banking laws were passed.[11] 

We have capabilities never dreamed of then.

And Americans, who built this country by their eagerness to seize opportunities, rushed to take advantage of these new capabilities.[12] The first thing you knew[13]  everybody was into the banking business.

The automobile industry[14]  was in early on.[15] 

GM has grown into the biggest consumer finance company in the country, and earned last year more than the fourth largest commercial bank in America. Ford's the second biggest. They compete with corporate banking in commercial paper, and consumer banking in retail lending.

Retailers are also big in banking. Chief but not alone among them, Sears has taken a tremendous bite[16]  out of the consumer banking market. They've come a long way since they started out extending credit to sell refrigerators. Now they earn most of their profit from financial services. To keep their insurance company, they just went out and bought a securities firm and a real estate company.[17] 

Sears will also take your savings, and pay you interest for them. Now any lawyer can explain with pages of footnotes why paying interest for savings is one thing when banks do it, and quite another when Sears does. But it's a lot harder for those of us who are not lawyers to see the difference.

The list goes on. National Steel[18]  owns the biggest federal savings and loan in the country, with 136 branches in New York, Florida and California. They have done for the separation of commerce and finance what Clark Gable did for undershirts.

The oil industry[19]  got into the act when Texaco formed Ful-Tex Euro Services to broker time deposits, money market instruments and foreign exchange.

You can hardly open your paper any morning without reading about another merger of finance and commerce. Two weeks ago American Can[20]  bought Associated Madison, an insurance company that wrote $2 billion in new business last year, mostly through mail order, credit cards, and other mass marketing strategies.

Even the movie business[21]  is now allied with banking. Loews, the theater company, also sells insurance, provides installment loans and invests in real estate. Paramount is in the Gulf and Western bed along with a bank, insurance, real estate and mortgage companies.[22] 

The money market funds, however, are the super new instrument that's revolutionizing the industry.[23]  Faster than a run to the state legislature to protect a market, more powerful than an interest-bearing checking account, leaping over interstate restrictions in a single bound, these funds in the four years of their existence have attracted over $170 billion in savings from traditional banking institutions, which, bound by obsolete regulation[24]  are unable to compete.

As illustrated by this scene from the mystery classic, "Murder on the American Express," that locomotive is pulling the biggest travel and entertainment card, a cable TV company, an insurance company, the second largest securities brokerage firm, and a commercial bank operating abroad.[25] 

It almost seems to traditional consumer bankers like S&Ls, savings banks, and commercial banks[26]  that the only way to prosper in their old business is to be some other kind of company.[27] 

It is only logical to ask, however, what is all this doing to the consumer?[28]  Consumers are being split down the middle.

Those that are smart and sophisticated [29]  are calling 800 toll-free numbers and getting top interest on their savings, plus other modern services.

Those who may be less sophisticated[30]  keep going to their local banks and getting 5 percent, or however much banks succeed in getting government to let them pay. With serious penalties, of course[31]  for premature withdrawal.[32] 

That's not to say the government doesn't protect consumers, in one of its proudest such moments, it passed the Truth in Lending act to show how much you pay for loans in terms so simple[33]  a child could understand using a formula[34]  to insure the simplicity and accuracy of the number.[35] 

In the great rush into American banking, though, American commercial and industrial companies aren't the only entries. This object of great desire is being hotly pursued by foreign adventurers [36]  in legions.

The outcome is predictable. As those who follow our industry know, the tremendous incursion by both foreign and domestic non-banking companies into American banking has put a very tight squeeze[37]  on traditional banking institutions, and indeed, threatens to leave us[38]  out in the cold.

Unaccountably, in spite of all this activity on every hand, there are those who continue to insist on retaining some imaginary separation that has long since vanished between finance and commerce. In a downpour of evidence to the contrary[39]  they whirl about, eyes tightly closed, mouths open, umbrellas furled.

Before you get the wrong idea, this is not a picture of our regulators. We have regulators in white hats, who see the situation clearly. We also have bankers in black hats, like Gene Kelly here, oblivious to what's happening around them.

There are many who, in the face of today's spirit of fostering stronger competition, still prefer to protect their activities very carefully[40]  and who, if you ask them: is business a game of risking your performance in the open marketplace?--will answer, "not the way I play it."

While talking a great game of free enterprise, they fight desperately[41]  to keep others out of what they see as their own personal markets.

A particular irony here in California is that six of the ten biggest banks seeking protection against banks from other states[42]  are themselves from other countries.

It has always been thus, however. Those who try to adapt to inevitable change usually survive and sometimes prosper. While those who try to hold back the clock usually find themselves in trouble.[43] 

The situation I find myself in reminds me of a favorite scene of mine[44]  where a stranger says to Mae West, "how do you do?" and she replies: "how do you do ?"[45] 

The bankers' question is, "how do you get into this game everybody else is already in?"

How do we start participating in the spirit of deregulation and free competition that's sweeping the country?

Well, like all good townsfolk, we have to volunteer for the posse. This town's not big enough for us and cruel regulation. We have to make it a better place for its citizens to live, with schools, and jobs, and personal freedom for its people and businesses. And as in all those old flicks, we hope a brave man[46]  with courage and perseverance will come along to lead us all in this united effort. [47] 

Thank you.

[1] (Slide # 1-Prehistoric Scene)

[2] (Slide # 2-Groucho and Chico)

[3] (Slide # 3-Moses carrying commandments)

[4] (Slide # 4-Stagecoach)

[5] (Slide # 5-W.C. Fields with gun)

[6] (Slide # 6-Buster Keaton)

[7] (Slide # 7-Gable, Colbert, blanket scene)

[8] (Slide # 8-Examiner scene)

[9] (Slide # 9-Chaplin on Gear)

[10] (Slide # 10-Frankenstein & Bride)

[11] (Slide # 11-Scene from 2,001)

[12] (Slide # 12-Cavalry Charge)

[13] (Slide #13-Crowded Stateroom Scene)

[14] (Slide # 14-Keystone cops in Model T)

[15] (Slide # 15-blank)

[16] (Slide # 16-Jaws)

[17] (Slide # 17-blank)

[18] (Slide # 18-Machinery)

[19] (Slide #19-Boom Town)

[20] (Slide # 20-Tin Woodsman)

[21] (Slide # 21-Director with megaphone)

[22] (Slide # 22-blank)

[23] (Slide # 23-Superman in flight)

[24] (Slide # 24-Pauline tied to tracks)

[25] (Slide # 25-blank)

[26] (Slide # 26-Hope, Crosby, Lamour)

[27] (Slide # 27-blank)

[28] (Slide # 28-Pauline, buzz saw)

[29] (Slide # 29-Groucho alone)

[30] (Slide # 30-Harpo)

[31] (Slide # 31-Hangings)

[32] (Slide # 32-blank)

[33] (Slide # 33-Shirley Temple)

[34] (Slide # 34-Formula)

[35] (Slide # 35-blank)

[36] (Slide # 36-Cooper and Dietrich)

[37] (Slide # 37-Scarlett, corset)

[38] (Slide # 38-Chaplin)

[39] (Slide # 39-Singing in the Rain)

[40] (Slide # 40-W.C. Fields holding cards)

[41] (Slide # 41-King Kong)

[42] (Slide # 42-King Kong with logos)

[43] (Slide # 43-Harold Lloyd on clock)

[44] (Slide # 44-Mae West & W.C. Fields)

[45] (Slide # 45-blank)

[46] (Slide # 46-Ronald Reagan)

[47] (Slide # 47-MGM lion with our logo)