Legislation always follows business needs too late
Legislation followed the growth of banking as Congress realized that to keep banks competitive, they had to relax interstate commerce laws. Medlin uses this example to show that politicians tended to react slowly and reluctantly to changes in the market.
Citing this Excerpt
Oral History Interview with John Medlin, May 24, 1999. Interview I-0076. Southern Oral History Program Collection (#4007) in the Southern Oral History Program Collection, Southern Historical Collection, Wilson Library, University of North Carolina at Chapel Hill.
Full Text of the Excerpt
- JOSEPH MOSNIER:
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Tell me about in your early years as President and then CEO your
assessment of the regulatory environment for the banking industry and
the whatever efforts and means you might have used in those years both
Raleigh and other places, Washington, to have an influence there.
- JOHN MEDLIN:
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Well we were very much restrained geographically. You couldn't go
outside of your home state except in certain exceptional things. You
could go overseas with an office, but you couldn't go to Atlanta. You
were restrained in the services we could offer. We were restrained in
the interest rates we could pay on deposits for example. It took a lot
of work in Washington on all those fronts to eventually get legislative
change. But the truth is the market change took place before the
legislative change. The Southeast Compact, the efforts to try to make it
possible for banks among certain states to merge. There was a similar
effort in New England, which really was earlier but not nearly as
effective as the one in the South in bringing about national change. It
was not until the early '90s, the Reigle-Neal Amendment that sanctioned
and legitimized interstate banking on a national basis that this became
a matter of acknowledgement by the United State's Congress. Whereas it
had been done by some southern legislators and New England legislators.
I think banks across the country and politicians across the country
realized their banks were not going to be in the game if they didn't
have broader geographic regulation. The product change, the product and
services change was driven a lot by technology. Money market funds could
do business all over the country by telephone, by fax, by computer, and
yet banks couldn't. The market had a lot to do with the creativity of
bankers and the market participants and the demands of customers really
drove the change. The politicians tended to be
dragged kicking and screaming into acknowledging it ultimately in many
cases.