Regional President Speech

SILAS KEEHN REMARKS KNOW YOUR CHICAGO SYMPOSIUM FIRST CHICAGO CENTER AUDITORIUM CHICAGO, ILLINOIS SEPTEMBER 11, 1985 WHAT ARE THE IMPLICATIONS OF CURRENT CHANGES IN THE FINANCIAL SERVICES INDUSTRY FOR CHICAGO'S FUTURE DEVELOPMENT t:UJJ~ ~ w~ w~ ,.,.11~.-.· ~o l(. INTRODUCTION .~ ~ • • _ :~... __ "\ ~~~/ ~ 'd;{ ~•'l-; - ~~ ~_,~•~,,z f'Pr>o/J,.. ~ ~ A. DON PERKINS 1 ~ 1. SET THE STAGE - Piz_u1'G..t.,v-<,1~ C(..l,. 2. METROPOLITAN CHICAGO A. TRENDS B. PROBLEMS C. HIGHLIGHTING THE ISSUES B. SK 1. RELATE MORE NARROWLY TO FINANCIAL SERVICES Fµ< 2. REVIEW CHANGES TAKING PLACE IN THE INDUSTRY 3. RELATE THESE CHANGES TO METROPOLITAN CHICAGO ~ A. WE ARE IN A VERY DYNAMIC PHASE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 2 B. TIMING, ISSUES ARE TERRIBLY IMPORTANT ct..,., ~,.,vf-•·~~ -~ C. THE IMPLICATIONS AND RISKS ARE SIGNIFICANT /'- I I. BEFORE TALKING ABOUT CHICAGO - COMMENT ON CHANGES TAKING PLACE IN THE FINANCIAL SERVICES INDUSTRY - WILL PUT THE CHICAGO SITUATION IN A BROADER PERSPECTIVE ~ A. PERIOD OF VERY SIGNIFICANT TRANSITION 1. PERHAPS THE MOST SIGNIFICANT PERIOD OF CHANGE IN DECADES 2. LEGISLATION THAT WAS PUT IN PLACE DURING THE '30S HAS NOT BEEN CHANGED 3. BUT THE MARKETPLACE HAS FOUND WAYS OF WORKING THROUGH AND AROUND THESE LEGISLATIVE IMPEDIMENTS B. HISTORICALLY, THE MAIN PARTICIPANTS IN FINANCIAL SERVICES 1. COMMERCIAL AND MUTUAL BANKS 2. INSURANCE COMPANIES 3. THRIFTS, SUCH AS S&LS AND CREDIT UNIONS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 3 4. SECURITIES FIRMS 5. CONSUMER LOAN COMPANIES 6. NUMBER OF OTHER MORE MINOR PARTICIµPAN~TS 7. THESE FIRMS OFFERED FAIRLY STANDARD SERVICES A. EACH PARTICIPANT CONSTRAINED IN ITS SERVICE OFFERINGS TO ITS PARTICULAR DISCIPLINE 8. ALL OF THIS HAS AND CONTINUES TO CHANGE DRAMATICALLY A. GEOGRAPHIC BARRIERS, AT LEAST ON AN INTERSTATE BASIS, HAVE LARGELY BEEN OVERCOME (1) MANY LARGE BANKING INSTITUTIONS MAINTAIN A PHYSICAL PRESENCE (BUT I WOULD EMPHASIZE, WITHOUT THE ABILITY TO COLLECT DEPOSITS) THROUGHOUT THE COUNTRY B. THE SERVICES THAT WERE FORMERLY OFFERED BY INDIVIDUAL CATEGORIES OF PARTICIPANTS ARE NOW BEING OFFERED BY ALL THE PARTICIPANTS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 4 ~ C. ltcJ.S TRENDfWILL ONLY ACCELERATE C. MY POINT IS, VERY TRANSITORY PERIOD 1. MARKET POSITIONS ARE BEING ESTABLISHED 2. INDUSTRIES DON'T GO THROUGH THESE TYPES OF PERIODS THAT OFTEN 3. ONCE THE POSITIONS SOLIDIFY, IT IS DIFFICULT TO ACHIEVE CHANGES Ill. LET ME RELATE ALL OF THIS TO EMPLOYMENT WHICH, FROM THE ff., POINT OF VIEW OF THE COMMERCIAL CLUB PROJECT, IS ,K,, CRITICAL ISSUE A. THROUGHOUT THE '60S AND EARLY '70S, FINANCIAL SERVICES EMPLOYMENT NATIONAL BASIS EXPANDED RAPIDLY 1. FROM 1962-1976 INDUSTRY EMPLOYMENT INCREASED BY <f, MORE THAN 1lif:t. ~0 2. BY 1976 SOME 4.2 MILLION PEOPLE EMPLOYED 3. BANK EMPLOYMENT GAINED RAPIDLY DURING THE PERIOD - 351 OF THE EMPLOYMENT GAIN DURING THAT PERIOD WAS IN BANKS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 5 B. NUMBER OF CHANGES TAKING PLACE IN BANKING THAT SUPPORTED THE RAPID EMPLOYMENT GROWTH 1. THE ROLE OF BANKS IN THE ECONOMY WAS EXPANDING 2. BANK ASSETS GREW MORE RAPIDLY ON AVERAGE THAN THE GNP 3. THE NUMBER OF EMPLOYEES NEEDED TO MANAGE THESE ASSETS ROSE COMMENSURATELY C. THE NUMBER OF TRANSACTIONS CLEARED THROUGH BANKS WAS ALSO GROWING RAPIDLY DURING THE PERIOD 1. DURING THE '70S, THE NUMBER OF CHECKS CLEARED IN THE U.S. GREW AT AN ANNUAL RATE OF 71 2. THE CREDIT CARD BUSINESS LITERALLY EXPLODED 3. IN 1973 BANKS CLEARED 620 MILLION CREDIT CARD SLIPS - MORE THAN DOUBLED BY 1979, REACHING 1.4 BILLION D. AS INTEREST RATES ROSE THE THEN EXISTING REGULATIONS PREVENTED BANKS FROM PAYING MARKET RATES OF INTEREST ON RETAIL DEPOSITS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 6 1. BANKS WERE FORCED TO FIND OTHER WAYS OF ATTRACTING DEPOSITS 2. ADDED SIGNIFICANTLY TO THEIR BRANCH NETWORKS 3. BANKING OFFICES DURING THE FIRST HALF OF THE 1970S DECADE INCREASED AT AN AVERAGE ANNUAL RATE OF 1.800 4. THESE WERE AT THE TIME VERY LABOR INTENSIVE E. THE FUNDAMENTALS HERE ARE CHANGING 1. COMPUTERIZATION HAS HAD AN IMPACT ON EMPLOYMENT , I ~ ~ 2. BIil MY POINT IS HUI lHE FINANCIAL SERVICES INDUSTRY. AND MOST PARTICULARLY THE BANKS. EXPERIENCED VERY SIGNIFICANT EMPLOYMENT GAINS y;'-- DURING THE 1960s AND THE 1970s ✓Y~NOTHER ELEMENT INVOLVED. NONBANK COMPETITION A. WHILE CHANGES WERE TAKING PLACE WITHIN THE FINANCIAL SERVICES INDUSTRY AS I'VE NOTED Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 7 B. ENTITIES NOT NORMALLY ASSOCIATED WITH FINANCIAL SERVICE TRANSACTIONS ENTERED THE MARKET C. YOU KNOW THE NAMES, BUT PERHAPS THEY BEAR REPEATING 1. SEARS HAS MADE AN ABSOLUTELY CLEAR COMMITMENT TO BECOME A MAJOR PARTICIPANT IN FINANCIAL SERVICES 2. 'THEY OWN SEARS SAVINGS BANK IN CALIFORNIA, ALLSTATE INSURANCE, COLDWELL BANKER (REAL ESTATE) AND DEAN WITTER (BROKERAGE) $E~,n 3. EARL I ER TH IS YEAR, AfQU I RED THE GREENWOOD TRUST COMPANY IN DELAWARE 4. HAVE BEGUN TO MARKET THEIR NEW CREDIT CARD, DISCOVER, IN THE SOUTHEAST, AND WILL MOVE TO A SECOND MARKET, SAN DIEGO, VERY SHORTLY cc--"1 1 5. THROUGH ITS CREDIT CARD BASE (OVER If MILLION CARDS IN 1983), HAVE ACCESS TO AN IMPORTANT PART OF OUR POPULATION D. AND THERE ARE MANY OTHERS, MERRILL LYNCH, AMERICAN EXPRESS, ET AL Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 8 1. OF THE 10 LARGEST CONSUMER INSTALLMENT LENDERS, 6 ARE NOT BANKS 2. AT THE END OF 1983 GENERAL MOTORS, THROUGH GMAC, ~ HAD MORE THAN 4 TIMES THE AMOUN~~S OUTSTANDING IHE CONSIIHFR CAJEt;ORY THAN THE l,N LARGEST BANK LENDER, BOFA 3-. NONSAN" beNBERS IIA'IE ALSO MADE ENORMOUS INROADS HI SOM£ QF TIIE COMMERCIAL ACT Iv 111 ES f 8RMERLY lHE RATHEQ EXCLIISIVE DQMAJN OF THE COMMERCJA:t::::!tAN""S E. TO REPEAT THE POINT, WE ARE TALKING ABOUT AN INDUSTRY THAT IS GOING THROUGH A VERY SIGNIFICANT TRANSFORMATION 1. IT WILL BE IMPORTANT THAT ALL FINANCIAL INSTITUTIONS BE PERMITTED TO FULLY PARTICIPATE IN THESE CHANGES 2. AND ALL OF THIS IS PARTICULARLY IMPORTANT FOR CHICAGO - CRITICAL TIME Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 9 A 88 EITHER WA'T (Ql:FeB V. NOW LET ME RELATE THIS TO THE CHICAGO AREA A. CH I CAGO IS AN IMPORT ANT FINANCIAL CENTER, PERHAPS SECOND ONLY TO NEW YORK 1. SECURITIES AND COMMODITIES EXCHANGES A. FI VE OF THE NAT ION IS 16 EXCHANGES ARE IN CHICAGO (THE CHICAGO BOARD OF TRADE, THE CHICAGO BOARD OPTIONS EXCHANGE, THE CHICAGO MERCANTILE EXCHANGE, THE MIDWEST STOCK EXCHANGE, AND THE MID-AMERICAN COMMODITIES EXCHANGE) B. NEW YORK IS THE ONLY CITY WITH MORE EXCHANGES - IT HAS SIX C. TOTAL TRADING SPACE IN CHICAGO IS ABOUT 250,000 SQUARE FEET - 8 TIMES MORE THAN A DECADE AGO Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 10 2. MIDWEST STOCK EXCHANGE A. IN 1984, THE MIDWEST STOCK EXCHANGE SURPASSED THE AMERICAN STOCK EXCHANGE IN SHARE VOLUME B. THE MIDWEST STOCK EXCHANGE RANKS THIRD WORLDWIDE IN DOLLAR VOLUME TRADED - BEHIND NEW YORK AND TOKYO 3. FUTURES AND OPTIONS TRANSACTIONS A. THE CHICAGO BOARD OF TRADE HAS THE LARGEST MARKET SHARE OF FUTURES AND OPTIONS CONTRACTS TRADED B. SO FAR IN 1985, THE CBOT AND THE CHICAGO MERCANTILE EXCHANGE ACCOUNT FOR MORE THAN 751 OF ALL FUTURES AND OPTIONS TRADED 4. INSURANCE COMPANIES A. OF THE TOP 25 LIFE INSURANCE COMPANIES, TWO ARE BASED IN CHICAGO AND WE RANK BEHIND NEW YORK, HARTFORD AND BOSTON Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 11 B. BUT OF THE TOP 25 PROPERTY AND CASUAL TY COMPANIES, 4 ARE BASED IN CHICAGO RANKING US AHEAD OF NEW YORK AND HARTFORD, AND THE SECOND LARGEST PROPERTY AND CASUALTY COMPANY, ALLSTATE, IS HEADQUARTERED HERE 5. BANKING - OUR POSITION IS NOT AS STRONG ~c..,'~c; A. ONLY TWO OF THE TOP 15 RA~K~ ~NB BANK HOLBING COMPANIES ARE LOCATED IN CHICAGO 8. SIX ARE IN NEW YORK, AND THREE ARE IN SAN FRANCISCO C. ENTIRELY POSSIBLE THAT THE RESTRICTIVE LEGISLATION THAT IS IN PLACE - WHICH l 'LL HIGHLIGHT IN A MOMENT - IS RESPONSIBLE FOR THIS B. IN TERMS OF EMPLOYMENT, FINANCIAL SERVICE FIRMS VERY IMPORTANT TO CHICAGO 1. THESE FIRMS CURRENTLY EMPLOY A LITTLE OVER 8% OF ALL EMPLOYEES - SOME 250,000 PEOPLE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 12 2. THE FIFTH MOST IMPORTANT EMPLOYMENT SECTOR IN METROPOLITAN CHICAGO 3. FROM 1976-1982, A SOMEWHAT SHORTER PERIOD THAN THE COMMERCIAL CLUB STUDY, FINANCIAL SERVICE FIRMS WERE BECOMING INCREASINGLY MORE IMPORTANT AS EMPLOYERS IN THE CHICAGO AREA A. OVERALL EMPLOYMENT IN CHICAGO INCREASED BY ONLY 3% DURING THIS PERIOD B. BUT FINANCIAL SERVICE EMPLOYMENT INCREASED ALMOST 8 TIMES AS FAST (24%) DURING THIS PERIOD C. EMPLOYMENT GROWTH WAS PARTICULARLY SIGNIFICANT AT S&LS AND SECURITIES DEALERS WHERE EMPLOYMENT INCREASED BY MORE THAN 50% 4. BUT SINCE 1982, THIS EMPLOYMENT TREND HAS LEVELED OFF - OUR CURRENT EMPLOYMENT IN FINANCIAL SERVICES IS HOLDING AT 250,000 Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 13 5. AS A CONSEQUENCE, CHICAGO'S SHARE OF NATIONWIDE EMPLOYMENT IN FINANCIAL SERVICES IS DECLINING - BY A SMALL PERCENTAGE, YET THIS IS A VERY LARGE PIE 6. EMPLOYMENT AT THE CHICAGO BANKS HAS DECLINED 131 SINCE 1982 A. AS A CONSEQUENCE, CHICAGO'S SHARE OF TOTAL BANK EMPLOYMENT IN THE UNITED STATES HAS DECLINED B. CHICAGO'S SHARE OF TOTAL BANK ASSETS HAS ALSO DECLINED C. AGAIN, THESE HAVE BEEN SMALL PERCENTAGE CHANGES BUT YET WITH AN IMPORTANT IMPLICATION FOR OUR ROLE AS A FINANCIAL CENTER (1) THE TRENDS ARE WRONG Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 14 C. DESPITE OUR STRONG POSITION AND INHERENT ADVANTAGES. OVER THE 22 YEAR SPAN OF THE COMMERCIAL CLUB STUDY 1. EMPLOYMENT GROWTH IN FINANCIAL SERVICES LAGGED THE NATIONAL AVERAGE BY A VERY CONSIDERABLE AMOUNT 2. THERE ARE SOME INTERESTING CHANGES TAKING PLACE THROUGHOUT THE COUNTRY 3. TO PERHAPS SURPRISE YOU. FINANCIAL SERVICE EMPLOYMENT IN ATLANTA. DALLAS. ST. LOUIS AND PITTSBURGH HAS BEEN GROWING MORE RAPIDLY THAN IS THE CASE IN CHICAGO. PITTSBURGH PARTICULARLY INTERESTING A. THE STATE LEGISLATED. IN EFFECT. STATEWIDE BANKING SEVERAL YEARS AGO B. THE PITTSBURGH BANKS HAVE GONE TO PHILADELPHIA NOT VICE VERSA C. THEY STARTED OFF LARGER AND STRONGER Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 15 D. PERHAPS A LESSON HERE WHICH I WILL TRY TO EMPHASIZE LATER 4. MANY STATES HAVE SPECIFICALLY TARGETED FINANCIAL SERVICES FOR INCREASED EMPLOYMENT OPPORTUNITIES. SOUTH DAKOTA, DELAWARE AND MARYLAND VERY DRAMATIC EXAMPLES 5. SOUTH DAKOTA PASSED LEG I SLAT ION THAT PERMITTED OUT OF STATE BANKING CORPORATIONS TO ESTABLISH LIMITED PURPOSE BANKS WITHIN THE STATE A. CIT I CORP ESTABLISHED THEIR VI SA AND MASTER CARD PROCESSING OPERATION IN SIOUX FALLS B. CREATED 2,300 JOBS - SMALL TO US - VERY SIGNIFICANT IN SIOUX FALLS 6. MARYLAND HAS JUST ADOPTED SIMILAR LEGISLATION A. CITICORP HAS MOVED A PROCESSING ACTIVITY TO MARYLAND (AND THESE TEND TO BE EMPLOYMENT INTENSIVE) - 275 NEW JOBS SO FAR Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 16 7. DELAWARE HAS ALSO BEEN SUCCESSFUL IN ATTRACTING NEW BUSINESS AS A RESULT OF A LEGISLATIVE CHANGE A. 13 BANK HOLDING COMPANIES HAVE MOVED OPERATIONS INTO THE STATE OF DELAWARE 8. THE MESSAGE IS - AND THE NUMBERS l'VE SUGGESTED SUPPORT A. EVEN WITH AUTOMATION, FINANCIAL SERVICE COMPANIES ARE EMPLOYEE/EMPLOYMENT ORIENTED B. PROVIDE ATTRACTIVE AND FINANCIALLY REMUNERATIVE OPPORTUNITIES (1) HIGH CALIBRE EMPLOYEE C. HAVE THE ABILITY TO DRIVE EMPLOYMENT UPWARD AT A RELATIVELY MORE RAPID RATE THAN SOME OTHER SECTORS OF THE ECONOMY D. GIVEN THE STRUCTURE OF ACTIVITIES IN THE CHICAGO AREA, SHOULD BE A GREAT OPPORTUNITY FOR US Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 17 VI. HAVING DESCRIBED THE INDUSTRY ENVIRONMENT, SOME CHARACTERISTICS OF CHICAGO AND SOME OF THE DEVELOPMENTS TAKING PLACE IN OTHER PARTS OF THE COUNTRY, LET ME MOVE ON TO SOME SUGGESTIONS RELATING TO OUR MARKET A. THESE ISSUES DO NOT LEND THEMSELVES TO QUICK AND EASY ~ ~ ~ FIXES _ B. LET ME START WITH A REVIEW OF THE CURRENT LEGISLATION AS IT EXISTS IN ILLINOIS - WHICH l AM SURE YOU ARE FAMILIAR WITH 1. FOR A GREAT MANY YEARS, ILLINOIS HAS PROHIBITED BRANCHING A. LAW PROHIBIT I NG BRANCHES PASSED IN 1923 - OVER 60 YEARS. THOUGHT THAT A UNIT BANKING ENVIRONMENT WELL-SUITED FOR STATE'S -:l:l&L. pt)"'ila T?B FARM ECONOMY B. BUT MORE RECENTLY THE LAW CHANGED TO PERMIT LIMITED "FACILITIES" - ~ ' ~ .. Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 18 2. BY LI HI TED I MEAN THEY HAVE NOT BEEN ABLE TO PROVIDE A FULL RANGE OF SERVICES - UNTIL 1983 FACILITIES WERE NOT PERMITTED TO MAKE AUTOMOBILE LOANS 3. A FACILITY HAD TO BE LOCATED WITHIN THE SAME COUNTY AS THE BANK'S MAIN BRANCH OR WITHIN 10 MILES q_ WITH SOME EXCEPTIONS, FACILITIES CANNOT BE LOCATED WITHIN ONE MILE OF ANOTHER BANK'S HOME OFFICE 5. YEAR OR SO AGO. ACQUISITION OF BANK HOLD I NG COMPANIES IN CONTIGUOUS BANKING REGIONS PERMITTED 6. EARLIER THIS YEAR THE LAW WAS AMENDED TO PERMIT 5 FACILITIES RATHER THAN 3 7. THESE FACILITIES CAN NOW OFFER ALL OF THE BANKING SERVICES THAT A BANK CAN OFFER AT ITS MAIN OFFICE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 19 8. THOUGH CERTAINLY THESE HAVE BEEN MOVES IN THE RIGHT DIRECTION, THE RECENT CHANGES ANYTHING BUT EARTHSHAKING C. MY POINT - WE DRAMATICALLY OUT OF STEP WITH THE WORLD - 24 STATES ALLOW FULL STATEWIDE BRANCHING 1. 18 OTHER STATES ALLOW LIMITED BRANCHING, USUALLY ~~ IN CONTIGUOUS COUNTIES 2. ONLY 8 STATES, AMONG THEM ILLINOIS, PROHIBIT BRANCHING 3. IN OUR AREA, INDIANA, MICHIGAN AND WISCONSIN PERMIT LIMITED BRANCHING D. JUST WHY DOES LEG I SLAT I VE CHANGE PERMITTING MUCH BROADER BRANCHING CAPABILITY MAKE SENSE AND WHY SO IMPORTANT 1. GIVEN INCREASED AUTOMATION CAPABILITY - AND THE Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 20 IMPORTANT ELEMENT IN THIS - BRANCHES DO NOT PROV I DE THE SAME EMPLOYMENT GROWTH AS WAS THE CASE HERETOFORE 2. BUT STILL COMMERCIAL BANKS NEED TO HAVE BROADER ACCESS TO RETAIL DEPOSITS (CORE DEPOSITS) TO SUPPORT THEIR GROWTH 3. OUR BANKS ARE COMPETING WITH BANKS IN STATES SUCH AS NEW YORK AND CALIFORNIA, WHICH DO HAVE STATEWIDE RETAIL DEPOSIT GATHERING CAPABILITY 4. ILLINOIS INSTITUTIONS NEED TO HAVE BROADER ACCESS TO CORE DEPOSITS TO SUPPORT ASSET GROWTH 5. IF CHICAGO IS TO MAINTAIN ITS POSITION AS AN I~P~RTANT ,COMMERCIAL AND FINANCIAL CENTER ~p~,~ A. MUST BE UNDERPINNED BY A STRONG AND GROWING COMMERCIAL BANKING STRUCTURE E. MEANWHILE. IMPORTANT LEGISLATIVE CHANGES HAVE AND ARE TAKING PLACE IN OTHER PARTS OF THE COUNTRY Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 21 1. THE TREND TOWARD REGIONAL COMPACTS 2. FIRST IN NEW ENGLAND THEN IN THE SOUTHEAST 3. RECENTLY ENDORSED BY THE SUPREME COURT 4. 16 STATES HAVE NOW ADOPTED REGIONAL INTERSTATE BANKING LAWS A. INDIANA AND OHIO HAVE PASSED SUCH LEGISLATION B. CURRENTLY BEING ACTIVELY CONSIDERED BY WISCONSIN AND MICHIGAN C. IMPORTANT FOR ILLINOIS KEEP PACE F. NEW ENGLAND AND SOUTHEAST, FOR EXAMPLE ~~ JJ_ -~ .!:-,•~c,,t th._ ~ ~ l,,d"-tr\,,\ Of..J'-<A I~ 1. CONSOLIDATION TAKING PLACE VERY RAPIDLY 2. CURRENTLY THERE ARE ABOUT 20 PROPOSED OR COMPLETED REGIONAL ACQUISITIONS IN THE SOUTHEAST _,. A~ND ABOUT 15 IN NEW ENGLAND OW'~~~~ 3. ARIZONA - 3 MAJOR DEALS IN RECENT WEEKS 4. THESE ACQUISITIONS IN MANY CASES DOUBLING THE SIZE OF INSTITUTIONS INVOLVED Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 22 5. CREATING INSTITUTIONS THAT ARE ALMOST AS LARGE AS THE TWO MAJOR INSTITUTIONS IN CHICAGO 6. IF THIS RATE OF GROWTH CONTINUES - SIGNIFICANT IMPLICATIONS FOR OUR ROLE AS A FINANCIAL CENTER G. THE RISK IS IF OTHER STATES IN OUR IMMEDIATE AREA ADOPT INTERESTATE LEGISLATION AND ILLINOIS DOES NOT 1. AS CONSOL I DAT IONS TAKE PLACE AROUND US, VERY LARGE INSTITUTIONS WILL BE FORMED 2. WHICH COULD BECOME A COMPETITIVE THREAT AS WE GO INTO AN INTERSTATE ENVIRONMENT 3. AND AGAIN IMPACT ON OUR ROLE AS A MAJOR FINANCIAL CENTER A. THE PITTSBURGH EXAMPLE - PHILADELPHIA LOST ITS ROLE 4. WITH LONG TERM EMPLOYMENT IMPLICATIONS Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 23 VI I. CURRENT STATUS OF THE ILLINOIS LEG I SLAT ION EMPHASIZES (THIS IS AN SK PERSONAL VIEW BUT NOT INCONSISTENT WITH THE SY~E~., ~I EW) ~~-.SfJi..w,lLt. A. THE BILL WOULD PROVIDE FOR INTERSTATE ACQUISITIONS IN ~ /? ~.-- I 6-..._ ~-,..J~ OUR AREA - REGIONAL COMPACT - \- '- r-~ - l ~~ •-A/~c., ~ 1. THE TRIGGER (WHICH PROVIDES FOR FULL INTERSTATE BANKING) IS CONTENTIOUS B. THE BILL FAILED IN ADOPTION LAST SPRING 1. MAY PERHAPS BE CONSIDERED DURING A SHORT SESSION OF THE LEGISLATURE IN OCTOBER 2. BUT IT IS A BRIEF TIME TO DEAL WITH SUCH A ile..W ~v ~J ~ ~ DIFFICULT ISSUE - 3. WE NEED ACTION ON THIS IMPORTANT QUESTION OR THE CONSEQUENCES WHICH l HAVE TRIED TO EMPHASIZE THIS MORNING WILL OVERTAKE US Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 24 VIII. lo CONCLUDE - OPTIMISTICALLY, I THINK THAT THIS PRESENTS GREAT OPPORTUNITY FOR CHICAGO A. INTERSTATE BANKING - LEGISLATION IS COMING AT THE FEDERAL AND STATE LEVELS, IS ENT !RELY POSS IBLE THAT FEDERAL CHANGES WILL OVERTAKE DELIBERATIONS IN SPRINGFIELD 1. ILLINOIS SHOULD BE A LEADER - NOT A FOLLOWER 2. CHICAGO SHOULD BE ABLE TO MAINTAIN, INDEED, ENHANCE ITS ROLE AS A FINANCIAL CENTER 3. THE FUNDAMENTAL ADVANTAGES HERE ARE VERY COMPELLING A. I'VE NOTED THE INFRASTRUCTURE THAT IS IN PLACE 4. IF ILLINOIS BECOMES PART OF A REGIONAL COMPACT ON A TIMELY BASIS, OUR INSTITUTIONS WILL HAVE THE OPPORTUNITY TO GAIN SIZE AND STRENGTH AND GO INTO A FULL INTERSTATE ENVIRONMENT IN AN ADVANTAGEOUS POSITION Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 25 5. EMPLOYMENT OPPORTUNITIES IN THE METROPOLITAN AREA WOULD BENEFIT FROM THE TRANSFER OF MANAGERIAL JOBS TO OUR CITY 6. AS OUR HI DWESTERN INST I TUT IONS GET Bl GGER, THE DEMAND FOR SOPHISTICATED FINANCIAL SERVICES WILL INCREASE 7. THE CONSUMER WILL BENEFIT FROM ALL THIS 8. CHICAGO HAS BECOME A MAJOR INNOVATOR IN MANY OTHER AREAS OF FINANCIAL SERVICES - FUTURES AND OPTIONS AT THE BOARD OF TRADE AND THE HERC 9. ENTIRELY POSSIBLE THAT THIS SORT OF INNOVATIVE, CREATIVE SPIRIT WILL CONTINUE TAKE PLACE 10. THUS, THE FUTURE CAN BE BRIGHT 11. BUT I DO EMPHASIZE THAT EVENTS ARE MOVING RAPIDLY AND THE STAKES ARE VERY, VERY HIGH 12. WE SIMPLY CANNOT BECOME COMPLACENT AS HAS BEEN THE CASE IN THE PAST Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis SK DRAFT (2) 9/10/85 PAGE 26 13. THANKS TO DON PERKINS/THE CIVIC COMMITTEE A. THESE EMPLOYMENT ISSUES HAVE BEEN CLEARLY HIGHLIGHTED B. AN EFFECTIVE/ACTIVE PROCESS HAS BEEN PUT IN PLACE C. BUSILY AT WORK ON THE ISSUE THAT I HAVE DISCUSSED THIS MORNING AS WELL AS MANY OTHERS ~·~ ~c:, ~ ; ~ · - D. W!i!CH, F ~ ~;;;ILi HAVE A VER't t'~ ~~ fU.t-#Ott POSITIVE~ IMPOftTANT EFFECT ON EMPLOYMENT ~cru,, ....:D .., & 1 OPPSRTHNITIES IN OUR METROPOLITAN AREA C,,4-,,...J bR. v~ ~~~'d).cedJ,, THANK YOU******* Digitized for FRASER https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis

Silas Keehn (1985, September 10). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19850911_silas_keehn

@misc{wtfs_regional_speeche_19850911_silas_keehn,
  author = {Silas Keehn},
  title = {Regional President Speech},
  year = {1985},
  month = {Sep},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19850911_silas_keehn},
  note = {Retrieved via When the Fed Speaks corpus}
}