Need a mortgage? Call Sears. Or National Steel.
Are you moving and need some relocation help? Call Merrill Lynch.
What about an insurance policy? Almost any big broker can help you.
Sick of banking your money at low, government-set interest rates? Forget your bank and find a money market mutual fund. They are virtually riskless, often pay higher interest than a bank, require relatively small "deposits" and most permit you to write checks on those deposits.
A decade ago the nation's financial system was, for the most part, easy to figure out. There were banks and savings institutions, insurance companies, brokers and investment bankers, consumer and industrial finance companies.
Today, in the words of Citibank Chairman Walter W. Wriston, "You can't tell the players with a scorecard."
That is not to say that there wasn't always some blurring and overlap. Even though the law, in principle, differentiates between "finance" and "commerce," many non-financial companies have financial arms -- legally.
The major automobile companies long have had finance subsidiaries. Big companies -- from department stores to oil companies -- have run their own credit card operations. Sears, the nation's biggest retailer, has run a California savings and loan association for nearly two decades.
In recent years other nonfinancial companies have invaded the financial field. National Steel bought a savings and loan association. RCA Corp., the owner of the powerful National Broadcasting Corp. network, bought a giant finance company, C.I.T. The Bechtel family, which owns the giant construction and engineering firm the Bechtel Corp., just bought the investment banking firm Dillon, Read.
If the barriers between industry and finance are eroding, the boundaries among financial firms seem to be evaporating. Brokers are accepting de facto deposits. Banks are selling commercial paper (corporate IOUs that used to be the domain of brokers), and insurance companies are managing customer funds.
Again, some commentators tend to make more than should be made about the "conglomerization" of the financial services industry. Despite all the fuss over Prudential Insurance Co.'s recent acquisition of the big broker, The Bache Group Inc., insurance companies have owned parts of Wall Street firms for years.
There is a growing realization amongst all purveyors of financial services -- from bankers to brokers to insurers -- that they are all in the same business.
And as these businesses look around to broaden their services, the first place they will look is to existing companies. Already the largest insurance company, Prudential, has acquired the eighth-largest broker. The giant financial services company, American Express, is in the process of acquiring the second-largest broker: Shearson, Loeb Rhoads. Merrill Lynch, which pioneered a lot of this activity, is the nation's biggest broker and a major factor in real estate, mortgages, insurance and executive relocation.
Even banks, the biggest of whom moan loudly that federal rules keep them from competing effectively with nonbank financial companies, have been allowed to move into other fields. Citicorp's Wriston noted that the parent company of New York's largest bank also, in effect, is the world's largest airline. Many of the planes overhead are owned by Citicorp and leased to the major airlines.
To hear some tell it, the decade of the 1980s will usher in a revolution for consumers. Indeed, it is consumer demand for higher interest on savings that has spawned the most visible change of the late 1970s and early 1980s: the money market mutual fund. Assets of these funds (which pool customer money and invest in high-yielding securities like commercial paper) have grown from nothing to about $125 billion in four years. Banks cannot run them -- brokers can -- and bankers are angry.
"If I don't provide a number of these services, I'll expose myself to my competitors," said Merrill Lynch Vice President John Fitzgerald.
Because of inflation and increasing sophistication, consumers are demanding more financial services.
Brokerage firms, many of whom faced extinction in the 1970s, were among the first to broaden. The stronger firms absorbed weaker ones, and the surviving firms added new products to woo customers who looked askance at the traditional stock and bond business. Options, commodity futures, money market mutual funds and insurance policies were among the new products brokers offered customers in the 1970s.
But 10 years from now today's murky distinctions among financial firms may seem clear in comparison to what they will be then. "I personally believe it will be more difficult to distinguish among the major financial services companies," said Merrill Lynch Chairman Roger Birk.
Although federal regulations prescribe what most financial organizations can and cannot do, ingenious business people continuously test those regulations and often succeed in circumventing them.
Brokers like Merrill Lynch have in essence become banks. Interstate banking, theoretically proscribed under federal law, is a reality in business lending, and a loophole in the federal law makes it a legal reality in South Dakota and Delaware, with other states expected to follow.
The nation's financial organizations will not only be different 10 years from now. They are likely to be bigger and fewer in number.
Today there are 14,000 commercial banks, about half the amount there were two generations ago. Chase Manhattan Bank Chairman Willard C. Butcher foresees the day when there will be perhaps 25 huge banks with a many-state presence -- banks can operate legally in only one state today -- and perhaps 1,000 to 2,000 smaller institutions.
Harry Taylor, vice chairman of Manufacturers Hanover Trust Co., conceded this week that in anticipation of interstate banking, the nation's fourth biggest bank is looking at smaller banks around the country it might want to acquire. He said he doubted Manufacturers was doing anything different from other big banks, who also are targeting potential acquisitions.
Many savings and loan institutions, whose low-interest, long-term mortgage portfolios have put them in the financial soup during a period of high-cost deposits, are likely to merge with each other, or, if federal law permits, with big banks or even big builders who want captive financial arms.
Two recent proposed mergers -- that of American Express and Shearson Loeb Rhoads, as well as Prudential and Bache -- point out the wave of the financial future in the eyes of many analysts.
The term in vogue, coined years ago by Citicorp Chairman Wriston, is "financial supermarket."
The financial supermarket, like the local Giant for edibles, would be a one-stop shop for the consumer of financial services.Such a supermarket would take deposits (if not actual bank deposits, then de facto deposits in the form of a money market mutual fund with check-writing authority; make mortgage loans and other loans; buy or sell stocks, bond, options and commodities futures and any other products the nimble minds on Wall Street might dream up. The financial supermarket would take care of a customer's insurance needs, sell his or her house, manage pension funds and sell annuities.
"The client is going to look for better service in achieving his or her overall financial security. We think there is a possibility for one-stop financial shopping. At least there will be more services under one roof than in the past," according to Prudential Vice Chairman Frank Hoenemeyer.
Merrill Lynch & Co., the nation's biggest broker, is probably farthest down the road to becoming a financial supermarket. Yet, noted Chairman Birk, talking about a financial supermarket and making one work are two different things. Merely providing various services within one company does not mean that a customer can walk down the financial aisle as he can in the grocery store.
Nor may the consumer want to. It may be convenient to get a single monthly statement from Merril Lynch or Prudential or even Citibank, but consumers may be wary of a single firm having that much control over their financial lives. It may make little sense to buy ice cream at Safeway and toilet tissue at Giant, but it may make sense to continue to buy stocks through Merrill Lynch, insurance through Prudential and checking accounts with Citibank.
Still, the move toward growing and conglomerating in the financial industry appears to be inexorable, as banks, brokers and insurers try to cash in on each others' businesses.
The driving force is inflation, as consumers and others seek market rates rather than the lower rates the federal government requires banks and savings institutions to pay.
The facilitating force is the new computer technology. That technology permits institutions the flexibility and freedom to offer accounts such as Merrill Lynch's cash management account, which turns deposits on account with a broker into a checking account and also permits a saver to move money from various investment packages with a phone call or push of a button.
The most fanciful see the day when cable television and home computers will permit a customer to do all his or her banking through a television set.
Meanwhile, the role of the banks in the financial system has been steadily declining in importance.
"Commercial banks are declining in importance," Butcher said. "Nonbank financial instutitions are in the forefront. Banks are being legally estopped from competing." Butcher noted that in 1947, banks controlled more than two-thirds of the nation's financial assets. Today they have less than a third.
If U.S. banks are to continue to compete in world markets plus develop the financial wherewithal to make the major investments in technology needed to serve both consumers and businesses, "We need mergers of banks of stature," Butcher said. He said that in the 1950s, when there was a wave of bank mergers in New York (among them the Chase and the Bank of Manhattan), competition improved.
"But there is no sense in merging banks that are not permitted to do business," Butcher adds. He said banks must be given permission to run money market funds and compete with nonbank financial institutions.
The current financial system was devised in the wake of the Great Depression. Banks were judged to be largely at fault for the stock market spiral that culminated in the crash of 1929. The wave of legislation in the 1930s set a firm boundary between commercial banking -- the taking of deposits and the making of loans -- and investment banking -- underwriting new stock and bond offerings by companies.
The banking and securities industries, which were intertwined in 1929 (and remain so in most of the rest of the world), were split in the 1930s. Wriston agrees that commercial banks should not be given powers to underwrite corporate stocks.
While the forces for change in the financial system may be powerful, so are the forces for maintaining the status quo. There are 50,000 financial intermediaries -- from banks to brokers to savings and loans to life insurance companies -- in the United States. The biggest of them -- the Citicorps, the Merrill Lynches and the Prudentials -- are willing to have a financial free-for-all. Many of the middle-sized and smaller institutions are not.
But the continuation of inflation and the advent of expensive technologies probably make inevitable a sizable shakeout in the financial system.
The financial supermarket may well be the wave of the future. In any event, the big actors are betting that it is.