The "level playing field" has become the most used and abused cliche of the banking battle now being played out on Capitol Hill.

The securities industry used it last week after describing the tax advantages banks would have if they were allowed to underwrite all municipal revenue bonds, as proposed in a bill before the Senate Banking Committee. Securities Industry Association official Walter W. Craigie Jr. went so far as to accuse banks of wanting to wear roller skates in the Boston marathon.

And Treasury Secretary Donald Regan often uses the analogy of the "level playing field" when describing the type of free market, deregulated competition he would like to see between banks and nonbank-financial institutions. Then there was the executive last week who described what he perceived as advantage for the other side as building "mountains on the level playing field."

David Silver, president of the Investment Company Institute, a Washington-based trade association for mutual funds, expressed the view that if banks selling mutual funds were regulated by the Securities and Exchange Commission, then "the playing field would be level on both sides of the 50 yard line." Yet Banking Committee Chairman Sen. Jake Garn (R-Utah), worried that money market mutual funds are besting thrift associations and small banks, called for competition on "a reasonably level playing field."

To the spectator, the "level playing field" appears to be mounted on a seesaw with the player of the moment describing it from his end. Rarely in these hearings do the opposing teams actually seem to get on at the same time. The only counterweight is provided by the legislators.

Referee Garn blew his whistle on several occasions last week at players he felt were offside or out of bounds. "Don't insult my intelligence by telling me you're not at least in the fringes of the banking business" with check writing privileges on cash management accounts , he told Silver. He berated the mutual fund industry for wanting banks selling securities to be regulated by the SEC, but not money market funds to be regulated by the banking agencies such as the Federal Deposit Insurance Corp. "You can't have it both ways," he remonstrated.

Earlier Garn had the same message for commercial banks, which also played a strong defensive game. The Independent Bankers Association of America testified that "more liberal thrift-branching rules, and lighter tax and capital-adequacy requirements would bind commercial bank hands in a race with comparably equipped thrifts for the finish." And the American Bankers Association, while stating that the thrifts problem has nothing to do with bank competition, argued nevertheless that thrifts would "continue to be able to exploit an interest rate differential" over banks during the phase-out of regulations.

"Everyone comes in here holier-than-thou, the nice guys. But the game goes on. When are we going to get realistic" and negotiate, Garn asked. "All I'm trying to do is find the middle ground."

At the end of the first week of hearings on the bill it was obvious neither the players nor the spectators knew where that ground lies. This week play will resume on the not-so-level playing field.