BANK CRISES in Pennsylvania, Illinois and California have now been followed by the dissolution of entire systems of state- chartered, privately-insured thrifts in Ohio and Maryland. Where did things go wrong?

The bad news started in 1980 when deregulation put banks and thrifts in competition with money market funds. Thrifts lost millions in deposits. Government deregulation of the lending side was seen as the good news -- now thrift institutions saddled with long-term, low interest rate mortgages could take higher risks to get higher returns.

This was unfamiliar territory, but thrifts and banks alike needed more money to bring solvency back to their loan portfolios, and in the case of stock companies, wanted to be perceived by investment analysts as "high flyers." Savings and loans soon became real estate developers, stock brokers, trust advisors, travel and insurance agents.

Whenever these new powers were exercised in a negligent or fraudulent manner, losses occurred. People became aware that their money was at risk; and the system came tumbling down. It was only then that the public asked, "Where were the regulators?"

The answer is that the regulators have been where they always were: in the middle. This is as it should be. Between the chaos of total deregulation and an equally unlikely return to government-dictated interest rates lies a path to restore sanity: Herewith are 10 suggestions to find it:

1. Disclosure. The government grades meat for the public, informs us of the amount of tar and nicotine in various brands of cigarettes; the credit-worthiness of corporate, municipal and state bonds is rated before they come to the market. Make financial institutions subject to the same disclosure.

Those financial institutions that, by choice, adopt a high profit, high risk strategy concentrating, for example, on real estate development, might be assigned a different credit- worthiness rating by the regulator than their more conservative, traditional home lending competitors.

2. The business of banking is banking. Using federal insurance, borrowing for liquidity, and check clearing through the Federal Reserve are privileges that have financial institutions in a partnership with the government. This suggests some responsibility on the part of those institutions to support their partner's interest in maintaining a sound and efficient banking system.

Brokerage services, real estae development, travel services and insurance are not the business of banking. Yet, 46 federally-regulated savings institutions, principally in California and Texas, had more than 5.3 percent of their total assets invested in real estate held for development, with the top three in excess of 20 percent of assets. Reasonable limitations on non-banking activities woul cut risk.

3. State and Federal regulatory authorities should have cease-and- desist power to halt activities and remove officers who endanger the safety of funds on deposit. Subpoena and contempt-of-court powers for failure to obey lawful orders of regulatory authorities should be coupled with civil and crimnal penalties. All too often, however, state auditors and examiners are undermanned, underpaid and outgunned. And their superiors in the executive and legislative branches of government are sometimes associated professionally and politically with the principals of the very institutions that require the closest scrutiny.

4. Cut needless interference: For example, too much energy is wasted on branch approvals. Institutions can do this by themselves. Also, we should look at regulations such as the Real Estate Settlement Practices Act to see if their cost is greater than their worth for consumers. Social programs designed to promote affirmative action in lending and hiring should be applied, if at all, to the whole financial services industry, not selectively to banks and thrift institutions.

5. Eliminate intra-corporate self- dealing. Just when we thought it was safe to go in the water, we found there were sharks in the sand. ABL (After Bert Lance), it was decided that transactions with related parties must be at market rates and not involve preferential treatment. But we didn't regulate the conduct of an institution dealing with itself.

By joining with an apparently unrelated party, a financial institution can get a piece of the action, along with fat consulting fees for insiders, by providing the financing for the joint venture. But who's minding the store, underwriting the credit of the project? It's a middle-level loan officer reporting to a superior who wants approval at the next loan committee meeting. Is it any wonder the favorable vote is unanimous?

6. Investments in corporate and governmental securities can make more money than loans. Federal insurance should be written with the same underwriting standards are applied to investments as loans, covering collateral, capital adequacy and the financial health of the securities firms the banks and thrifts deal with.

7. Risk insurance. If we let the market set interest rates for savings, why not it set prices for federal and state depositor insurance programs? Letting high-risk institutions pay high premiums will also give a boost to institutions that have adopted a low risk-low gain policy.

8. Changes in control of institutions should be examined like applications to start new ones. We should check the business plan, expertise and character of the applicants.

9. Interlocking directorates should be permitted. In many smaller cities and towns, the talent pool for directors of financial institutions is not big enough to ensure high quality policy direction. Elimination elimination of self-dealing and conflict of interest combined with disclosure could make this possible.

10. Send them to jail. A burglar commits a crime against one family. But the crooked bank official harms thousands of families, and destroys public confidence, which is what the system is based on.

And lets send the regulators to "C.A.M.P," which they should remember as: Capital adequacy; Asset quality; Management; and Profitability. Dedication to these principles will restore sanity to our banking system. There is still time.