THE COUNTRY'S largest retailing company now proposes to buy the fifth-largest securities and investment company. It's the latest in a series of takeovers designed to bring high finance to a mass market. In this case Sears, Roebuck is apparently going to introduce its millions of customers to some of the services that Dean Witter Reynolds, a major Wall Street brokerage house, can provide.
A profound reorganization of American financial institutions is under way, and it's the result of two phenomena--inflation and the computer. When inflation and interest rates were low, conventional savings accounts adequately served all but the few who handled very large amounts of money. But high inflation puts pressure on people of even modest means to handle their money with a sophistication that even a decade ago only highly professional financial managers attained. The elegant technology of the computer makes it possible to keep expanding the size of these markets and the complexity of the accounts. Money market mutual funds are now increasing at the rate of $10 billion a month.
As the new style of financial service company gets bigger and more elaborate, it also pushes increasingly into kinds of business that used to be the exclusive preserve of the commercial banks. The banks are heavily regulated and are required to carry reserves. Their new competitors are not. The banks are complaining strenuously--and with good reason--against the unfairness of this disparity. Most banks, for example, are prohibited from crossing state lines. It is not entirely clear how Sears, Roebuck intends to develop its new ally and subsidiary, Dean Witter, but one thing it doesn't have to worry about is state lines. In regard to this rule and a hundred more like it, you have to ask why it's justified for one kind of financial institution if not for the other.
The enormous expansion of the new financial companies has an immediate importance for the sharp debate here in Washington over economic policy. That policy currently depends on the tight control of the money supply. But how do you define money? There's a rising dispute within the Reagan administration, and between it and the Federal Reserve, over the interpretation of these numbers. The most commonly used statistic counts deposits in conventional banks, but not in the more exotic and versatile accounts now being offered by imaginative brokerages and investment funds. This statistic, known as M1-B, seems to have become the pivot of national policy at just the point at which new financial ventures, by companies like Sears, are diminishing its relevance to actual economic activity. Historians in the next generation may find that coincidence faintly comic.