THE BANKS complain bitterly that their business is being overrun by new competitors that, not being traditional banks, don't have to obey the banking laws. Citibank in New York, the country's second-largest commercial bank, has produced an inspired polemic in a witty brochure entitled "Old Robbers' Guide to Where the New Money Is." There's a picture of Willie Sutton, who robbed banks because, as he once said in a classic explanation, that's where the money was. But more than $150 billion has gone into the money market funds over the past three years and, as Citibank asks, "Where's the money today, Willie?"

Citibank turns to Ma Barker, whose family in the 1920s and 1930s stuck up 17 banks in nine states. "As a working mother, Ma Barker would agree that convenience is as important in finance as it is in shopping," Citibank says. "Today's busy career woman simply hasn't the time to cover nine states. Forward-looking companies like Household Finance, Sears Roebuck and J. C. Penney serve family needs by providing a wide range of convenient retail and family services. . . . Sears, the biggest U.S. retail chain, is also the largest savings and loan holding company. Sears can give you a NOW account with bill-paying by telephone, sell you insurance, plan your trip and rent you a car."

You are not required to take the banks' protests quite at face value. So far, they are holding their own pretty well. But it's also true that as their customers learn to use the new institutions--money market and securities funds, for example, with check-cashing provisions--the banks will have to expect significant losses of deposits to them. This process is part of the country's adaptation to high inflation and interest rates.

Sen. Jake Garn has drafted legislation, on which his Banking Committee has been holding hearings this week, in an attempt to redress the terms of competition in the financial industry. But when Treasury Secretary Donald T. Regan testified for the administration, he was exceedingly cautious and qualified in his support.

His dilemma is genuine. If the government allows the banks to compete more widely with the securities dealers and the mutual funds, beyond a certain point it would create a degree of risk to the country's basic financial structure. But if it continues to do nothing, the heavily regulated banks' deposits will decline, and a boisterous and highly aggressive new style of quasi-banks, operating on razor-thin margins, will take over an increasing share of the country's financial business. That's not a formula for stability either.

Part of the solution is a relaxation of some of the present banking laws. The prohibition on interstate banking, for example, is clearly obsolete. And part of the solution--although it runs counter to the spirit of the times and of this administration--is more careful regulation of the securities firms and mutual funds where they have edged farther and farther into commercial banking.