Darwinian is the word for the banking measure passed in the dying gasps of the 1991 Congress. Its effect, for better or worse, will be to insure the survival of the fittest and the demise of the weakest. Banks already in trouble will become even more endangered species. Government will exert a heavy hand by imposing strict capitalization requirements on wobbly banks that might force their closure or their absorption by stronger financial institutions.
Thus, the deregulation binge of the 1980s has led to re-regulation in the 1990s. Irresponsible lending practices that got a lot of banks and S&Ls in trouble during the free-wheeling Reagan era will be followed by tougher discipline and a continuing shakeout in the industry.
In strictly business terms, this was a minimal reform waiting to happen. Its timing, however, could hardly be worse, coming at a time when the economy is gripped by double-dip recession. Re-regulation, plus the higher fees that now will be imposed to finance a $70 billion replenishment of the Federal Deposit Insurance Corp., will impose higher costs on a faltering industry precisely at the moment when a faster flow of credit would do much to stimulate a recovery.