Since Carl Schmitt started the University National Bank in Palo Alto, Calif., four years ago, his bank has grown nicely, although with deposits of over $60 million, no branches, and no automatic tellers, it is still small by United States bank standards.
As chairman and chief executive officer of his bank, Mr. Schmitt might be expected to be among those concerned about the possibility of large, ''money center'' banks opening ''consumer'' banks around the country, taking direct aim at the very sort of customer Mr. Schmitt needs. A consumer bank would take consumer deposits and make consumer loans but could not write commercial loans. Thus it would not fit the strict definition of a ''bank'' and could operate in other states.
But Mr. Schmitt says, ''I'm not concerned at all. In fact, looking at it selfishly, I think it's wonderful.''
Such small, locally based institutions, says Schmitt, who is also a former superintendent of banks for the state of California, should be able to survive - even thrive - should federal regulators begin approving applications from the big banks to open consumer banks in cities outside their home states.
''A bank's real value,'' Schmitt says, ''comes in knowing your customers and responding in a manner that meets their needs, not the needs of some big institutional policy set hundreds or thousands of miles away.'' As long as local banks maintain good relationships within their communities and remain flexible, he says, they should not fear losing some business to big outsiders.
But Mr. Schmitt and a lot of other bankers, regulators, and banking experts are concerned that many of the changes in banking - particularly the breaching of barriers against interstate banking - are going on without direction from Congress.
So, apparently, is Comptroller of the Currency C. Todd Conover, who last week renewed a freeze on new consumer banks to give Congress more time to act on banking legislation now before it. Mr. Conover did approve 10 consumer bank applications filed before March 31, the effective date of a new moratorium on them, and said he would begin approving the rest if Congress did not act by year-end.
''I think Congress has to do something,'' says Muriel Siebert, a former New York State banking commissioner, who is once again running the discount brokerage she founded. ''What we have now is banking regulation by loophole. . . . The purpose of banking regulation is the safety and soundness of the banking system - no more, no less. It's just not prudent to have people chip away, chip away at the banking laws like this.''
''Consumer banks are 'loophole banks,' '' says Bill G. Prince, chairman of the First City National Bank in Lufkin, Texas, and a member of the American Bankers Association's bankers advisory group. Still, he says, he and the ABA support interstate banking. He does not think it will endanger the smaller, already-established banks. ''The entry into new markets by the national or regional banks will be mainly in metropolitan or money-center areas,'' he says. ''There has to be enough business in an area before a banker will make a decision to enter the new market.''
A lot of de facto reregulation of the banking industry is going on because bankers and some regulators are using these loopholes in present laws, says Richard Syron, senior vice-president and economic adviser to the president of the Federal Reserve Bank of Boston.
''The longer Congress waits to act,'' he says, ''the fewer options it's going to have before it. . . . But I think Congress will address this issue.''
The chances for congressional action increased last month when two of the people most needed to get a banking bill through Congress - Sen. Jake Garn (R) of Utah, chairman of the Senate Banking Committee, and House Banking Committee chairman Fernand St Germain (D) of Rhode Island - issued a joint press release declaring that it was up to Congress, not the regulators, to rewrite the definition of a bank.
It is not known exactly what that definition will be, but it might define a bank as any institution that takes deposits and writes loans. This would bar out-of-state expansion. But bank holding companies - those amorphous corporate entities under which banking companies enter new businesses and locations - could expand securities operations to underwrite municipal revenue bonds, mortgage-backed securities, and mutual funds.
The rules may also give some definition to the ''nonbank banks,'' those financial-service firms that, through various subsidiaries, take deposits, write mortgages and other consumer loans, issue credit cards, and perform many of the other functions that real banks perform - all on a fully nationwide basis.
The rush to consumer banking began several weeks ago when US Trust Company of New York received approval from the Federal Reserve Board to open a consumer bank in Florida. Since the US Trust decision, nine more banking institutions have applied to open such banks in other states. The list includes Citicorp, Bank of New York, Chase Manhattan Corporation, Mellon National Corporation of Pittsburgh, First Interstate Bancorp of Los Angeles, and three North Carolina banks: First Union Bancorp, Barclays American, and NCNB Bancorporation, all of Charlotte.
Most of the applications seek permission to open consumer banks in several states. Citicorp, for example, would like to be in 10 states; Mellon wants to operate in 14, plus the District of Columbia.
Mr. Schmitt's optimistic readiness for battle is not shared by everyone in his part of the industry, however, including the group that is supposed to be representing him, the Independent Bankers Association of America. When large banks get broad powers in a state, says Kenneth A. Guenther, the association's executive director, they tend to overrun the little guys.
''The record will show,'' he says, ''that when any state goes to statewide branching, the number of independent banks drops dramatically.''
The association is one of many groups lobbying Congress to put some rules behind the changes in the banking industry. For his part, Mr. Guenther says, ''I am optimistic that Congress will do something.'' He does seem concerned, though, that even with congressional action, the money-center banks will continue to take business away from the small institutions. ''In terms of the trends of the times, I know what the tea leaves are reading, but I'm not going to tell you.''
If she were the president of a small, locally based bank facing new competition from a large money-center bank, Miss Siebert says, ''I would be worried. The big banks don't have any responsibility to these small towns. Lending decisions can be nothing more than a matter of pure consideration of dollars.''
Still, she thinks the smaller banks will do all right with Congress. ''They have a heck of a lot of clout there. They know all the congressmen.''