THOMAS LABRECQUE, president of Chase Manhattan Bank, America's third largest, made headlines last fall when he said his institution was thinking seriously about becoming something other than a bank. More recently, Lewis T. Preston, chairman of J.P. Morgan & Co., hinted that his bank, the fifth largest, might go the same route.

The bankers are unhappy because more and more thrift institutions, investment houses, insurance companies and other financial concerns - plus major non-financial giants like Sears and General Electric - have whittled away at the banks' traditional markets while the banks have been held tightly within a regulatory straitjacket.Banks enjoy only one unique privilege, that of creating money. When any lender other than a bank makes a loan, it must dip into its cash on hand. On its balance sheet, loans go up, cash comes down, but deposits and total assets remain the same. By contrast, when a bank makes a loan, it simply creates a new deposit in the amount of the loan. On its balance sheet, loans, deposits, and total assets all go up by the same amount, but cash remains the same.

(With this wonderful money creating capability, why don't banks, like a counterfeiter, go on making more and more money? They might, but unfortunately they are required to keep cash on deposit as reserves - and the Federal Reserve controls carefully the amount of available reserves.)

In any event, the money creating privilege, plus deposit insurance - available additionally only to the thrifts - enables banks to lend at lower interest rates than other lenders. By itself, however, this hasn't prevented others from muscling in on bank markets. One example is consumer credit. In 1980, banks still held 48 percent of the market. By 1985, they were down to 44 percent, with finance companies, credit unions, retailers and savings institutions holding 56 percent.

More important is the market for commercial credit, the banks' traditional turf. In the 1950s, bank lending amounted to more than 85 percent of all the short- and intermediate-term credit extended to business. By the 1980s, this percentage had fallen to just over 60 percent, largely because of direct business lending by way of the commercial paper market.

At the same time, new financial giants - American Express, Merrill Lynch and Prudential Bache are examples - emerged to challenge the banks with a wide range of depositary, lending and investment services, while a growing number of industrial companies, taking advantage of loopholes in the law, became ''non-bank" banks.

More than any other single injustice, the banks have been outraged

because they have remained prohibited from extending their activities to underwriting corporate securities.

The prohibition came about in the aftermath of the 1929 stock market crash and the ensuing Great Depression. Before the 1930s, the banks engaged in all aspects of the securities business, including corporate underwriting. But passage of the Glass-Steagall Act in 1933 separated commercial from investment banking.

There is little evidence that underwriting practices were a cause of the collapse of the banking system or that underwriting abuses were widespread. The public wanted a scapegoat, and Glass-Steagall was the answer. Significantly, the Federal Reserve has agreed to review the applications of three large New York bank holding companies - Citicorp, Morgan and Bankers Trust - for a wider role in corporate underwriting.

Among other things, the banks note that they never have been kept from engaging in such activity abroad and that there have been no dire consequences.

It's a telling argument for lifting the domestic prohibition and one in which we join.

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