"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations that grow up around [the banks] will deprive the people of all property until their children wake up homeless on the continent their fathers conquered..
Thomas Jefferson
After college, my father secured a job for me at a local institution in Corpus Christi. He had a friend who was the executive vice-president of that institution, who promised to teach me the banking business and push me along the career path.
It was a promise that would be impossible for him to keep. I was always late, my hair was long, and although I always wore the required coat and tie, I detested wearing socks...and still do. I was also a musician playing with a band some weekday nights. I was certainly not the prototype young banker.
I was assigned to an office with three older women who immediately resented me. They disliked that my salary, as an inexperienced trainee, was greater than theirs in spite of their tenure. They disliked my appearance. They disapproved of my attitude and tardiness. They suspected that musicians were were always doing something illicit...unless they were Lawrence Welk. Mostly, I think they resented my youth.
These were the days before office computers, so computations were done manually using ten-key calculators. The results were recorded by hand in huge ledgers. The calculations and analysis that I performed were easily learned and quickly became boring. I found myself with time to kill. I learned a few things...
Customer escrow accounts, which were under my purview, were debited at the end of December for taxes due the state, county and city...But the taxes were not due until late February or March. Hundreds of thousands of dollars vanished from the ledger. I snooped around that these funds were transferred to another entity to earn interest for sixty to ninety days. The customers did not share in the earned interest. The earned interest for this undertaking was noted to be "incremental income"...a practice which has since been outlawed. I also learned that that an insurance agency adjacent to the bank was owned by the three executive officers of the bank. It was managed by the son of my sponsor, the executive vice president of the bank. When a prospective customer applied for a loan, it was suggested that things would go more smoothly if they place their insurance coverage with that agency. It was a pretty easy sell.
"Proof" was a word in those days to describe teller functions, checking and savings accounts and all things not loan-related such as cashier's checks and wire transfers. A returned check charge at that time was two dollars. "Proof" was considered a necessary burden of the banking business. Times would change.
I was with the bank for two undistinguished years. During this time my Mom died and I matured...well, maybe a little bit. My questions about bank policy and my life-style made me a corporate pariah. My sponsor suggested I find employment elsewhere...immediately.
Over the ensuing years, I developed friendships with many bankers; their moral texture ranged from scrupulous to scandalous. From them, I learned a great many things.
Banker Bob was in charge of his bank's proof department. It was losing money. He developed a scheme of fees, charges and balance transfers that made his department profitable. Many of his innovations you will likely find on your checking account statement.
Banker Art loved to gamble. To underwrite his gambling addiction, he would sell repossessed items from the bank to his friends. These items were sold well below market value. When the items were resold, Art and his friends would split the profits. Art seemed to have two minds: One mind was clear and analytic with perfect banker's logic. The second mind was dark and wormy, spinning illicit schemes for making money. Gambling eventually cost him his job. Diabetes, fueled with alcohol, killed him.
Banker Gene dealt with bank examiners by getting them drunk on the eve of an audit. When the audit began, the hung-over examiners were placed in a hot, un-airconditioned room where temperatures would hover in the ninety-degree range. Under these conditions, the examiners seldom spent enough time to find very much to complain about. (The coming of the computer age destroyed this tactic.)
Banker Gerry was a banker at the First National Bank of Midland. It was the seventh- largest bank in America. Junior officers were allowed to make six figure loans without going to a loan committee. Most loans at that time were oil-related. Officers very often made loans with the proviso that the borrower would cut them in the profits that the loan would engender. Then the oil business crashed...and in 1983 the First National of Midland was declared insolvent and was closed down. During the next decade, hundreds of banks (especially those tied to the oil business) failed. Some bankers went to jail. Many had to find different careers.
Banking had to find new revenue streams. The credit card industry was good, but it did not provide what the oil business once provided.
Then the banks re-discovered mortgage lending and Jefferson's great fears were about to be realized.
Banks became invested in the mortgage business, gradually at first, then at a break-neck pace. The loans were bundled and sold to investment firms who then re-bundled and resold the paper to other firms. The paper trail was difficult and the side deals between banks, investment houses and insurance firms were even more so. Basically the banks were doing what Bob, Art, Gene and Gerry had done...Only on a much grander scale.
The avarice of banking institutions had once again sent America into a financial crisis, ruining businesses and destroying peoples'
savings. Yet many of the top banking executives are still on the job, still being paid seven figure incomes.
During the eight-teenth century, English banks would accept a gold deposit from a client. When that same client came to make a withdrawal, the bank would give him a bank note. If the client protested, the bank would try to charge a fee for a gold withdrawal.
During that same period, a banker convicted of embezzlement might, and often was, hanged.
"A banker is a fellow who lends you his umbrella while the sun shines, but at the first drop of rain, he wants it back."
Mark Twain
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