Extract 3
Virginia Clary said: "The savings banks use the Ubco as a correspondent bank. We sell mortgages to them. We're all doing the same thing — banking. But there is our side and their side. Why?"
"Do you know the difference between a commercial and a savings bank?"
She nodded, blew out smoke and waved it away in a business-like manner, as if disposing of the question. "They can't make business loans."
"That's a by-product of the real difference."
"Which is?"
"Which is shrouded in the mists of time," Palmer explained. "Back, oh, about a century and a half. Right after the turn of the nineteenth century. Poor people could do only two things with their money: hide it under the mattress, or spend it. It wasn't safe under the mattress, so they spent it on the thing that would let them forget their poverty: whisky."
"Ah, well I know the feeling."
"The do-gooders of the day were appalled. Drunkenness was all about
them. So they imported an idea developed in Scotland by a dominie. Minis
ters, philanthropists, educators, reformers ... they began organizing savings
banks to accept the savings of poor people."
"Sounds pretty dastardly."
"Terribly. The regular banks of the period wouldn't touch anything but business deposits or the estates of wealthy men. But the savings banks would accept anything, a penny a week, whatever a wage earner wanted to put aside. And the really dastardly thing was that they invested those pennies and paid back interest to the wage earners as an incentive to save more."
"Criminal!"
"No, the worst part hasn't been explained yet."
"What could be worse?" she asked.
"Just this: these savings banks were mutual. They had no stockholders. They were owned by their depositors. They made money only for their depositors. Nobody skimmed a profit off the top. All the earnings went right • back to the wage earners who deposited their pennies in the savings bank."
"Sounds downright socialistic."
"It is," Palmer told her. "But, you see, Karl Marx was only eight years old when that Scottish minister had his brainstorm."
"Oops."
"In any event, our brand of savings bankers were pretty true-blue. They usually invested their funds in government bonds. Highly patriotic. Highly stable, too. Almost none of their banks ever failed, which is more than you can say for... well, anyway, time passed."
"A century of it."
"A century and more," Palmer said. "Things happened to the wage earner. He became unionized. He got Social Security, old-age benefits, health insurance, life insurance, welfare funds, pensions, everything. The commercial banks stopped turning up their noses at him. They welcomed his savings. He was banking's darling now, secure whether he worked or not, whether he was healthy or sick and with his family provided for when he died." |
"Which has what to do with savings banks?"
"Exactly. It has nothing to do with them. They've outlived their usefulness. Nobody needs them any more."
"Oh," she said, "that's a shame. Really?"
"Seriously. What do they provide that isn't available to the wage earner from five other sources?"
"But it's sad," she objected. "All those ministers".
"I'd never have told you if I'd thought you'd crack up."
"I'll get over it in a moment," she said. "See? I'm over it already. Tell me, has anyone mentioned this to the savings banks? They're cruising right along as though they still served a purpose."
One corner of Palmer's mouth turned up in a wry expression. "That's the whole problem."
"No one's told them, huh?"
"Here is what's happened," Palmer said. "Those ministers planted a seed that grew into a tree. Nobody needs the tree, but it keeps right on growing. Savings banks give jobs to tens of thousands of employees, from the presidents on down to the clerks. True, there aren't any stockholders. But the employee corps has a stake in making sure the savings banking system keeps flourishing."
"Why not let them? I mean, people like to save at savings banks."
"I'll tell you why," Palmer said. "That tree, the one that kept growing? It has deep roots. They've spread out and they keep spreading. And they're stealing the nourishment from the ground on which we're planted. Does that make it clear to you?"
"All of sudden, yes." She sat back and stubbed out her cigarette. Then, looking up at him in a wary way, her eyes half hidden behind her long black lashes, she asked, "What are you going to do about the tree?"
Palmer looked at the table. "Prune it... drastically."