From bigxc@prairienet.orgFri Jan 20 07:18:39 1995
Date: Wed, 18 Jan 95 04:16:09 CST
From: Brian Redman <bigxc@prairienet.org>
To: Multiple recipients of list <conspire@prairienet.org>
Subject: Conspiracy Nation -- Vol. 3 Num. 54


              Conspiracy Nation -- Vol. 3  Num. 54
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                    ("Quid coniuratio est?")
 
 
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THE GENTEEL WAY OF THE BANKER
[Excerpts from a chapter of the same name in *The Screwing of the 
Average Man* by David Hapgood (Garden City: Doubleday, 1974)]
 
[CN -- Note that the author relies on the word "man" to refer to 
men and women. I hope too great offense is not taken.]
 
 +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +  +
 
During the first third of the century bankers were often 
synonymous with robber barons. [J.P. Morgan] left us such 
industrial giants as U.S. Steel and AT&T. Morgan created these 
and other corporate gold mines by using his capital to destroy 
competition and bring one industry after another under the 
control of one, or at most a handful of companies.
 
[Bankers have come to play the role of] faithful guardians of the 
national economy, with such urges as their profit motive kept 
discreetly under wraps. As John Kenneth Galbraith remarked, "If 
anybody else is lobbying for a higher price, we take for granted 
that they want more dough, but if a banker is lobbying for higher 
interest rates, this is pure unadulterated righteousness. 
Everybody else says they want more money, but let David 
Rockefeller speak for higher interest rates and, boy, that's 
statesmanship."
 
[Banks depend on our] almost total ignorance of things financial 
to pull off some of the most outrageous, but always genteel, 
screwings of them all. The genius of these bank heists is that 
they never tamper with the principal, they just keep developing 
new and better ways to avoid paying interest on it.
 
These days checking accounts are probably the bank swindle that 
touches us the most directly. It is a rare soul who finds 
anything odd in the way he is paying the bank ten cents a check 
so the bank can lend out his money at 10 percent interest. And 
those of us who thought we were outsmarting the game in signing 
up for free checking by maintaining a minimum balance, say $500, 
are in equally bad straits. Unless you are the sort who tries to 
buy candy from vending machines by writing a check, you are 
foregoing far more in lost interest on the $500 than you could 
possibly save on the free checking.
 
Although the amount of an individual's loss is still not 
breathtaking, interest-free checking accounts are perhaps the 
biggest things banks have going for them. On any given day, 
commercial banks -- the only ones allowed to handle checking 
accounts -- are holding $200 billion in checking account money. 
This amounts to 40 percent of these banks' assets and they don't 
have to pay a penny of interest to use it. At 10 percent, the 
bank customers are losing a total of $20 billion a year.
 
In the theoretical free market, competition would soon force all 
banks to pay interest, or lose their checking accounts to the 
more aggressive fellow across the street. But here's where the 
federal government, that guardian of the free enterprise system, 
comes in. Banks are protected from the rigors of competition by a 
series of federal laws which produce monopoly behavior without 
the inconvenience of actually creating a monopoly... The 
government's role in the operation is also a perfect way to 
deflect criticism from the banks, who are reaping the benefits... 
If you complained to your local banker, he would patiently 
explain that the decision was not made by him...
 
Although the thrill of the daring daylight bank robbery has 
appealed to the American psyche since the heyday of Jesse James, 
most bank-inflicted screwings have all the drama of a TV dinner. 
Gentility is the watchword and most bank hustles are impeccably 
legal, abstract and rather boring -- like the bankers 
themselves... The swindles directly affecting the customer are 
little noticed because the loss to the individual is small and, 
because of their complexity, they are hard to detect. The big 
swindles [CN -- e.g. the $40 billion "line of credit" to Mexico], 
which invariably involve the government, do not arouse public 
indignation because, though the swindle is obvious, it is far 
from clear who is being taken by whom...
 
The perils of competition are held at bay by the difficulty of 
getting into the banking business. Although opening a medium- 
sized bank often requires less capital than starting a chain of 
pizza parlors, you need considerably more to become a banker than 
the requisite capital and the yen to close down operations at 3 
p.m. every afternoon. The sine qua non to go into banking is a 
charter, issued either by your state banking commissioner or the 
U.S. Comptroller of the Currency. This is just another area where 
the government shelters banking from the normal rigors of a 
competitive economy. According to free enterprise theory such 
decisions as starting a business are made by the investors, those 
with money to lose, but when it comes to banking these decisions 
are placed in the hands of the government regulators.
 
The criteria for getting a charter are pretty foggy, but 
political clout generally helps on the state level. For the more 
prestigious federal charters, the major criterion is a guarantee 
that your bank won't hurt any existing banks. You not only have 
to prove that your banking won't cause any other bank to fail, 
but also that you won't even cause a dip in their profit margins. 
Your clients will all be new ones: those who have just moved into 
the area... Reduced to its simplest, this means that in an era of 
zero population growth there would be no new banks.
 
The key phrase in all of this is "overbanking." Although never 
precisely defined, it appears to refer to a competitive situation 
where banks are forced to start offering free checking and a few 
of the more aggressive units start grumbling loudly that they 
want to pay interest on checking accounts, as well, to attract 
even more deposits... Unhealthy competition was... on the 
regulatory mind when an application for a bank charter on Key 
Biscayne island, where the only bank is run by Charles G. (Bebe) 
Rebozo [CN -- one of Nixon's buddies], was denied by the U.S. 
Comptroller.
 
Regulators also screen banking personnel, not the $115-a-week 
tellers, but the Ivy League vice-presidents, looking for those 
most likely to launder money for the mob. Of course, laundering 
money in the name of public service elicits quite a different 
response from banking regulators. Some of the Mexican money that 
paid for the Watergate burglary originally came from a 
Minneapolis businessman, Dwayne Andreas, who shortly thereafter 
received a federal charter to be the only banker in a giant new 
shopping center in Minnetonka, Minnesota. Most applicants for a 
bank charter are supposed to exude qualities like "character" and 
"integrity."...
 
Once you have gained entry to the banking business, the water's 
fine. As in any monopoly, the profits are high, the stress is 
low, and the risk of loss is minimal... It is also getting harder 
for the average man to get the fruits of those profits through 
the corporate income tax, for the banks, while making more money, 
have managed to reduce the amount they have to pay in taxes -- 
their effective tax rate, 38 percent in 1961, was down to 17 
percent by 1972.
 
Government helps the banks help themselves in other ways as well. 
Take the government's habit of leaving federal funds in interest- 
free bank accounts... Following the laws of physics, these 
deposits gravitate to those banks that already weigh the most. A 
1972 House Banking Committee study found that just 102 big banks 
hold 43 percent of these no-interest funds. And the largest 
account is, not surprisingly, at David Rockefeller's Chase 
Manhattan, followed by another Rockefeller bank, First National 
City.
 
[...]
 
The banks put the government's money to good use -- with the 
government itself. Banks invest much of that $6 billion in 
interest-free federal deposits in U.S. Treasury bills,
 
  [CN -- As I recall, they did this again just recently, when 
  the Fed dramatically lowered interest rates and the banks 
  then (instead of lending the money to you or I) put the money 
  into government bonds. In other words, the banks were getting 
  money from the Fed at 3 percent, then investing that money in 
  government bonds paying something like 6 percent. The banks 
  "made out like bandits".]
 
on which the government was paying, at this writing, about 8 
percent. Thus, incredibly, the government is paying the bank 8 
percent in order to borrow back the government's own money. From 
the bank's point of view, it is collecting 8 percent for passing 
the money from one government pocket to another.
 
[...]
 
It is not surprising that Uncle Sam is rather reticent about his 
banking policies. Almost all government files on the granting of 
bank charters, for example, are off limits because, in the words 
of a former acting Comptroller General, "We don't want anyone to 
come in here on a fishing trip."
 
The national debt, as it is now managed by the government, is 
another vast bonanza for the banks, and an equally large disaster 
for the average man. Since 1953, the government has allowed banks 
to buy a piece of the national debt... Congressman Wright 
Patman... believes that letting the banks in on the national debt 
has cost the public from $350 to $500 billion since 1953. Part of 
this is billed indirectly to the average man, in higher taxes to 
finance the higher interest rates his government has to pay. Part 
of it hits him indirectly -- in mortgages at 8.5 percent, as of 
this writing, almost twice the pre-1953 rate, and in higher 
interest on all his other forms of borrowing... The government 
has managed the national debt in such a way as to maximize bank 
profits and add to the interest costs to the general public...
 
Hardly anyone protests, or even notices, the handling of the 
national debt, though the impact on the public is obvious. ITT 
makes headlines when it raids the government, while the banks go 
on quietly picking up much larger booty. This is the genius of 
banking: the bankers take us in ways that are discreet, 
complicated, legal and boring...
 
The national debt swindle is far too abstract, too lacking in 
drama or obvious villains, to stick in most people's minds. The 
government's subsidizing of banks with interest-free accounts is 
a model of discretion. No taxpayer's money is actually delivered 
to the banks; there is no budget item reading "bank subsidy." The 
government merely fails to collect from the banks, and nowhere in 
its accounts is there a listing for "failed to collect from 
banks: $400 million." The hustling of the client is done by 
rules... so well established that they are rarely questioned. The 
treatment is administered in a spirit of sober responsibility; 
there are no used car dealers in this business. If you don't mind 
being considered dull, banking may be the best way to do it.
 
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Aperi os tuum muto, et causis omnium filiorum qui pertranseunt.
Aperi os tuum, decerne quod justum est, et judica inopem et 
  pauperem.                    -- Liber Proverbiorum  XXXI: 8-9 

 Brian Francis Redman    bigxc@prairienet.org    "The Big C"
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    Coming to you from Illinois -- "The Land of Skolnick"        
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