I’ve got a question to open up for comments. It feels like a dumb question — even a prejudiced one. But I have to ask it.
Is there something about banking that’s inherently immoral or corrupting?
I know bankers (“usurers”) have been hated throughout history. But I always figured that was mainly sour grapes and jealousy of anyone who has or controls money. It’s always seemed to me that bankers provide a needed service and one worth paying for. It also seems that banking, as a profession, is one that ought to inspire the greatest trust and trustworthiness. Granted, it hasn’t lately.
But lately it seems as if everybody — including some of the most capitalistic, entrepreneurial, free-marketeering people I know — speak of bankers in tones normally reserved for baby-rapers, puppy-torturers, and ATF agents. I hear people speak this way not only of Federal Reserve bankers or big corporate-bailout bankers or crooked mortgage lenders (who so richly deserve the scorn) — but of bankers in general, as if banking were a trade so low that even kiddie porn purveyors would consider it beneath their dignity.
So what’s up with that? It’s not just anger in the wake of TARP. It’s not mere Bernanke-rage. Is it really something about the banking trade itself?
Well, all bankers are fractional reserve bankers. They rely on the central state, centralized monetary system and central bank for their business to even work the way it does. With the fractional reserve system, their duties, obligations and risk suddenly disappears and is suddenly shouldered by the central bank and governmental insurance (in your case the Fed and FDIC).
In my opinion that’s pretty despicable. But no worse than your average rent seeker really. I think the current uproar is just people looking for someone to be mad at.
Honest banks, like the ones in Irwin Schiff’s pro-market comic book, are pretty much gone. For honest banks to exist there would need to be honest, private money. It doesn’t have to be gold or silver. Just private, not backed by illegitimate state powers to grab, grasp and deprive.
There is an old quote “Cold as a bankers heart” left over from the depression so this is not new. I think the main problem is that things like mortgages are being sold as bonds etc. Banks have become more impersonal. They are nolonger loaning your neighbors savings and giving them a fair intrest rate.
Most banking has become the brokering of corporate or quasi government money or services(the FED).
“Give me control over a nations currency, and I care not who makes its laws.”
~Baron M.A. Rothschild …and that happened to America in 1913 – the banksters took control of our currency … and that has led us to where we are today .
The sole purpose of current situation is to kill the American dollar in order to introduce new currency…and the basis is the same as 1913. GLOBALIZATION at its finest! One government.. one currency.. one law.. absolute power… world domination.
For ppl. who don’t understand that, I recommend this video 45 minute clip of historian Edward Griffin talking about the history of the Federal Reserve and how the currency system works for the advantage of the banksters.
http://video.google.com/videoplay?docid=638447372044116845#
I’m not very educated on economics and the federal reserve and whatnot…but even in the best of times, with private currency and all, bankers would still be disliked to a cartain degree I think. They reposses houses and cars and screw around with fees and your interest rates all the time….
Banking is a neccesary service but dealing with banks isn’t, hasn’t been, and won’t ever be a fun activity.
I see nothing ‘evil’ (which I define as harming the innocent – initiating force or fraud) with lending money (or any other object). I see nothing evil with fractional banking (if it is reported to the depositor) as they might want this risk for the increased reward.
The fed (or any other government created entity) on the other hand represents pure evil and is appropriately hated. Also people rationally (or irrationally?) associate the $1B+ TARP bailout with the ‘bankers’, and therefore hatred by association.
Am I the only one who remembers when banking was an admirable profession?
My bad attitude towards banks started when I was young and listened to my Grandparents tell stories of the Depression years….every time one of those stories came up, it included the phrase “and the bank wouldn’t let us get the money out”…..morph ahead a decade or two, and in a short lived search for mortgages I did the math on just how much was being paid for that – incredibly insane how that works……
I guess my simpleton idea of putting money into an account in a bank, for them to hold for me, means that it should be held in there and not used for other purposes – belongs in one of those fantasy stories…..kinda the same way I could never figure out how they can turn a percentage of interest on one figure and it “magically” becomes 4 times the original figure…..
I haven’t had a bank account or dealt with any bank in nearly 20 years….yes, that does make some things more challenging and requires some “out of the normal” adjustments, but it’s possible…..yes, it means I have still had to pay fees to other institutions in order to cash a check or to have one issued, but it’s a fee for a service provided and not an ongoing one (or any unexpected added ones)……and no one can tell me I can’t get to my money either 😉
Always advertised as being a smart thing to do, that will make life easier (along with the credit card advertising with the same intentions) it lulled (some impatient) people with busy lives into contributing to all of it and now it’s truly a monster ready to devour alot of people out there…….
jellydonut hit the nail on the head, but maybe not in a way that some readers will understand. Fractional reserve banking, which is basically all the banking in the world today, means that a bank is allowed to loan out all but some fraction of their deposits. 10% is a normal fraction. Thing is, when some of that loaned out money comes back in as deposits, they can loan out all but 10% of THAT money. Bottom line, if you do the math, is that a $100 deposit enables a 10% reserve bank to make $900 in loans, while keeping a $100 reserve. That $900 is created out of thin air. Hence, a fractional reserve bank is basically a huge, government-approved counterfeiting operation.
I tend to use the word “vault” for an honest bank. They take real money, e.g. gold and silver or other valuable commodities, for deposit, and store it and keep it safe for their depositors, allowing them to write checks, or do electronic transactions to transfer ownership of their money to other bank depositors, without needing to actually move the physical commodities. Such a bank will make its money on storage and transaction fees, but won’t be allowed to loan it out without an explicit contract with a depositor in which the depositor accepts liability should the loan not be repaid, and accepts that his money will only be available as the loan is repaid.
Banking isn’t inherently bad. It provides a liquidity that, if used judiciously, can increase prosperity. On the other hand, bankers can also offer whatever terms they want – reasonable or usurious. We’re free to take those terms or leave them.
What irritates me is when people want something now (NOW, mommy!), so they sign up for injurious terms without reading them. Then, when the avaricious banker, who preyed on the borrower’s stupidity, goes to enforce those terms, the borrower cries, “Unfair!”
There is no fair or unfair, short of actual fraud. There’s crafty and stupid. People these days (and presumably almost always) behave short-sightedly; they want what they want, when they want it with no reflections on the whole of Polonius’s advice:
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
Isn’t that what we’re seeing right now? The mortgage industry’s loans have lost both themselves and friend, and our borrowing has dulled our ability to budget and live within our means.
None of that is inherent in banking. It’s inherent in wanting a free lunch. TANSTAAFL.
What Bill St. Clair describes as a “vault” is readily available; it’s called a safe deposit box. These are available at a lot of banks, but other places have private safe deposit box companies too. You pay money to rent a box, with the rent depending on the size of the box that you want. But you must keep paying – if you get behind too much, by some length of time depending on the laws of your state, they can open the box and seize the contents to sell to recover their rent.
If that’s what you want for a bank, have at it. But if you expect services and interest, then you’ll have to choose a fractional reserve lending bank.
Banks and bankers are institutionalized fraud and organized crime sanctioned by the state. The crime of robbing a bank is trivial compared to the crime of founding one.
The other commentators have hit the high points. Banks are frauds because they take your money on deposit, and promise that you can have it all back at any time. But you cannot, because they take your money and lend it to someone else without your permission. The courts have deliberately mis-applied well established principles of law and justice to banks for centuries, because the courts serve the state and not justice.
Rothbard has a cogent summary:
“When a man deposits goods at a warehouse, he is given a
receipt and pays the owner of the warehouse a certain sum for
the service of storage. He still retains ownership of the property;
the owner of the warehouse is simply guarding it for him.
When the warehouse receipt is presented, the owner is obligated
to restore the good deposited. A warehouse specializing in
money is known as a “bank.”
….
“Let us take the case of a warehouse owned by the Trustee
Warehouse Company. It holds various goods in its vaults for
safekeeping. Suppose that this company has developed a reputation for being very reliable and theft-free. Consequently, people tend to leave their goods in the Trustee Warehouse for a considerable length of time and, in the case of goods that they do
not use frequently, will even tend to transfer the goods-certificates
(the warehouse receipts, or evidences of ownership of the goods) and not redeem the goods themselves. Thus, the goods certificates
act as goods-substitutes in exchange.
“Suppose that the Trustee Company sees this happening. It realizes that a good opportunity for fraud presents itself. It can take the depositors’ goods, the goods that it holds for safekeeping, and lend them out to people on the market. It can earn interest on these loans, and as long as only a small percentage of depositors ask to redeem their certificates at any one time, no one is the wiser.
“Or, alternatively, it can issue pseudo warehouse receipts for
goods that are not there and lend these on the market. This is
the more subtle practice. The pseudo receipts will be exchanged
on the market on the same basis as the true receipts, since there
is no indication on their face whether they are legitimate or not.
“It should be clear that this practice is outright fraud. Someone
else’s property is taken by the warehouse and used for its
own money-making purposes. It is not borrowed, since no interest
is paid for the use of the money. Or, if spurious warehouse
receipts are printed, evidences of goods are issued and sold or
loaned without any such goods being in existence.
Money is the good most susceptible to these practices.”
from Man, Economy, and State, pages 800-802
http://mises.org/books/mespm.pdf
Banks are also the key engine of inflation. When they loan out 10, 20, or 30 times the amount of money they have on deposit, where does it come from? It is created out of thin air. Those newly created dollars dilute the purchasing power of all the honestly earned dollars. Everyone who saves gets poorer every time any bank makes a loan. Anyone living on a fixed income or from savings is cheated when money is created from nothing.
The Mystery of Banking explains it very well:
http://mises.org/mysteryofbanking/mysteryofbanking.pdf
but a 300 page tome may be more investment in time than most people are willing to make.
Robert Murphy has a 2-page example:
http://mises.org/mobile/daily.aspx?Id=4499
But the real answer to your question is simpler, and the reasons that people are presently down on bankers has little to do with the fundamental fraud and inherent immorality in all banking. Jimmy Stewart’s banker character was just as much a fraud and a thief as any banker. So why did most people adore Stewart’s character and hate modern bankers?
Because it is becoming clear that the game is rigged. Bankers never lose. There is no risk, no real work, only rewards. Most people can connect the dots well enough to see that banking excesses had a major role to play causing the Greater Depression. But the banks, and only the banks, have profited hugely. Ordinary people are struggling while banks get bailed out, bring in record profits, and resume paying themselves obscene bonuses.
So yes, banking as conducted for the past 300 years is inherently immoral and corrupting. Stealing the savings of widows and orphans to further enrich the wealthy is so insanely immoral that one is either completely corrupted or driven insane. Inflating away the purchasing power of the thrifty so that imprudent debtors can sustain their lifestyle is evil. Continually stealing from the poor to give to the rich is beyond immoral.
Safe Deposit boxes at banks, are subject to federal control and regulations. When my parents bank moved locations in the same town, my parents had to open the box and move the contents themselves. They were required to open the box under the review of a bank employee. During the depression, and when the FED confiscated gold, Safe depoist boxes were opened with a federal inspector in place to look for gold, hoarded greenbacks etc. Remember, no matter what they say, the bank will always have a key to your safe deposit box.
Someone once said, and I think it was Robert J. Ringer, that the bricks in the walls of bank buildings are held together not by mortar, but by the blood squeezed out of the people who dealt with them (paraphrased).
As usual, I am getting to this late but it looks like (as usual) the comments here reflect pretty much everything I can think to add on the subject. My background is banking, spending 10 years working in many different areas: consumer credit quality, risk mgmt., consumer real estate, corporate lending, loan processing, etc.
I witnessed a real change in the actions of banks over my time there, and I think the idea of bankers “drinking the blood of puppies” came based on those actions. It is deserved!
A really good, concise (slightly economic in nature, but something everyone needs to understand) explanation of the banking system is here:
http://www.youtube.com/watch?v=vm3DixfL9o0
Not a bad use of 10 minutes of your time! It has always amazed me how the eduction system focuses on “things you need to know” like algebra and geometry, yet ignores basic finance and economics. What is more likely? Will the average Joe Six-Pack need to 1.) calculate the area of a trapezoid 2.) solve for x when given y or 3.) borrow to buy a car or home? Finance is something you SHOULD know, but the government would prefer to keep the citizens dumb.
Anyway, if you chose to watch the video you gain understanding on how the fractional reserve system Bill St. Clair mentions above, gets lent out many times over. Having a bank charter basically give one a license to steal. The Fed and banking system are stealing the purchasing power. Personally, I have more respect for a thief who comes at me with a ski mask and gun. I do have a chance to defend myself. A system set up to benefit one segment of society and steal from you with the full authority of US laws and use an army of lawyers and lobbyists is something we have no defense from.
The eventual undoing of the US will not come from terrorists or immigrants. It will come from the fed and the banking system.
George Bailey lost, Potter won …
Everyone’s thoughts so far are great and educational for me.
I hate banks because they are the most direct avenue for the fed, state, county, and city governments to know what you are doing and how much money you have at any given time.
Every teller in this country is required by law to report any “suspicious” activity you may be doing, or that you may discuss or brag about with the teller as she/he does business with you.
Bank employees are the rat-finks of the United States. The law requires them to be.
And if you ask them will this transaction be reported to the government, they are not allowed to tell you. They will lie to you.
I like to ask them if I am doing a “suspicious” transaction — just to see what they will say.
My wife, who works at a bank, said I could be reported as a “suspicious” person because I mock the law.
Guess what? I quite mouthing off.
The taddle-tails are everywhere, and I had hope that America was still basically free.
I think a lot of people hate bankers because of their own issues. They love them when they want a loan for a car or a house but then go immediately back to hating them when they……. want to get paid back as promised. People also hold it against bankers that homes get foreclosed on.