Whether it’s a U.S. bank or a European bank, it seems their reason for simply existing has somehow been forgotten through the years.
When I was first introduced to banking as a young child my grandfather took me to meet my banker. We sat at a desk and I was asked how much I would like to deposit. I had a grand total of $3.00 and wanted to learn why I should entrust my money to him. It was explained that he personally did not receive the money, the bank did.
He also stated that initially my money would be placed in a vault until such time as it was needed. That was a very alien concept to me, the idea that the bank would use my money for other people.
My banker provided comfort by saying that the house I lived in was ultimately made available by depositors such as me. My dad’s car had an auto loan which also came from the bank. I asked, “How could I get my $3.00 back if it had been lent out to others?”
My banker said that was the reason reserves were kept in the vault, just for my convenience. I felt very special. He also said the government protected my money should the bank encounter any problems.
I inquired as to what kinds of problems but was led to believe that type of information was way over my head. I could live with that. So, I placed my $3.00 in the capable hands of my banker.
I was then informed that in one year I would earn $0.15 of interest if I made no withdrawals from my account.
With my savings account passbook in hand, my grandfather and I walked out of my bank and my pride was immeasurable. Instantaneously, I was a legitimate contributing member to an economic way of life that was simple and, oh, so sweet.
I couldn’t ask for anything more. Had bankers remained bankers and not try to be hedge funds, commodity traders, currency exchange artists, or derivative masters, the world would most likely look very different today.
I’m certain that “bailouts” would be reserved for leaky canoes and I’m also convinced that some bankers somewhere would still have time for a 7-year-old making his first deposit out of both faith and trust, two simple concepts that are very much lacking today.