On Banks and Prosperity

While the “Occupy Wall Street” mobs have subsided, having served their political purpose last year, the notion that banks are a device of the “excessively wealthy” is not new to our time. The image of fat, out-of-touch, greedy capitalists forming banks to “exploit” workers, the poor and the needy, robbing them of their hard-earned money was just as familiar in the early years of the twentieth century as it is now. Despite the verifiable fact that Secretary Mellon paid millions more in income taxes under his own plan, it did nothing to assuage the attempts throughout the twenties and thirties to finally “pin down” this “excessively wealthy tycoon” as guilty of something. If one keeps looking, they seemed to say, it can be found somewhere. Even F.D.R.’s tax “show trial” of Mellon yielded nothing but an unfairly demolished reputation. On the contrary, Vice President Coolidge addressed this very attitude about banks, a prejudice against capitalism and the myth that forceful redistribution of prosperity is both possible and virtuous. In a speech given on June 27, 1921, he said:

“There can be no permanent prosperity of any class or part. Such a condition can only be secured through a general and public prosperity. This means that to secure this end there must be a general distribution of the rewards of industry. Wherever this condition is maintained there you have the foundation for an increasing production and a sound financial and economic situation.

“One of the strongest reasons for supporting American institutions is that under them this condition is more nearly attained than under any other form of government that has ever met with any permanent success…

“…Too often the uninformed think of a bank as the possession of a few rich people, and as the creditor of the people at large. You who have had any experience with banking know that it is the opposite of this which is true. The resources of banks are not the resources of a few rich, but the resources of the people themselves, small perhaps in any individual instance, but, in the aggregate, very large. Nor are banks exclusively a creditor class. It is usually true that they owe to their depositors more than their borrowers owe to them. Every banker knows that to depend on the business and patronage of the rich would be in vain, that if any success attends his efforts it must be by serving  and doing the business of the people. The stock is generally owned by the people, the deposits are always made by the people. This is the reason that banks partake of the nature of a public institution and perform real public service. They are the sole means by which modern commercial activities can be carried on. They afford the method by which the people combine their individual resources, providing a collection of capital sufficient to extend the necessary credit for financing the whole people of the nation…A bank is not a private institution, responsible to itself alone, or to a few. It is a public institution, under a moral obligation to be administered for the public welfare…Any power which is not used for the general welfare will in the end destroy itself…Such an institution is doing the work of the people.”

This simple explanation lays bare the ignorance of those who vilify banking and American capitalism as the instigators of what is wrong with the country. To go to war against these concepts is to war against the “common man,” the very person protestors claim to be helping. By calling for redistribution and the boycott of banks, the true perpetrators of class conflict, economic stagnation and human suffering are sought out as “saviors.” People like us, ultimately, are held responsible for this “unfairness” while those who create the climate are rewarded with more authority to solve problems they have no inclination or ability to resolve. While certain government officials are usually first and foremost this kind of “savior” sought, it is conveniently ignored that the capital on which banks are made possible belongs to “normal” people engaged in the daily use of what is theirs — buying, selling, saving, earning, investing, exchanging, lending, and borrowing. The complaint is with Washington not with regular folks.

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