Credit Slips has this wild idea about reforming the banking system by letting some fairy-tale character named “Bob” run around issuing loans to qualified people in his community. We normally love Credit Slips as a well-researched piece of scholarly work masquerading as a blog, like cauliflower disguised as Cheetos, but this “community banking” idea? Ridiculous, right?! Grab a juice box and hit the jump to see what happens when economists take a stab at children’s fiction.
Bob was a local banker. He lived in the same town where his bank was. He was a loan officer, probably a Vice President, and worked for the bank for years. Bob married his high school sweetheart, raised four or five kids in the town you lived in, belonged to the local optimist club, and attended a local church every Sunday. Bob showed up at most of the civic events in town. You saw him at many of the weddings, christenings, and funerals in town too. Bob knew everybody who was anybody in your town. He also knew a lot of nobody’s as well, but that didn’t matter to him – anybody or nobody, you were from his town and he was the banker.
Bob viewed himself as the guardian of the bank’s money, and the reputation of the bank in the local community was very important to him. When people needed money, they would come to Bob to apply for a loan. There was paperwork to fill out, but it usually wasn’t very extensive. Bob looked at the paperwork to be sure, but Bob knew you, he knew your parents, he knew where you worked, and he knew how much money you made. Most importantly, Bob had a pretty good idea what sound financial practices were and he cared about your financial well-being because it was tied to his bank’s reputation.
If you tried to borrow money to buy a house or a car you couldn’t afford, Bob would take you aside, puffing on his cigar, and say, “Son [a term applied to all males under 50 years old, sic] there’s no way I can loan you this money because you can’t pay it back. If I have to foreclose on you, my name will be mud in this town…”
Hey Nostalgists, your drugs aren’t wanted here! Maybe next year if Bank of America stops trading at $13 we can afford your family trip back to Pleasantville.
Bring Back Bob the Banker [Credit Slips]