Speaking of banks, as I did on this page a short time
ago, there are those who are concerned that too many people in the United States
are “unbanked” or “underbanked.” By the
former they seem to mean those who do not use any banking services,
particularly who do not have any bank accounts.
By the latter, they mean those who obtain some banking services from
businesses that are not banks. The very
existence of the terms, and the way that they are used by those who use them,
implies that being “unbanked” or “underbanked” is a bad thing.
I will here disclose that I have worked for banks for
nearly 10 years and for all I know may continue to do so for some time into the
future. Whatever bias or color to my
views that this condition provides I will nevertheless try to comment from a
fair and factual point of view.
My first point, therefore, is that I am not prepared to
assert that absolutely everyone
should have a bank account. I can easily
envision the value of a bank account for most if not all people, but I concede
that they should be allowed to choose for themselves and that it would be
terribly wrong to force people into banks.
I acknowledge that there are some alternative providers of financial
services who seem to please their customers, and I do not deny that banks can
benefit from good competition. Banks
have a long history of drawing upon the ideas and innovations of non-banks,
just as non-banks have been eager to try their hand at successful new products
and services that banks have pioneered.
Bank customers have benefited the most from that process, as the variety
and value of financial products have expanded, and the United States
has led the world in the discovery of new and useful financial services.
Having said that, the nation cannot do well without a strong,
vibrant, and prosperous banking industry.
Our nation and people grow as we save financial resources and invest
them in improvements for the future, whether new homes, new factories, or new
ideas of how to do and make things better, faster, and cheaper. That is a major part of what banks do and are
all about.
Moreover, there are a lot of things we do and a lot of
places we go because we know that our ability to pay and get paid—to exchange
things we value less for things that we value more (the reason we buy and sell
things and use money to do it)—is secure, reliable, accurate, and relatively
quick. That is our payments system, and
banks created it and are at the center of it.
Americans also like the idea of becoming wealthier and
expect to do so. If that seems a
commonplace to you, recognize that it is not so in all parts of the world,
where getting by from day to day is about the most to which people can aspire,
for whom poverty is a way of life that they expect to bequeath to their
children. To the extent that this
miserable condition is becoming less the case in much of the world, that more people
are beginning to believe that they can build and improve their wellbeing for
themselves and their posterity, this new-found hope for accumulating wealth is
attributable to the dispersion of principles of freedom and prosperity that
Americans take for granted but which are new to much of the world. The global adoption of many American
principles of prosperity has been a major contribution of the New World to the Old World and to all mankind.
Now get ready for the bold but true statement: you cannot get there and stay there without
banks and the services that banks provide.
Banks gather wealth, safeguard wealth, allow it to be used efficiently,
and apply it to building the future.
That is why governments pay so much attention to banks, and also why it
is so harmful when governments try to capture banks and channel their services
to the personal gain of themselves and their cronies. That is also why misguided bank regulations
are harmful—even if in subtle but powerful ways—to the nation and its people.
Which brings us back to the agenda of the “unbanked” and
the “underbanked.” In the United States,
chief causes for people remaining “unbanked” are regulations that make banking
more difficult and services more expensive; cultural barriers for people who
come from societies where personal banking is either unknown or where the
experience has been one of banks used by local governments to harvest wealth
from people to enrich the governing elites and their cronies (much of Latin
America, for example); and people who for whatever reason just do not prefer to
use banks. The first cause regulators
can solve but have largely been resistant to solving; the second can be
overcome by time and experience and is showing signs of that; and the third
cause is no more of a problem than people who prefer to rent rather than own
their home, to eat eggs without grits, or who do not like the New York
Yankees. I do not have to understand the
personal preference to acknowledge it.
The concept of “underbanked” (that government needs to help banks figure out how to serve people who may get some banking services outside of banks) I fear may be a political
device to harness American banks to serve the cronies of the “underbanked”
advocates. We have already seen this
game with the Community Reinvestment Act (CRA) regulations, adopted ostensibly
to ensure that banks lend to their local communities (as if bankers, unlike
other businessmen, need government regulation to notice business
opportunities right under their own nose).
In practice, CRA has been used to coerce banks into providing loans and
even grants to and through poverty advocacy agencies that tend to prosper more
than the people whom they claim to be helping.
The folks who fret about the “underbanked” have marvelous formulas and
plans for other people’s money to solve problems about which the people to be
helped seem little concerned. I have
never heard of any truly “underbanked” people themselves calling for the firm
hand of government to get them into the banking system; if they want banking
services, they just go and get them.
I have the haunting suspicion that the “underbanked”
advocates would if they could use banks the same way found in the abandoned societies
of the “unbanked,” where banking services came through the hands of people who
knew better than others and always made sure to get their cut for their benevolence. That is not really banking, and that is
symptomatic of why people flee those lands.
The wealth creation of such captive banks seems to be for someone
else. If it happens in America , where will the people go?
