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Ralph Nader > In the Public Interest > Money From Heaven

WASHINGTON—It’s called “The Bank Book.” It is an exposure of banks by a bank insider using the pseudonym of Morgan Irving. This book is only one indication that the consumer movement is finally catching up with the banking industry.

At about the same time later this fall another booklength critique on banking will be published under the title “The Dollar Barons” by Christopher Elias. This volume concentrates on the fifty giant banks which hold half of all the deposits in the nation’s 13, 500 commercial banks.

Both books take the mumbo jumbo out of banking and clearly describe the abuses which banks inflict on consumers, taxpayers, home buyers in search of mortgages and smaller businesses. Irving tries to show consumers how to avoid the more flagrant bank traps. Mincing no words, this whistleblowing banker asserts: “Simple incompetence vies with shortsightedness, bigotry and just plain “let’s fleece the consumer” at many banks including the large bank where he works.

It is true that bankers have surrounded themselves with a mystique that says only they can understand banking. This mystique has been their greatest camouflage against public scrutiny and has infected the federal and state bank regulatory agencies which are more servants of banks than their regulators. Throughout his 45 years in Congress, House Banking and Currency Committee Chairman Wright Patman has been documenting this intense coziness between the banks and their regulatory agencies.

Three years ago when a group of young lawyers and graduate students started our study of the First National City Bank [Citibank in New York], we called upon Citibank’s chairman–haughty Walter Wriston. Sitting astride more than $22 billion in assets, hecould not understand why anybody would want to study his bank–the nation’s second largest with offices all over the world.

The completed report on Citibank, which will be published later this year, provides many answers to Mr. Wriston’s questions. Citibank is using the money of small depositors and trust accounts to make the rich richer. A handful of financiers invest billions in a handful of giant corporations, promoting monopolistic practices and mergers as well as whirling funds in the private world of international financial and currency machinations. But back in New York City many investment needs that would help the people are ignored.

Growing at the expense of many smaller banks around the country who can’t mutually backscratch and interlock directors with their large corporate customers, Citibank is luring deposits away from these smaller banks.

Now with the blessing of the Federal Reserve, Citibank and other giant banks are moving to acquire under the recent bank holding company act other businesses such as insurance, leasing and travel. Traditionally, our laws have restricted our banks to banking business so that they don’t become like octopi controlling the economy. This tradition is now rapidly changing.

The deepening concentration of bank power in a few corporations, conflicts of interest between trust and commercial departments of banks and the move into non-banking business are all contributing to the prospect of the greatest public investigation of banking since the Depression years.

Already Chairman Patman is holding hearings on reform of the country’s financial institutions. Segments of the insurance industry are battling to keep banks out of their business. Small banks led by the banker’s son of Wendell Wilkie are renewing their struggle to curb the voracious appetite of the big metropolitan banks. A Federal Reserve Board governor has called for the divestiture of trust departments from commercial Departments of banks. The Civil Aeronautics Board is investigating possible violations in sizeable bank ownership of the airlines.

These events together with the publication of several investigative books, high interest rates and the tight home mortgage market are likely to produce a chain reaction
that will spotlight as never before the power of banks to abuse their trust. This reaction will extend to “two-hatter” legislators in Congress and state legislatures who push laws favorable to banks at the same time that they are holding directorships or investments in banks or receiving low interest loans on easy terms.

Citizens may want to ask their legislators about such dual allegiances to legislative duties and to the banking industry.