Submitted by Elie Elhadj, Sep 16, 2008 06:48

Credit 101 to bankers In December 1863, H. McCulloch, U.S. Comptroller of the Currency and later Secretary of the Treasury, wrote to all national banks. Here are some of the paragraphs. "Let no loans be made that are not secured beyond a reasonable contingency. Do nothing to encourage speculation. Give facilities only to legitimate and prudent transactions. "Distribute your loans rather than concentrate them in a few hands. Large loans to a single individual or firm, although sometimes proper and necessary, are generally injudicious, and frequently unsafe. Large borrowers are apt to control the bank. "If you doubt the propriety of discounting an offering, give the bank the benefit of the doubt and decline it. If you have reasons to distrust the integrity of a customer, close his account. Never deal with a rascal under the impression that you can prevent him from cheating you. "Pay your officers such salaries as will enable them to live comfortably and respectably without stealing; and require of them their entire services. If an officer lives beyond his income, dismiss him; even if his excess of expenditures can be explained consistently with his integrity, still dismiss him. Extravagance, if not a crime, very naturally leads to crime. "The capital of a bank should be reality, not a fiction; and it should be owned by those who have money to lend, and not by borrowers. "Pursue a straightforward, upright, legitimate banking business. 'Splendid financing' is not legitimate banking, and 'splendid financiers' in banking are generally either humbugs or rascals." The sub-prime mortgage debacle should serve as a reminder, yet again, that deposit taking is a sacred heavy responsibility and that commercial banks must remain separate from investment, insurance, and brokerage entities. These entities are no banks and their executives are no bankers. The culture of bankers, articulated by Mr. McCulloch, is stranger to the culture of non-bankers. The emasculation of the Glass-Stiegel Act contaminated commercial banking with the free wheeling and dealing of gamblers in pursuit of quick and big profits and millions of dollars in ill-earned bonuses. Let Glass-Stiegel restore sanity to managing peoples' saving again. Elie Elhadj

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