Note on Banking as a Profession
and its Reform
[This note is based on material contained in an
article, "The Nature of Banking" by Dr. Ralph Borsodi, which
appeared in Green Revolution, Vol. 34, No. 10, December 1977,
published by the School of Living, RD1, Box 185A, Cochranville, PA
Borsodi outlines the following principles which he sees as necessary
in reforming the banking profession.
"1. Banking is a profession and not a business. The
Banker, like the lawyer and the doctor, unless he stultifies
himself, must put the trust reposed in him before anything else. We
entrust our health and even our lives to our doctor. We entrust
vital rights and our material interests to our lawyer. We entrust
our money and our savings to our banker. The banker is a trustee,
and he has not more moral right to exploit the funds entrusted to
him than a doctor has the right to exploit the sickness of his
patients, or a lawyer the difficulties of his clients. Professional
compensation is one thing, but maximizing profits is something
altogether different [emphasis added].
2. Bankers, like lawyers and doctors, should therefore
be licensed and only those qualified to study (usually at an
accredited university) and who observe professional standards both
in their practice and in their charges for their services, should be
permitted by law to engage in banking.(109)
3. The banker, by the essential nature of the service he
renders, is a fiduciary trustee. It is malpractice for him to do
anything with the funds entrusted to him which he ought to know
should not be done with them, just as it is malpractice for a doctor
to prescribe treatments which he ought to know endanger the health
of his patients. Nobody, no matter how great the profit, has a moral
right to betray those who trust him. It is betrayal to exploit the
opportunity for profit which trust in his integrity creates.
4. Bankers should not be granted charters to operate
banks as business corporations; they should not be legally
authorized to earn profits for stockholders because corporations
limit the liabilities of those who own them. In practice the law
makes it virtually impossible to hold corporate officers and
directors liable for what I am calling malpractice.
Banks should be owned and operated by sole proprietors,
by partnerships, by mutual and cooperative associations; and all
those who own them and conduct them should be personally responsible
and accountable for the safety of the funds entrusted to them. All
laws which exempt bankers, as would be true of all laws which
exempted any kind of professional person from full liability for his
or her practices, are morally null and void."
Borsodi also enumerates a number of measures which he thinks would
eliminate inflation, reduce unemployment, end the boom and bust
business cycle, reduce speculation, provide for the capital needs of
the local community, and prevent the government "from using the
banks of the nation to indulge in its present extravagances by forcing
them to finance its deficits."
He argues that, if the following measures were taken, the whole moral
climate of the economy would be transformed:
- Bankers, as professionals, should ensure both the safety and
proper use of the funds entrusted to them.
- Professional bankers should see to it that the funds entrusted
to them be used only to facilitate commerce.
- Professional bankers should give priority to financing local
needs before investing in projects outside the community.
- Professional bankers should take over the whole field of
investment, taking it 'out of the hands of the so-called
investment bankers of Wall Street.'"
It is encouraging to note some movement in this direction by a few "enlightened"
bankers. There are some notable examples of banks which, while still
operating under the umbrella of the corporate charter, have acted to
implement some of the above proposals, especially the financing of
local needs. Among these are the South Shore Bank in Chicago and the
Community Capital Bank of Brooklyn. Besides these, there are dozens of
non-bank community loan funds springing up all over the country. For
more information about these, contact the National Association of
Community Development Loan Funds, P.O. Box 40085, Philadelphia, PA