“What is the crime of robbing a bank when compared to the crime of owning one?” — OLD WOBBLIE PUNCHLINE I he above quote, spoken with JL tongue-in-cheek by even the most vehement of union organizers, may still draw a chuckle from radicals and progressives today. Yet in terms of our daily lifestyles, nearly everyone from right wing survivalists to left wing theoreticians makes use of banks. We are becoming a nation of U-Bankers, increasingly dependent on friendly computers to supply us with crisp bills at all hours of the night. But what about the business behind the computers — the system by which banks accumulate capital, loan it out at a profitable rate of interest and thereby keep their stockholders smiling? Most of the U-Bank generation would probably nod out if forced to wade through a bank's annual corporate report, with it’s contrasting tables of Average Equity as a Percent of Average Assets, Average Deposits and Average Loans, and paragraphs of bank-speak such as: “Liquidity must be carefully monitored along with interest sensitivity. With funds sources becoming increasingly sensitive to rates, and with the banking world being at a competitive disadvantage at times because of regulation, the risk of disintermediation increases.” — Annual Report, U.S. Bancorp, 1981 Yet it is precisely this impenetrable system of deposits, assets and loans that controls the distribution and flow of money through our economy. If Oregonians hope to comprehend the nature of our current recession and to develop realistic plans for economic recovery, the role of banks in private investment must be discussed. et’s start with U.S. Bancorp, Oregon’s largest financial services institution. Last spring, Bancorp announced a plan to get the Oregon economy “back on track.” The plan, called the Oregon Challenge Program, aimed to attract $100 million in new deposits for Bancorp’s major subsidiary, U.S. National Bank of Oregon, $1 million (1%) of which would be donated to state economic development projects. Backed by a 10-week, $400,000 promotional barrage asking Oregonians “Are You With Us?", 400 Bancorp employees fanned out over the state, going door- to-door to obtain the new deposits. Mayor Frank Ivancie called the plan “innovation at it’s best.” Governor Vic Atiyeh hailed the program as an effort where “all of us can work together” to boost the Oregon economy. Bancorp chairman John A. Elorriaga said the bank felt a “real responsibility” to do something to “create jobs and bring new business” to Oregon. On Feb. 1,1983, the bank signalled the end of the program by giving out the last of $950,000 in grants, 1% of the $95 million supposedly generated by the campaign. Through the Oregon Economic Action Council, chaired by Elorriaga, U.S. Bancorp distributed money to over 80 organizations. The largest grants went to Oregon Business Magazine ($65,000) for a series of inserts on economic development in the state to be mailed to growth-oriented companies nationwide, the Agri-Business Council of Oregon ($42,000) for construction of an exhibit center in Wilsonville, the Greater Portland Convention and Visitors Association ($38,000) to help convince delegates to stick around an extra day after the convention, the Taxpayers for a Better Economy ($30,000) to publicize a sales tax, and the Portland Development Commission ($24,670) for it’s Portland Ambassador Program, which flies business executives to Portland and surrounding communities for “economic tours.” Elorriaga commented, “Based on the many outstanding ideas we have seen to assist Oregon’s economic development, the U.S. Bancorp Are They Apparently, a lot o fthat $95 million U.S. Nationalgenerated by asking Oregonians ‘Are You With Us?” is eventually going to windup out o fstate. council is confident that together we can all get Oregon back on track.” Really? An exhibit hall in Wilsonville is an answer to double-digit unemployment? Executive fly-ins will help struggling small farms in Eastern Oregon? It’s difficult to be too critical of any lending institution that gives away $950,000 in seed money, no matter how questionable some of the recipients may seem, but it is clear that the “Are You With Us?" promotions were motivated more by the pursuit of profit than by genuine concern for the public welfare. In the first quarter of 1982, the recession finally caught up to U.S. Bancorp, resulting in a quarterly earnings drop from the previous year for only the second time in the last twelve years. Bancorp’s net income for the first quarter of 1982 was $13,035,000, a 24.1% decrease from 1981’s record high. A month later, the bank came up with its massive “Are You With Us?" campaign to attract new customers. I Y / here did the $95 million in W new deposits the bank claims to have acquired (though an examination of their quarterly reports between March and September shows a net gain of only $14 million) come from? Other banks, most likely, some of whom weren’t too happy about U.S. Bank going door-to-door soliciting their wealthier depositors. How does it help the Oregon economy, one might ask, to have money transferred from smaller local banks around the state to U.S. Bancorp, which provides financial services in nine states, and looks increasingly to non-banking activities outside of Oregon for growth opportunities? There is no law requiring financial institutions to disclose where they are investing their money, but we can draw some conclusions from Bancorp’s 1981 annual report, which read, “We provide services in a market area which we characterize as a ‘crescent of economic potential.’ This market consists of Western, Rocky Mountain and Southwestern states. We are concentrating on ‘filling in’ these market areas . . . ” Apparently, a lot of that $95 million U.S. National generated by asking Oregonians “Are You With Us?" is eventually going to wind up out of state. “We viewed the campaign as a real scam,” says Jeff Anderson of Oregon Fair Share. “Our concern is unemployment. High interest rates are one of the main causes of the devastation of the timber industry. U.S. National has a responsibility to do something about that. That’s why we asked them to meet with us — to begin to deal with the real issues in the state. But it’s become pretty clear that the only interest U.S. Bank has in the jobs problem in the state is to use it as an advertising gimmick.” Anderson claims that U.S. Bank has about $2 billion in deposits that could be reinvested in hard-hit communities. Fair Share has repeatedly accused the bank of violating the Community Reinvestment Act of 1977, which requires banks to reinvest in their local communities. The organization has also leafletted branches of U.S. National and First Interstate banks asking them to lower interest rates, which are still at 16- 20% for small businesses, small farms and housing starts, despite the recent drop in the rate of inflation. Thus far, both banks have refused to discuss the proposal. “The conclusion you draw is that it’s all lip service,” says Anderson of Elorriaga’s plan to get Oregon “back on track.” I Y / hat could a bank the size of Yr U.S. National do if it were truly committed to helping rescue the state’s economy? Bill Street, the former Economic Development Coordinator for the Clatsop/Tilla- mook Intergovernmental Council and now a consultant for the lobbying organization Northwest Legislative Services, Inc. comments, “While I think it’s admirable that they donated some of their money to various organizations and individuals in the state, giving out free money is nothing a bank can do for a protracted length of time. What banks can do is influence the allocation of investment capital. If U.S. Bank is serious about ‘being with us,’ it would be more cost-effective for them to take some portion of their portfolio and target it to entrepreneurs in high unemployment areas. In other words, take a risk.” Street doesn’t believe this would necessarily result in loss of profits. “Not if they are good bankers. 7 out of 10 new firms fail within three years. If they can beat the odds, the bank will see future returns. It’s a question of long-term management vs. short-term management. One is good for the state as well as the bank, one isn’t.” Street differs with Fair Share’s view that high interest rates are a root cause of the recession. “The effect of the price of money is exaggerated. It’s availability that’s the problem. What it boils down to is that U.S. Bank — all banks — loan money to people they think are likely to pay it back. When a small or mid-size firm goes to the bank, they have less chance of getting a loan than a big firm. Small firms are more likely to fail, so they have less access to capital, so they are more likely to fail. It's a cycle.” Street believes that just as U.S. Bank refers to a ‘crescent of economic potential’ in the nation, they concentrate on a crescent of profitability in Oregon as well, and it doesn’t necessarily include Burns, or Tillamook, or Albina, or any of those communities hardest-hit by the recession. This backs up Fair Share’s assertion that U.S. National, by defining the entire state as its “local community.” is in violation of the Community Reinvestment Act. Street would like to see state and local governments take a more active Clinton St. Quarterly 31
RkJQdWJsaXNoZXIy NTc4NTAz