Two days before Thanksgiving 1931, the Bank of Westerville, Ohio, was short on cash and was shuttered by the state banking superintendent, making it one of 5,000 banks that failed during the Depression. The stark reality of family savings lost, commerce paralyzed and food and clothing in short supply gripped the tiny central Ohio farm community. Five weeks later, town fathers raised an appeal for a new bank: “The Citizens’ Bank. The name is fitting and proper,” they said. “Westerville needs a bank.”
They sought $39,000, a heavy lift for a town of 2,900. A single share cost $65, slightly less than a used 1926 Chrysler Roadster. That was more than John F. Smith, a poorly paid professor at the local college, could realistically afford. But he bought one anyway.
For 40 years, “Prof” Smith—my grandfather—boasted of that decision: Save and invest in your community. For 40 years that share grew steadily in value as Westerville prospered and the bank expanded—through some 56 mergers and acquisitions—to become Bank One, one of the nation’s largest.
Prof Smith’s response to a civic call and his decision to save were important lessons learned at a hard time, and they were rewarded: The town grew to nearly 40,000, the bank building still stands and the share became a significant part of a modest estate.
This is another hard time. Undermining our natural strengths are a viral combination of a record national debt now approaching $10 trillion; a federal budget deficit projected this year at $492 billion, but likely closer to $700 billion; a staggering foreign trade deficit; and exhausted savings accounts. The average American household is now buried under mortgage debt of $84,911, car and tuition loans of $14,414, home equity loans of $10,062 and credit card debt of $8,565—in sum, outstanding debt totaling $117,952. According to other Federal Reserve statistics, average household savings this year are a mere $392. The spiraling collapse of the housing market, the mortgage market and now the broader credit market was triggered by a cavalier attitude to thrift, a preoccupation with short-term gain at the expense of long-term, and bankers seeking high profits rather than sound investments.
My grandfather would have had something to say about that. The lesson of Westerville is one to be learned by the federal government. Billionaire investment banker Pete Peterson agrees and is financing a new foundation to raise the alarm. He has company: Another billionaire, Warren Buffett, and former Federal Reserve Chairman Paul Volcker are echoing the warning of former U.S. Comptroller General David Walker that we are on a fiscal path that is unsustainable. “Trust me,” Walker says. “It could swamp our ship of state.” There is an urgent need to bring future spending, future tax policy and future savings into alignment. For emphasis, Peterson’s foundation is bankrolling the national rollout of a new movie—I.O.U.S.A. The message is simple. “We are one nation. Under stress. In debt. ”
We have a civic duty to save and insist on fiscal sanity from our leaders and ourselves. It’s the lesson of Westerville.