by Jeff Thomas, International Man:
When I was twenty-four, I knew virtually nothing about business and less about banking. I had very limited self-esteem and assumed that, if someone was wearing a suit, he knew what he was doing and I shouldn’t question him.
At that time, I came into some money for the first time in my life and opened a CD at a prominent bank, to keep the money “safe.”
That was in the early 1970s and bank rates were phenomenal. I had chosen the bank due to the fact that they were paying 11.5%—more than anyone else. One day, I decided that it would be prudent to visit the bank and meet the manager. When I went in, there were quite a few young pretty women walking around in designer outfits—something I’d never seen in a bank. One of them said I couldn’t see the manager right away, but she showed me to a leather sofa and offered to bring me a drink.
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I’d never heard of a bank serving alcoholic beverages, but it made me feel a bit special to sit on the nice sofa and have a rum and Coke.
By the time I’d finished my drink, I asked again when the manager would be seeing me and the young woman said, “Soon. Would you like another drink?”
At that moment, I suddenly began to feel a bit uncertain about the bank. I refused the drink but remained waiting. As I waited, I watched the other customers, who were being pampered by the staff and it occurred to me that my idea of a banker was somebody who was careful and frugal with my deposit, not lavish. After being in the bank for an hour, with no manager in sight, I called the young woman over and said, “I’d like to see the manager now.”
She said that it wasn’t possible at the moment, but that he would be available “soon.”
I said, “In that case, I’ll take all my money out of the bank right now.”
She tried to discourage me, but I said, a bit loudly, “Are you saying that withdrawals are not possible?”
She looked a bit nervous and asked me to wait just a moment while she got the manager. She returned a few minutes later and said that he’d see me now.
I was brought into the manager’s office who smiled, shook my hand and asked if I had any questions regarding my account. I said, “No, I’ll be withdrawing all the money now.” He pointed out that that would be a mistake, as, in a few weeks, I’d be receiving my quarterly interest and it would be better to leave the money in the bank.
At that moment, I reminded myself that I knew nothing about banking and the manager seemed to know everything. Also, what he said made sense. Surely, I was over-reacting. But I had an uneasy feeling in the pit of my stomach. I thought for a moment, took a deep breath and said, “I want to withdraw it all now. I accept the loss of interest.”
He stated that what I was requesting was unusual and that, in any case, he was unsure if a clerk was available to provide me with the withdrawal at that moment.
I said, “You can give me the money now, or I can leave here and go to the newspaper office and offer them a front-page headline that your bank is refusing to provide depositors with withdrawals. Which do you prefer?”
He then lost the smile and told the young woman to bring in a statement of account. We agreed on the balance and I was paid out in cash.
Two weeks later, the bank closed its doors and an announcement was later made that it had gone into liquidation. The directors had left the country. The liquidators charged exorbitantly for their work and took a full five years to perform the liquidation. When they were done, the depositors received less than 5% on the dollar.
So… this may be only a moderately entertaining story, but I learned a major lesson from it.
I was just a young no-account, who was entirely unqualified to judge those “in the know.” But my instincts told me that this was no way to run a bank.
Of course, the hook here was that, in a few weeks, I’d be getting that fat interest payment. If I could just be reasonable and wait until then, I’d be getting my hands on more money. Surely that was worth waiting for?
No, it wasn’t. In fact it almost never is. When your gut tells you that a situation has turned sour, it doesn’t matter if it sounds like the best deal in town. The smart move is to get out—immediately. Don’t wait for the alleged payoff—accept your losses and run.
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