Wednesday, July 02, 2008

I am trying to sell some General Motors Debentures. With rumors of GM's demise floating through the financial community offers are ridiculous to absent.

These "Good Faith Promises to Pay" have paid me above average interest over several years so I hold on to them with my eyes open.

What is best judgement?

In the early 1930's grandfather B. received a large check from a customer. It being Friday afternoon his best judgement was to deposit the check in the Union Bank so it would be safe.

He rushed to the bank only to miss closing by a few minutes. He tapped on a window and caught the eye of a clerk who recognizing a bank customer unlocked the door and accepted the deposit.

Sunday morning a banner headline on the local paper proclaimed, "Union Bank Fails".

In the days before the Federal Deposit Insurance Corp.was established this was not an uncommon occurrence.

Grandfather actually was lucky. An astute group of receivers worked diligently to salvage the bank's assets and in payments spread over many years he recovered most of the balance of his account.

Customers of other banks often were not that lucky. A rumor that a bank was in trouble could send a hoard of depositors queuing up at the tellers windows withdrawing their balances. Thus the rumor would be self fulfilling.


Post a Comment

<< Home