Other People’s Wealth and How the Bankers Use It REVIEW
Louis Brandeis’ 1914 book on “the Money Trust" has too many specifics in it to go on the “easily-read-classic” shelf but if you skim through the evidence to the argument, you begin thinking that you are reading a Bernie Sanders speech. In the course of his essays, Brandeis tries to explain how and why the rich of 1914 were getting richer and how and why the poor were paying them to do it.
Lets take Joe Six Pack. He works hard. He saves a little money. He doesn’t have any idea how to start a profitable business and if he did, the cards are so stacked against him, he can’t. Most of his ideas would somehow put some existing business in danger of making less profit and the owners of those businesses are not interested in competition. They have friends in high places on the boards of all the different banks that might loan Joe some money so, his idea isn’t going to get the credit support it would need to get off the ground.
So, rather than start his own business, he invests in one of the already existing businesses, say a railroad. Here is where his money enters the labyrinth. He will probably be allowed to make just enough interest from his money to discourage him from putting it under his mattress but that is about it. If the railroad company that he invests in does well, it will take its money and put it in a bank that it has business connections with. That bank will take the money and loan it back to the company. At interest. Perhaps it will take the money and it will then buy some steel from another company (at inflated prices). A man on the board of directors of the first company will be on the board of directors for the second company so the money spent will look like a business expense. Ah shucks, the railroad company made less than expected so Joe six pack only gets a little from his investment.
Oddly enough, the same thing will be happening to Jim Sixpack who invests in the steel company. Somehow, the company profits will never pay as much in dividends to the investor as it is to the owner? And it never is going to give a leg up to the employee. Why is that? Brandeis talks about the influence of the banks. They may require that one of their men be placed on the board of directors of any company that wants a loan. And thus, all money loaned seems to keep working for the interests of the few people who own the large financial institutions that give loans. The money invested and saved by millions never seems to “trickle down” to them. It just “trickles back and forth to the folks up at the top.”
Perhaps the secret s to take your money out of the large banks and put it in some venture that will re-invest it into the local community – that will take the people’s savings and loan it to the people for the people’s good? (Like Credit Unions)
That is Brandeis’ idea any way. He trusts the government to break up the banks and the interlocking directorates so that “the little guy” can emerge from his serfdom. It is somewhat of an unspoken axiom of his that the community of business elites are where you will find all the power-hungry greedy people who do not think of the public good but their own good. People working for government, he seems to believe, will naturally be thinking about the public good and not their own personal advancement. I suspect though that there is a breed of people who will follow the money and the power wherever we place it and that he may be trading in one form of dependency for another. But that does not discount his point.
Brandeis certainly has something to say about how the system was not working for common people in 1914 … and today. The problem came down to a problem of trust which was caused by a problem of image versus reality. Large financial institutions had managed to convince people that they were a safe and honest place to put savings and investment monies. And by and large, they were. They granted SOME of the profits of that trust back, but absconded with most of it in the guise of interlocking directorates that siphoned money from the public's account to their own without its being known.
Question for Comment: Who is using your money to make money? What keeps them from just using your money to make themselves money?