Thursday, January 04, 2007

A Bank for the Frugal

I came across some news on the wire about the Tightwad Bank closing in Tightwad, Missouri, population 63. You can read more about the closing here in an article I wrote for YourPanorama. Granted, most of the accounts at that branch were probably small and only set up for the novelty of having checks that read: Tightwad Bank. It's like something you would expect to find in a game of Monopoly. In fact, I can picture the bank president with a white mustache, top hat and cane.

After I wrote the article, I started to wonder how many of those Tightwad checks were actually cashed. Especially if they were written for smaller sums. Bank patrons were sure to have saved money just by issuing Tightwad checks to individuals because the novelty was certainly passed along. I once recall reading an article stating that Pablo Picasso always paid his bills with checks. Why? They bore his signature, which meant the savvy investor would never cash the instrument, preferring instead to keep it for the value of the signature alone.

So why not the same thing for a Tightwad check? I'm not naive enough to think the value of such a document would equal that of a famous painter's signature, but there has to be some level of value there. The test is whether it is enough to outweigh the amount of the check. Something to consider if you are in possession of a Tightwad check.

UMB, current owner of Tightwad Bank, cited economic reasons for the closure and went on to say they were corralling costs. That may be the case if UMB accountants and auditors looked only at the raw data: number of accounts, value of deposits, average deposited per customer. Accountants and auditors tend to look at the world that way - very dryly.

But take a look beyond that initial dry set of stats. Try to see what describes the number, not just states it. What I mean is considering how long a deposit stays at the bank. If checks aren't being cashed, a specific deposit should sit there a longer time. And that means, well, money in the bank.

Banks like deposits that sit there a while. That's because the money doesn't really just sit there. It gets invested, or it gets loaned to other customers. Either way, the bank makes its money from interest earned on the loans and investments. So, if a banker doesn't have to pay out a sum because a check is not cashed, the result is dollars that stay out there collecting more interest.

Seems to me UMB had a golden opportunity in the Tightwad Bank. One that should have been celebrated and promoted instead of shut down. Accounts were established at the bank from all over America, so the marketing efforts could have been nationwide. Tightwad t-shirts and coffee mugs could have fetched additional revenue along with the well known checks. Maybe even a bronzed figure of a hand gingerly rubbing two pennies together would have adorned fireplace mantles and office desks all across our country. Who cares if each customer only had a small deposit on hand. Isn't a million one dollar deposits the same as a single one million dollar deposit?

Instead, the Tightwad Bank will be no more come January 31. Another missed opportunity based on static numbers trying to describe a dynamic world.