In recent news, from the Money Monopoly, Ethan Clay, the owner of a Pittsburgh-area ice-cream parlor, has been offering a small-time check-cashing service and community bank through his shop’s gift card system. The interest on deposits is paid out in ice cream gift cards. From the WSJ story, it sounds like he was largely motivated by frustration over fees from the cartelists in the Bureaucratically Correct banking system. So he’s offering a neighborhood alternative that’s designed to minimize fees, offer a moderate rate of interest on deposits, and offer low-interest microloans.

PITTSBURGH–State banking officials want to put the freeze^[1] on the owner of an ice-cream parlor who opened a community-bank alternative that pays interest in the form of gift cards for ice cream, waffles and coffee.

Ethan Clay, 31 years old, opened Whalebone Café Bank seven months ago in his shop, Oh Yeah!, a year and a half after he was hit with $1,600 in overdraft fees from a local bank where his account was overdrawn by a series of checks.

Mr. Clay says he wants to offer an alternative banking experience, and has accepted small deposits and made small loans. He claims he isn’t subject to banking rules because his operation is a gift-card savings account.

. . . Mr. Clay’s ice-cream-bank novelty is drawing attention at a time when people, irritated over banking fees and overdraft penalties, are increasingly looking to alternatives to traditional banking. Today, 8.2% of the nation’s households—up from 7.7% in 2009—are managing their finances without a bank, according to the Federal Deposit Insurance Corp.

. . . Mr. Clay said he has $550 from depositors and has loaned $1,700, an amount that includes some of his own seed money. My goal is to get to $100,000 in deposits by Dec. 21, he said. This is the prototype, but I hope to become the neighborhood bank.

He said he came up with the idea after he paid 45 fees at $35 each to his local bank. If I’m overdrawn by 64 cents, the bank should charge me 10 cents and not $20, said Mr. Clay. At some point, he said he might have to consider a small penalty for borrowers who spend money they don’t have.

You have to have a way of making it uncomfortable for people to be overdrawn, he said.

— John W. Miller, Wall Street Journal (2012-09-13)

The story doesn’t mention anything about it, but I expect that accepting the deposits would also be a good way for Clay to capitalize his small business without having to go through the high volumes or bureaucratic demands for getting standard business loans from a bank, and without paying off the Money Monopolist’s skim. In any case, the prospect of a community alternative to cartel banking is certainly more than enough for the Pennsylvania Department of Banking to leap into action. My God, the man is threatening to compete. And he isn’t even a banker!

Now of course I do in general terms understand the cartelizing function of banking regulations, and the role that they play in insulating incumbent capitalists from the threat of market competition. And I know that these cartelizing and insulating functions are in fact, and always have been, the essence and the raison d’être of the regulations. And I realize that there really isn’t any micromanaging defend-the-status-quo, control-at-any-cost argument so baldfacedly idiotic that it can’t still be assimilated and rationalized and seriously produced by the internal logic of bureaucratic rationality. Still, when I read this stuff from a guy like Ed Novak, Spokesman for the Pennsylvania Department of Banking …

It’s a strange case, we don’t have the authority to go close an ice-cream store, said Ed Novak, spokesman for the Pennsylvania Department of Banking. But we are going to do something. You can’t mess with people’s money.^[2]

. . . There are other issues, as well. Oh Yeah! does not have depositors insurance. If a bank goes under, the depositors get their money back, said Mr. Novak. If the ice-cream store goes under, who knows what happens?^[3]

— John W. Miller, Wall Street Journal (2012-09-13)

… I do still find myself wondering, at some level, how you ever get to a point in your life when you can actually say this kind of stuff without just falling over laughing at yourself. In any case, when he ventures to say it in public, the rest of us ought to at the very least to pick up the slack and laugh him out of the room for it.

In any case, here’s a bit more from Novak:

There is also the question of enforcing banking charters, which licenses institutions to cash checks. Banking in the 19th century was a hit-or-miss proposition, says Mr. Novak. And we have a banking system now to make sure that that’s not the issue.

— John W. Miller, Wall Street Journal (2012-09-13)

Now, of course, you can’t mess with people’s money, and we don’t have any of that hit-or-miss stuff. You can’t mess with people’s money because now we have a Banking System which owns all the money, and only allows you to do what they please with it. And within the enclosed game reserve of that Banking System, there is no hit-or-miss: government guarantees that megacapitalists like Citi and J.P. Morgan-Chase will bag their targets.^[4] Whether you think all this is a good thing or not depends on how much you like being in the crosshairs.

Also.

• State Capitalism and the Many Monopolies, in The Freeman 61.7 (September 2011).
• GT 2011-01-21: Revolving Door
• GT 2011-05-16: Investors Anonymous
• GT 2008-03-19: Small enough to fail.

1. ^[1][The Editor would like to extend his apologies. The Wall Street Journal story seems to exist mostly in order to print as many awful journalistic puns as you can fit in the available space. –RG]↩
2. ^[2][This was apparently said with a straight face. –R.G.]↩
3. ^[3][This too. –R.G.]↩
4. ^[4]If they should miss on their first shot, FDIC and TARP will roll up in a tank and open fire on their behalf.↩