A run on a bank is a nightmare for any banker. Alex Vendervoot—the vice president of First Mercantile American and a strong candidate for promotion as president in the immediate future—was no exception. He had received the news about the unusual rush of the bank customers queuing up at the nearby, Tylersville branch, determined to clean out their accounts to the last dollar. Alex had stayed calm and had set into motion a series of strategic actions that would ensure uninterrupted flow of funds to the branch. He had also despatched a team of senior officials to be available at the site to help deal with the situation.
Since the situation did not seem to ease off, Alex decided to leave for Tylersville by the mid-afternoon. On arrival, he decided to chat with some of restive bank customers and got an impression that most people were not sure whether FMA Bank was sound or not but they did not want to take a chance.
The Turning Point[i]
It was about 5.30 PM that Alex was told about a new anxiety gripping the waiting crowd. With half an hour left to close for the weekend, the Bank can’t deal with everybody in the queue.
Alex was seized by an impulse to react in a spiteful manner and say to those who were still waiting: ‘Hell with you! You don’t trust me, so sweat till Monday’. It would be perfectly legal for FMA to stop transacting at 6 PM and no one could seriously object. Alex wavered for a moment but his strong commitment to principles and business ethics held him back. He chose to go all out to serve the customers’ interests as a matter of priority and decided to address the crowd. In a decisive and re-assuring tone Alex:
- Confirmed that the bank will remain open here until we have attended to you all.
- Cautioned the people not to keep the money drawn from FMA at home and deposit it with one of the other banks we have requested to remain open later than usual in order to accommodate you .
That is when this dialogue followed:
A male voice: “Can you recommend a good bank?”
Alex: “My own choice would be First Mercantile American. It’s the one I know best, the one I am surest of. I only wish that all of you felt the same way too.”
An elderly, 80 year old, now facing Alex, came in with a clear and firm voice: “Used to feel that way myself. The wife and me, we’ve had an account at FMA for more than thirty years. Feel kind a bad taking it away now.”
“Then why do it?”
“Too much smoke for there not to be some truth somewhere.”
“There is some truth and we have admitted it. Because of a bad loan our bank is likely to suffer a loss. But the bank can withstand it and it will.”
“If I were younger and working, may be I’d take a chance on what you say. What is in there in that bag is pretty well all we got left until we die. Even that ain’t much. He paused for a moment and said: “Let me ask you a question, young fellow. If you were me and this here was your money wouldn’t you be doing the same as I am now?”
“Yes, I suppose, I would.”
The old man seemed surprised. “You are honest, anyways. Just now I heard that advice you gave about getting to another bank and I appreciate it. I guess we’ll go to one and put our money in.”
“Wait, do you have a car?”
“Nope! We’ll walk.’
“Not with that money. You might be robbed. I’ll have someone drive you to another bank.”
The chief of security, stepped ahead on a signal from Alex and said to the elderly couple reverentially, “No sweat, be glad to drive you myself”.
The old man did not move. He stood looking from one face to the other.” You would do that for us? When we have just moved our money out of your bank? When we’ve as good as told you we don’t trust you anymore?
Alex: “Let us say it is all in our service. Besides, if you have been with us thirty years we ought to part as friends.”
Old man (pausing uncertainly): ”May be we don’t have to. Let me ask you one more question, man to man.”
“Go ahead.”
“You told me the truth once already, young fellow. Now tell me again, remembering what I said about being old and knowing what these savings mean. Is our money safe in your bank? Absolutely safe?”
“I give you my word. This bank is absolutely safe.”
“Aw shucks, Freda”, the old man told his wife. “Looks like we have been barkin’ up a tree about nothing. Let us go, put the damn money back.”
When the old man and his wife turned back into the FMA branch and re-deposited the money from their shopping bag, the bank run at Tylersville effectively ended. Almost at once the waiting line began dispersing as quickly and mysteriously as they had formed. It was the herd instinct in the reverse. Would the run begin again? In the event, it never did.
[i] This story—from Arthur Hailey’s The Money Changers—is a part edited version of a subchapter appearing—with permission—in my book Organisational Schizophrenia