Marlene is the best customer at Store 22, the check-cashing outlet I own on the south side of Youngstown, Ohio. I mean “best” the way a trap means it. She is 41. She works second shift at a stamping plant that pays her $1,143 every other Friday, and every other Friday she drives 3.2 miles to hand it to a man named Roy, who is my manager, and Roy hands back $1,111. That’s the 2.9%. Her check, her hands, my $32.33. She has done this 87 times since 2021. I know the number because the number is the relationship.
Here is the part most people stop. Marlene doesn’t stop at the window. She takes the note: $500 against the next paycheck, and the price of having it now is $68. She has rolled it four times. That is $272 in fees on $500, which annualizes to 353%, which is a number I can say out loud in any room in Ohio without lowering my voice. “Cast thy bread upon the waters,” says the Preacher. Mine comes back on the fifteenth and the thirtieth. The $272 is a weekend in Sea Isle. I didn’t watch it go.
Now you’ll tell me she should be allowed to pay me in pieces. She can. I won’t. The terminal upgrade that would let Store 22 take four payments instead of one costs $2,400 a store. There are 68 stores. That’s $163,200 to build a feature whose entire purpose is to reduce my fee revenue by about two-thirds. I have presented that proposal twice to my board. It has failed twice, both times correctly.
Slow down on that last sentence. It is the most important one here, and you read it like a speed bump.
You read John Puri in National Review this week, asking the Federal Reserve to stop guessing how much money America needs and let the market decide instead. (Read him here.) He wants the discount window closed, interest on the reserves banks hold ended, open-market operations turned into a two-way valve any bank may draw on at fair price. The banks are sitting on just shy of $3 trillion at the Fed, earning nothing, waiting to be told what money is worth. He wants the faucet handed to the people who use the water. Brother, so do I. I have been handing it to them for 21 years, at the only price anyone ever offered them. You have a bank account. That account is a promise that your money will still be money on Friday, and this week it cost you nothing to hold it. Somebody absorbed that. It was not me.
Now the building where Marlene’s exceptions come to roost.
Junie is a reconciling clerk on the item-processing floor of the bank I own outside Youngstown, Ohio. Her job is the exception: the payment that doesn’t match, the name that doesn’t sit right, the 4-cent gap between what somebody meant to send and what a bank sent instead. 340 of them a night, 5 nights a week, 10 p.m. to 7. Her fingers don’t uncurl on their own anymore. She does it with the other hand. Her chair is an $89 chair we bought in 2019 and the lumbar foam went in March and is taped. Tuesday the Federal Reserve Bank of Cleveland wired me $14 million for the balance my bank parks at the Fed, and I did nothing for any of it. The balance is $4.1 billion. Every 0.01 point the committee sets is $410,000 a year to me, and the committee moves those points the way a man adjusts a faucet, and the wire clears on the 15th. A new chair is $640. There are 62 of them on that floor. There is no product in that transaction. The Lord rewards a man for what he leaves alone, and I have made a profession of it.
Every November my floor managers file what they need. I approve the first list and I keep the second. Every bank has one. No customer has ever seen one. Here is Ohio’s, current: 62 chairs at $640 each, $39,680 — denied 11/4, denied again 3/2, deferred 9/18. A $0.22 hourly differential for the 10 p.m. exception shift, $11,000 a year across 24 clerks — denied on the grounds that 10 p.m. is when volume is lowest, which is why it is also when the queue is meanest. One additional clerk on the 6 a.m. line, $41,000 with benefits — denied because the queue clears by 9, which it does, because of the taped chair. The stairwell light on the second floor, $340 — approved, then reassigned to the ATM canopy. The chair lost in 4 minutes. The stairwell light took longer than the chair did. You’re reading it the way I read it now. As arithmetic. That’s the lesson landing.
Cyrus is Junie with a window. Branch manager outside Wheeling, West Virginia, same bank, same list. 14 account openings a week, and a script for the overdraft: sell one and it’s $32 a month off a household, forever, and his own name goes on the board in the break room, and he believes the board. That’s the part I pay for. Different surface, same arithmetic. One window instead of a belt.
Here is the law the chair was only an example of, and it is older than any of us.
Your Federal Reserve administers one money supply. There are two. The first is priced near 5% and settles in Treasuries across a valve at fair market price. The second is priced near 353% and settles in cash on a laminate counter. The only difference between the two markets is the customer’s collateral. Mr. Puri’s reform would leave my half exactly as it finds it, because everything he proposes happens in the plumbing above a man with no collateral. The discount window can close. The interest on reserves can end. The valve can open both ways. A man who needs $500 on a Tuesday in February does not become a bank customer because a bank learned a new trick.
I am not new. The company store was me with a coal seam. The scrip was me with a printing press. The fee schedule is me with a card reader, and I want to be plain about the continuity, because it is the only part of this business I did not have to build.
John C. Calhoun said it in the Senate in 1837, and he said it the way I would say it:
I hold then that there never has yet existed a wealthy and civilized society in which one portion of the community did not, in point of fact, live on the labor of the other.
He was talking about a different arrangement with a different vocabulary. The arithmetic is the arithmetic. The ledger just got shorter and the counter got a chair.
You would like to file me under one bad bank. I am not a bank. I am a course. I teach Money and Banking at Warden on Tuesday mornings in a room with 40 chairs. 11 of my former students now run reserve desks or community banks. One of them is faster with the second list than I am, and I said so out loud last spring, and the room wrote it down.
“There is a sore evil which I have seen under the sun, namely, riches kept for the owners thereof to their hurt.” The hurt is not mine, and he didn’t say whose. I have never needed to find out, and that isn’t a confession, it’s a description of the division of labor. I hold. Junie reconciles. The wire settles between us on the 15th.
If the valve passes — and I expect it to, the arithmetic is popular this year — my balance becomes my own choice. My choice would be smaller. A smaller balance is a one-page memorandum I have already drafted, and page one begins in Ohio. Junie has 22 years in and the pension vests at 30. I wrote that as a schedule, not a threat. Where the 340 exceptions go in a valve world, and where she goes at 22 years, is a seminar question. I have the room booked through May.
They tell me a credit union opened in Boardman in March, 4 miles from Store 22, offering a $5 checking account. Our Youngstown volume was up 6% in the second quarter. I don’t have a theory about that. A man cannot chase every variable and still keep 68 sets of lights on.
Marlene’s renewal is on my desk. She signed it in blue ink. She signed the same line in 2021, in 2023, and last February. Her signature hasn’t changed. The fee has. Store 22 opens at 9. Friday is payday. She’ll be in by 9:10.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.