The Importance Of Money Being There When It's Needed

Bartle related in his address that in March of 1933 he was the president of seven Missouri banks and life was good. However, he awakened on the morning of March 5, 1933, to learn that he was the president of seven banks, all of which has been closed as a consequence of the famous "bank holiday" imposed by President Roosevelt in order to assess the solvency of the nations banks.

Closing of the banks prompted an immediate series of meetings with the boards of Bartles seven banks. The meetings revealed, to their great relief, that the banks were all in reasonably good shape and that with the infusion of a little additional cash they could meet the criteria necessary to reopen. Thus relieved, the directors adjourned and set out to raise the necessary cash.

Bartle went on to say that the next several days were the most frustrating of his entire life. He and his directors had plenty of assets, but none could be converted to cash–at that moment they were virtually worthless. They could not sell real estate, for there were no buyers. Their stock portfolios were devastated from the stock market crash. They could not borrow money because their friends had none to lend and the banks were all closed.

Bartle said that finally something clicked. He remembered that his insurance agent had told him that his policies had a cash value and that if he ever needed money he could either cash them in or borrow against them. With that thought in mind he took all his policies down to the Kansas City Life, dropped them on the agents desk and asked if he could borrow against them and in a hurry. The answer to both questions was yes.

The upshot of the story was that Bartles policy loans and similar loans on the policies of other directors enabled them to reopen the banks on March 13 and resume business. Bartle said he had no idea what kind of return he was getting on his policies, but he did know that having cash available at that critical moment meant about $5 million to him in the ensuing years.

As I heard this story I could not help but wonder how many other banks across the country were also saved by policy loans. By restoring the nations banks to solvency, "capitalism was saved in eight days," as Raymond Moley, a member of FDRs famous brain trust observed.

I thought about Mayor Bartles story when I read Robert J. Kuehls letter to the editor in the Sept. 22 issue of National Underwriter. Kuehl, in his letter stated, "In my view a strong case cannot be made for using life insurance as a college funding mechanism."

I believe the reasons he gave for this view were all specious and ignored the lesson learned by Mayor Bartle, namely, "The most important thing about money for future delivery is, will it be there when it is needed." A college education is too important to be left to chance.

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 10, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.