A Century-Old Lesson in Better Banking

Banks used to know how to make their customers feel welcome.
Today's immigrants could use Jarmulowsky Bank.

At the corner of Orchard and Canal streets in New York’s Lower East Side stands a limestone building with "Jarmulowsky" etched over its doorway. Few now recognize that name, but 100 years ago today, a mob of 5,000 immigrant depositors gathered in front of this bank to protest its closing. They railed against the loss of their one means of sending their hard-earned dollars to loved ones in the Old Country.

Jarmulowsky has faded into history along with the other immigrant banks that the New York state banking superintendent closed during the summer of 1914. But the debates these banks started -- over immigration, the working poor's access to credit and banking reform -- continue to this day.

The unchartered immigrant banks had transferred vast sums abroad -- more than $141 million in 1907 alone -- and invested heavily in their communities.

Then, unforeseen global circumstances -- an assassination in Sarajevo that escalated into a war -- triggered a rush on the banks. Thousands of depositors suddenly sought to take out their savings to send to loved ones in Europe. Unable to sustain the simultaneous withdrawals, the banks had to close.

Part of the problem was that the bankers had invested in real estate, so their assets could not be quickly liquidated. Banking regulators declared it had been too risky to invest in emerging working-class neighborhoods in Harlem, Brooklyn and the Bronx, and soon new laws required immigrant banks to reincorporate, and banned investment in real estate.

Yet those property holdings reflected the immigrant bankers' inside knowledge of New York City’s growing economy. They understood that their hard-working customers desperately wanted to move beyond the Lower East Side. They put their money in undeveloped areas along the ever-expanding subway lines, hoping to help New York accommodate its hard-working newcomers.

These bankers also understood that poor people, whether native or foreign born, need access to credit. And by providing it, the banks flourished in the years leading up to 1914.

This credit enabled people to bring their relatives over to America. They could put down just a few dollars on ship fare -- to be paid in full after the new immigrants began working in New York. Credit also allowed many workers to start small businesses and make down payments on housing lots.

While mainstream U.S. banks made foreign depositors feel unwelcome for speaking another language and dealing in small sums, immigrant bankers watched the small transactions add up. They didn't care if customers tracked mud into their lobbies or needed help translating documents and writing letters. Immigrant bankers provided these services, and set their hours to suit their patrons' schedules. Sender Jarmulowsky’s bank opened for business on Sunday to cater to its Jewish clientele’s financial needs.

Today, immigrants in the U.S. have rotating credit associations, immigrant savings clubs and any number of other financial strategies, but none that, like the early immigrant banks, helps them build up the credit history that's needed to participate in the current highly regulated system of commercial banking. Meanwhile, the national conversation about immigration focuses only on immigrants' legal status or avenue of entry.

Immigration policy should be developed with appreciation for the role immigrants have played in the country's economic development. Their mark on New York City’s landscape can still be seen in Harlem, the Bronx and Brooklyn, and on the face of upscale businesses, too -- including the soon-to-open Jarmulowsky Bank boutique hotel at the corner of Canal and Orchard streets.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author on this story:
    Rebecca Kobrin at rk2351@columbia.edu

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