A Bold Breed

In a near-empty lot in downtown Hamden, Conn. (pop. 46,000), three 28-year-old entrepreneurs telephoned busily and dispatched letters last week from a modest and makeshift trailer. Their aim: to market a $3,000,000 stock issue that they will use to open a bank. The men, all trained in junior executive positions at the Chase Manhattan Bank (two have left), are typical of a bold new breed who are making new banks bloom all over the U.S. after a 40-year decline in total numbers.

This year more than 300 banks will get started, almost three times more than in 1961. For the first time in a generation, new national banks have opened or soon will open in downtown Boston, Washington, Newark, San Francisco and countless small towns. The expansion is so rapid that Congress is now debating whether to demand closer federal screening of the people who bankroll the banks, and some authorities are worried about the possibility of "overbanking."

How to Start. One reason for the boom is the stimulus of the U.S. economy's upswing, which has greatly increased bank earnings. In addition, the sprawl of the suburbs and the westward population drift have created a need for expanded lending and checking-account services that cannot be met by established banks, which state laws often bar from branching. Partly to skip around those archaic laws, U.S. Controller of the Currency James J. Saxon has been eagerly chartering new national banks. He hopes that they will introduce fresh methods, hone competition to the consumer's benefit, and revitalize a business that has been steadily losing ground to the savings and loan associations and the credit unions. Compared with the richer, older banks, many of the lean and aggressive newcomers stay open longer hours, charge less for loans and checking accounts, and adopt more aggressive ways of attracting money.

Almost any group of entrepreneurs with sound character and solid financing can get a bank charter. All they have to do is find a suitable location, convince state or federal examiners that the area could support a new bank, then raise the money for it. Businessmen often collect enough by passing the hat among themselves, and sometimes they can get started on a small stake by putting up their shares in the bank as collateral for low-interest loans from bigger banks. Less affluent organizers sell stock to the public. Often investors are let in only after they pledge to deposit $500 or $1,000 in the bank for every $100 worth of stock they buy.

High Yield, Low Risk. Most stock issues are oversubscribed two or three times. Reason: banks are highly profitable, earning a yearly average of 9% of their capital, and many of the new ones break into the black within a year. Says Phoenix Millionarie David Murdock: "Bank stocks are among the best you can get. Very few banks ever fail, and that's more than you can say for most businesses."

The long queue of banking investors includes some interesting personalities. Among the initial stockholders in the new District of Columbia National Bank are Bobby Baker, half a dozen Congressmen and several financial reporters. Baseball Hero Jackie Robinson is the chairman and a major organizer of Harlem's soon-to-open Freedom National Bank, which is one of five recently chartered in big cities to appeal to the Negro community. And, of course, investments in several Texas banks, including at least one new one, have helped to swell the fortunes of Lyndon and Lady Bird Johnson.

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