31. For Love of Money — Part 1

For many years the Italian postal system has offered savings bonds. I began buying them as a young man, when the lire was still our currency. I started with denominations of 250 thousand lire (about 125 euros) and worked my way up. When I had socked away cash from odd jobs and gifts, I’d go over and buy more bonds. They were a good deal, better than bank savings accounts, particularly in the years when the bonds carried a 15% interest rate; over 30 years’ time the bonds would triple in value.

In the context of that kind of return, perhaps it did not seem too outlandish to some when a new bank appeared in our town and offered an interest rate of 25% on “jumbo” accounts. Some people withdrew all of their lifetime savings from their long-time banks and transferred the funds to the new bank.

Not everyone flocked to the new bank. Some – particularly the wealthy – took a wait-and-see approach. Those who did open new accounts were mostly retirees or near-retirees who had worked many years building up their small businesses. Someone I knew had amassed savings of more than half a million euros (in today’s currency) by operating a couple of bakeries. For decades that man had risen before dawn to go bake focaccia, rolls, and loaves of bread. He hoped to increase his savings enough to leave his children and grandchildren a comfortable inheritance.

The generous returns on investment began showing up in the accounts of the new bank’s clients. As news about the interest payments spread in our little town, more and more people opened accounts. Things went smoothly and the clients considered themselves savvy investors. By then, the economy was on a precipice, and interest rates on savings accounts and even on the postal bonds had tanked to 3% or less.

Can you guess what happened? After a while, interest was not being credited to the accounts at the shiny new bank. The bank president himself assured the clients that this was just a technical glitch. Then, one day, the bank was closed. For good. No explanation, nowhere to turn for information. Yes, police got on the case, but tracking down those responsible was not easy and would take time. I don’t know if the culprits were ever caught.

Those who were cheated suffered much more than humiliation. Many of them were left broke at a time when they were too old to make up the loss. The baker I mentioned died of a heart attack.

It would be easy to spout the old clichés: a fool and his money, if it seems too good to be true But I can’t. These were people I knew. I had grown up with their kids. They were not sophisticated investors, just ordinary people who had made many sacrifices to achieve a measure of economic security; the embezzlers took advantage of this.

I also keep in mind that, if my father had been able to grow wealthy from his farming, he, too, might have fallen prey to the bank’s Ponzi scheme. He was a strong man, but I know that would have destroyed him.

Fading Dreams – Québec City, Canada courtesy of “Anton”

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