I’m not an expert on bank failures, but I remember a lesson that came in a handwritten note from my father about 25 years ago.
The envelope included a certificate for 250 shares of Sobieski Bank. It was a gift, with a small request.
Dad was a big fan of Sobieski. During the Great Depression it had helped customers who were unable to pay off their loans. His scrawled note said words to the effect of “Good People. Don’t Sell.”
One afternoon, I did enough reading to figure out why a local bank had earned Dad’s respect.
In its early days, Sobieski was a savings-and-loan business with offices on the second floor of West Side grocery. It became a solid partner in South Bend’s growth, especially in the city’s Polish community.
There was no big secret to its success. Sobieski did exactly what savings-and-loans nationwide were doing – loaning money to hard-working neighbors who would pay it off on time.
The bankers knew their people. If Lenny on Ford Street needed $500 to build a garage, the bankers already knew the neighborhood. They knew where Lenny’s kids went to school, which church pew he sat in on Sunday, how old his Studebaker was.
If Lenny missed a couple days of work with the flu, the bankers knew it because they had family members working the same shift at Bendix with him. On his way home from work, a bank officer might swing by to see if the framing was up or the windows were in.
There wasn’t a lot of drama in that kind of banking. You were betting on a sure thing. Any money you were lending was certain to come back to you.
That kind of business appealed to my father, whose job bore some similarities. He was a bookkeeper in a small foundry that supplied aluminum castings that were used in the rubber boot industry on the East Coast. He didn’t design the boot, sell the boot or even see the boot. His company provided one of the pieces that made boot making possible hundreds of miles away.
Every step was familiar. There was never going to be an amazing day when all of a sudden he made a million dollars. He just kept doing a job so someone else could do a job, and everyone got paid.
He invested his money conservatively, in banks and utility stocks like NIPSCO and Indiana & Michigan Electric. On his advice, I invested my college savings back in the 1970s in a four-generation family-run business called Michigan Gas & Utilities, and I continued investing there for the next three decades.
Like Sobieski, it had a clear business model – hook a natural gas line to a house, keep track of how much they use, collect the money.
In a century’s time, founder Lemuel Green hired his son, Ralph, who added his son, Richard, as the business grew steadily. When the fourth generation, Richard Jr., took over, he was smarter than the rest. He saw how Enron and other huge utilities were making ridiculous profits by concentrating less on natural gas service and more on energy price speculation.
So that’s what Richard Jr. did, and it ended badly. The business went in the tank and was taken over by other companies. We investors lost 90 percent of our investment, and thousands of employees saw their 401(k) retirement plans disappear.
You might be wondering what happened to that bank I was mentioning.
Like the natural gas industry, the banking business went through an upheaval in the 1990s and early 2000s. The stodgy old way of doing things was paying off in nickels and dimes, but the jet-set money was going to far bigger projects.
Sobieski had started shedding its Polish neighborhood ways when my father bought 1,000 shares of stock in 1994. It had a fancy new headquarters a few years later when Dad sent some of those shares to me.
I started to see the Sobieski name on local projects far bigger than a two-car garage or a modest family home. One of those was the South Bend Brewery, a can’t-miss restaurant that two local businessmen opened at the former Captain Alexander’s property on the East Bank riverfront.
We were excited to see a new place like that, hoping it would revive the city’s nightlife. But here were two things I noticed early on:
One day, a little after noon, I walked in the door and had to sidestep stacks of cans and bottles. One of the owners had left word in the morning that a new brew needed to be featured. When the other owner came in just before lunchtime and saw the display, he rescinded that order and demanded a whole new setup. “Happens every day,” the greeter said.
Another time, I ordered a three-beer sampler and sat at the bar. It was called the Red, White & Blue – a red ale, a white Belgian ale and some sort of lager with blueberry flavoring.
“They’re all flat,” I said after a few sips.
That’s the way they’re supposed to be, the bartender said. American beer needs carbonation but true European beers are naturally smooth.
That’s how I found out I didn’t like true European beers.
As best I can tell, the place opened in March 1999 and closed that October. The contents of the place were auctioned off by Sobieski. I thought about bidding $25 for a lifetime supply of beer mugs, but I didn’t have room to store 400 of them.
I had to wonder if the bank directors thought the beer was flat but were afraid to say so.
Sobieski didn’t last much longer. One of the commercial loan officers got involved in illegal stuff, and almost $10 million in funds disappeared. The loss brought the bank to its knees. In 2004, after more than 100 years as Sobieski, the bank’s assets were taken over by MFB Financial, which was taken over by Mutual Bank, which was taken over by Flagstar.
I don’t intend to pick on Sobieski or banks or utilities. This is the way we are now. We abandon tried-and-true methods because they’re boring and can’t bring us instant millions. That’s what ruined the news business, for example. It’s why I don’t like politics and why I’m less of a fan of professional sports.
I knew folks at Sobieski. After my shares were absorbed by MFB at a fraction of their value, the remaining Sobieski officers continued to track down missing assets. Eventually, I received a final settlement check that included a few more hundred dollars.
My father was right. They were good people. They just lost track of Lenny and his garage.