The Knowledge Bank

Jonny Red · 12-20-2007, 01:07 PM

After careful consideration and the receipt of the "2007 V7N Member of the Year" email (and reading through some of the other posts) I have decided that crazy isn't necessarily a bad thing.

For those who don't know me (and that's almost everyone here) I am always looking for creative and feasible ways to better the world we live in. I would say that 80% or more of my ideas are... Well, the best way to put it is that I firmly believe that the best idea is formed from testing many bad ideas; and you'll notice after hearing some of my thoughts, I am not afraid to test the bad ones

Lately I have been focusing my free time on ways in which to provide better funding for local communities. As far as I can tell, (and please correct me if I'm wrong) too much of the general population is working long hours with little break and still lives paycheck to paycheck. They have problems with getting adiquate insurance, good credit, healthy food at a reasonable price, good education and a whole list of other issues that everyone knows about but can't or won't change.

Somewhere in the idealistic part of my brain I believe that the changes necessary to correct those issues are not as complex as they seem. Also, the side of me that is based in the "Real World" knows that greed can make change difficult; More than that, fear of not having enough money can cause poor investment decisions, like those "Get Rich Quick" plans that are so popular. (Check out eBay if there is any doubt)

Anyway, I have an idea that just might work, but I have too little knowledge of this particular industry to pull it off. I welcome all comments, suggestions, random thoughts, and interested facilitators.

The Idea is to start a Not-For-profit bank that contributes all of it's earnings to the community in which it resides. (Towards educational programs, food, shelter, medical care, sustainable development...etc)

The first Question I would like you to consider when thinking about this is:

When you pay an ATM withdraw fee, would you feel better knowing that it is ultimately going to pad someone's wallet or to improve the community?

What do you think?

Atom · 12-20-2007, 05:03 PM

Exactly how would the withdrawl fee improve the community again? I may have overlooked something.

Jonny Red · 12-20-2007, 07:07 PM

Hi Atom,

Thanks for asking.

Today's banks charge you fees for everything; fees for ATM withdraw at a convenience store, for overdraft penalties, and even so far as a charge for going inside your bank and speaking with an associate at some account levels.

Long story short, this is one of the many revenue generators that the bank has in place. (Along with the whole loan & interest rate stuff)

What I am proposing is to structure the bank in a slightly different way so that the "Profits" are used to facilitate growth and opportunity within the community.

So, if you had to take money out of one of those bastard machines that is charging you for it, than at least you will have some small satisfaction that the "bank Charge" would benefit the community and not just be additional revenue for a "Rockefeller".(probably shouldn't be a charge in my suggested model, but to make the point it seemed an easy example)

Does that make sense?

Atom · 12-20-2007, 07:13 PM

Hi. Yes, that makes sense.

How would profits facilitate growth and opportunity within the community?

Jonny Red · 12-20-2007, 07:30 PM

Well that’s a longer answer than I have time for tonight but I'll do my best to answer it in more detail tomorrow before I leave for vacation... Here is one of the thoughts.

A non profit organization has to spend it's "extra" money in certain ways to keep it's 501-C3 tax exempt status. When I worked with adjudicated youth we would spend the money on computers, better teaching materials...etc.

This bank would need to partner with charities in the local area, or start it's own if need be. The reason that I think it should be a bank is because the amount of profit that a bank earns in a year is enough to make you blush. And, if you have time, take a look at what former president Andrew Jackson thought about the banking structure we have now and what the great leaders at the time did to pay off our national debt.

I'm not saying that this is anywhere near a perfect idea, but it couldn't hurt and would at least help a little bit.

Proper management would be critical.

Atom · 12-20-2007, 07:40 PM

So basically your goal is to help charities?

jdspc · 12-20-2007, 11:41 PM

Even if the 'funds' were used to beautify parks in the zip code of the atm...
The concept is worthy.

Jonny Red · 12-21-2007, 09:31 AM

Thank you JD! Do you know anyone qualified for the loans to get it going?

And yes Atom, the funds would go to help charities. My original idea though was to create a charity arm to the organization in a similar way as The Virgin Group did with Virgin Unite but with a few twists.

First: Start small-

Start up 1 county at a time. Set revenue goals sufficient for accommodating a realistic percentage of the county that is in severe need.

Now let’s say that we have launched in Delaware County, PA and were successful in generating enough in funding for the first year. (I realize that it is not likely to have enough funding in the first year, but enough for a start and this is for conversation purposes.)

Now we take the funds and purchase as much farmable land as is needed to support that % the county's struggling families. (Full pay, no loans) If not enough land is available, or if special permission is not available for the community in that area, buy as close as possible)

Take the remainder and purchase the bare necessities for running a functional farm & setting up standardized housing for the local homeless population and / or poverty stricken families. (This would have to be a non-religious based community.) Then hire struggling farmers to come in and teach our new friends how to manage it. Education and job training will be available, but farm chores come first

)

The goal once they arrive is to teach each person marketable skills & provide some type of employment. (Farming, canning, machining, teaching, cleaning, cooking... The same as being at boy/girl scout camp only for big kids like us

)

I understand that some will be unable to learn skills and will likely become a permanent resident. Guidelines and restrictions will have to be in place, but that will require people much smarter than I to organize.

The Community will be engineered to be as energy efficient as possible so that in 2 or 3 years time it can be 100% self sufficient. After it reaches that stage, any funds available from those local banks will be directed to the next community on the list, and for the purpose of building banks, buying land, equipment and educational tools like computers & Books...etc)

Hit the major cities first and decide the order of priority by the number of needy in the county.

That's my

in a nut shell... Anyone asleep?

Jonny Red · 12-21-2007, 09:37 AM

Quote:

Originally Posted by jdspc

Even if the 'funds' were used to beautify parks in the zip code of the atm...
The concept is worthy.

I agree with you 100%. This would also be a great way to gain acceptance in a community by having our 'guests' do the clean up.

ewomack · 12-21-2007, 01:26 PM

Why a bank? Many non-profit and government organizations already perform the services you described. Plus, banking comes with a lot of overhead, maintenance, and marketing hassles. Banks also come with negative cultural capital: they have a reputation for being money grubbing mercenary institutions. Marketing would have a hard time proving to potential bankers that "we really mean it." Plus, people look to banks for competitive interest rates on accounts, loans, and mortgages. The money you would spend on improvements would get taken away from investing in the bank's monetary health. And if that goes people will pull out in droves.

If your ultimate goal is to improve humanity, banking probably isn't the path to scuttle down.

Just my zwei pfennigs.

Jonny Red · 12-21-2007, 02:40 PM

Ed, I will gladly respond when I return from Vacation, but the reasons you mentioned for not going down that path are actually some of the motivators for the idea. Bettering business ethics is always a goal.

Jonny Red · 01-03-2008, 03:29 PM

Quote:

Originally Posted by ewomack

Why a bank?

Because it works so well for the Rockefeller family

Quote:

Originally Posted by ewomack

Many non-profit and government organizations already perform the services you described. Plus, banking comes with a lot of overhead, maintenance, and marketing hassles.

Yes they do, and it does. Overhead is my primary concern, but it is achievable.

At first glance I believe that the property and real estate (owned by the bank -and the bank owned by the people of the community) will be the leading responsibility of the bank managers to acquire. Responsibility for the initial funding will have to come from wealthy idealists who believe in the cause, and are willing to commit to long term deposits of large sums of money at a fixed interest rate.

Another thing I like about that is that funding could be given as a donation, and then would be a tax deduction for the sponsor. Once the bank has developed the community sufficiently enough to repay it’s initial loans, those funds would be released to the investor, or floated to the next community on the list if the investor wishes (the bank would always float it's earnings to the communities it serves).

How many celebrities do you think would donate to a cause to help impoverished communities? (I can name more than a few that are currently doing something similar, and would be ideal for first round financing)

Quote:

Originally Posted by ewomack

Banks also come with negative cultural capital: they have a reputation for being money grubbing mercenary institutions. Marketing would have a hard time proving to potential bankers that "we really mean it." Plus, people look to banks for competitive interest rates on accounts, loans, and mortgages.

2 things:
1. What gives them a bad reputation? (Feel Free to add to my list, I'll start with 2 and offer why my suggestion could be better)

a) Interest: They charge a mountain of interest and... what is your interest rate at your bank?
I would plan to charge a fixed, smaller interest rate and split the earnings with the people who keep their money with us. To make the point short, it's your money they're loaning out & you should profit more.

b) Loans: Banks can loan out much more than they have in actual currency, so they make money on money they have never even seen. I would suggest loaning out only an amount of money to the prospective borrower that they have enough assets to cover. <-- this is tough for me to work out and I welcome advice in this area.

I think it could work like this: If the bank has to foreclose, the property that it acquires will go back to the community and the person/s borrowing will still have some resources available to regain footing should they go belly up.

2. Marketing Problems... don't see this as such a big problem, just market Smart!

Focus on what the people are interested in and advertise accordingly.

i)the "Green" benefits
ii)the interest rates
iii)the community improvement programs
...etc.

Quote:

Originally Posted by ewomack

The money you would spend on improvements would get taken away from investing in the bank's monetary health. And if that goes people will pull out in droves.

Not if we invested wisely. We only borrow against our assets and invest in farmable real estate among other generally stable things. Real estate is a great investment if we buy outright because it has good, usually growing market value. If we build "Green" on the properties we need to keep, we will only enhance the value of the investment and thus have some reasonable stability with our investment for the future. At least it will be more predictable than our shakable stock market. Thoughts? Suggestions?

Quote:

Originally Posted by ewomack

If your ultimate goal is to improve humanity, banking probably isn't the path to scuttle down.

Why Not? For the reasons above it seems pretty good to me.

Where is it written that a bank's business model can't be used to build a charity? Can you think of another money machine that the majority of the population utilizes daily without serious though for where their money goes?

I say tell them where it goes and help them to invest it better

(by better I mean earning more money through interest and helping the community, not earning the common interest "share" while a very few people profit.) If I said it's a win/win, would it be cliché?

I hope that I’m making sense, and I really want arguments for both sides. I don’t know if this is an idea headed anywhere but it’s a nice though for me and hopefully a good conversation piece to throw around a group of creative thinkers