A Field of Schemes II

 

          

                                                                                      

This is the city. Chicago, Illinois. A place where people work hard, save their money, and trust their banks. But trust has a way of being broken.

The story you’re about to read is true. The names and places are real. People trust their bankers with their money, their futures, their lives—but not all bankers are worthy of that trust. And the consequences—lives ruined, faith broken—speak louder than the just facts, mam.

There are many stories like this—tales of banking crimes, fraud, and deception. Some make the front pages; others vanish into the footnotes of financial history. What follows is just one of them.

This is the story of A Field of Schemes.

Marvin Wagner turned to see a thirty-something man (John) wearing a Chicago Cubs’ t-shirt entering the bank  lobby. Wagner knew him. They exchanged smiles. Wagner knew  most of his customers. He spent a fair amount of time on the lobby floor each day socializing with them while hovering over his array of household gadgets and other premiums. People generally want to be acknowledged and entertained, and Wagner was a consummate  “schmoozer” as well as the bank president. 

The “bank,” City Savings and Loan, located in Chicago’s  “West Town”  - a neighborhood closely allied with  "Ukrainian Village" and known for its historic architecture, and vibrant culture was part of the broader Savings and Loan  industry. Most of  City’s customers were from Eastern Europe. Ukrainians, Poles, Czechs, and Hungarians. Wagner is a German name (Wagon Maker), but Marvin had an ear for Slavic languages and was able to get by in casual conversation with most all of his depositors -  and he was an artful talker.

Chicago in the sixties was alive and bustling—skyscrapers and factories towered over- crowded streets, streetcars clanged along State Street, jazz and blues drifted from clubs, and neighborhoods pulsed with ambition and tension, filled with immigrants arriving in search of opportunity, often too trusting in a city that offered  both promise and inequality.

And the S&L industry was facing tough times strained by the effects of inflation, competition from other financial institutions, and fluctuating interest rates. Federal regulation capped rates  and to attract depositors, S&Ls like City Savings offered promotional giveaways: like toasters, blenders, or cookware, electric blankets, and electronics, even television sets- to attract customers capitalizing on the booming consumer culture. (Maybe you got that Sunbeam fry pan from one of them?)

The regulatory framework governing S&Ls was inadequate at the time to responsibly manage their financial risks. Regulations that were meant to protect these institutions instead limited their ability to adapt to changing market conditions. And when market (interest) rates rose, their portfolios of low yielding long-term fixed rate loans did not adequately fund the interest they had to pay depositors and cover operating costs.  Many S&Ls failed in the Chicago area and City Savings did as well, but it had help. 

Fraud.

As president, Wagner  approved numerous  loans to cronies with abysmal credit  in exchange for large kickbacks - loans that quickly went into default.  His embezzlement involved siphoning money directly from deposits and creating false accounts to hide the illicit withdrawals. Sometimes he would use the bank’s money for his own speculative investments including buying property in his name. He  “cooked the books,”  manipulating financial statements to misrepresent the bank’s health by inflating asset values and understating liabilities giving a false impression of solvency and profitability. Ultimately, auditors  uncovered Wagner’s schemes and found him guilty of fraud, embezzlement and financial misrepresentation. City Savings was closed by its regulators  in 1964, and Wagner was sentenced to prison.

For some reason the  judge decided to “go easy” on him, referring to his misdeeds as just white collar crimes. He was sentenced to serve time at an “honor farm”, a minimum-security prison  where he  performed agricultural work:  Federal Prison Camp (FPC) Bryan in Bryan, Texas. The prison's amenities included recreational activities, educational programs, and a commissary offering personal care items leading  some to describe it as a "country club" prison.

One sweltering August afternoon, Marvin Wagner was detailed  with other prisoners  to work  in the prison’s cornfields. His fellow inmates watched as he veered from his assigned row, slowly slipping away farther from their sight as though the stalks themselves beckoned him inward never to be seen again.

 Somewhere in that endless maze of corn, he still wanders, a wayfaring stranger shackled less by the prison barb than by shame and  the weight of his own deceit.

Meme:

Strangely, even after word got out that the bank was failing and depositors scrambled to withdraw their savings, Wagner stood in the lobby and was able to convince many  of them it was not true, and they redeposited their money.