When a Bank Takes a Home
I ONCE had a neighbor who worked for many years on rebuilding his house. He did a lot of the renovations himself and the place was transformed from a hideously ugly ’50s ranch house into a very attractive, two-story colonial. In time, our friend and his wife borrowed some of the equity they had accumulated on the house, equity which was generated by the increased value of the house resulting from the labor he had put into it. They borrowed the money to send their children to private school. And then they borrowed more to send them to college. And then his income declined. And then his wife left him. And then he drank too much. The bank reclaimed the house. The house he had spent years rebuilding and infusing with his own artistic personality no longer belonged to him.
Leaving aside the great injustice that was done to him through divorce, let me focus for a second on those banking transactions. The bank that held his final mortgage took the house not because it had lost any of its own real money on the house. It reclaimed it because it had not made enough money on the house. Our friend and his wife had, of course, paid tens of thousands of dollars in interest payments over the years, but they could no longer afford the credit that had been extended to them. The interesting thing about the loans they procured is this. They had put up something real — a house — to obtain the credit. The bank had put up nothing. It had risked nothing other than the opportunity to profit from extending credit elsewhere. It had simply created figures in its accounts, made money out of nothing, to make the deal with him. The credit the bank had extended to him was part of its share of the national reserve of credit that constitutes our collective goods and services. The bank takes some of the credit that rightfully belongs to all and sells it for a profit.
Something doesn’t quite make sense here, don’t you think? That’s what Jerome Daly thought when he was about to be foreclosed on his Minnesota house in 1969. He said, “Wait a minute. The bank put up nothing, and now it is taking my house.” He challenged the foreclosure in court.
In this video excerpt from a movie called Zeitgeist: Addendum (I have only seen this clip not the whole movie), the case of National Bank of Montgomery vs. Daly is explained. Jerome Daly won the day. Unlike my neighbor, he did not lose his house because the court agreed that the bank did not rightfully own it.




