When the Fix Went In

My first newsroom job was working the traffic desk at Chicago’s NBC television affiliate, three dozen years ago. I answered phones and sorted mail. My seat was at the bottom of a cramped horseshoe, with editors at keyboards flanking both sides. It was the best seat in the house.

Management had recently recruited a young financial reporter. Terry Savage gave up her place on the Chicago Mercantile Exchange trading floor to reach a television audience. She’s since written several books. Her consumer advice is featured in the Sunday business section of this and hundreds of other newspapers.

I caught up with Terry recently to compare our memories of a particular story she did and the deluge of reader response that followed.

It was 1979. America was enduring double-digit inflation. Passbook customers were earning a measly five percent interest on their savings. (Savings-and-Loans were allowed to offer a half percent better. Regulators ruled.)

Terry remembers the tease tag to this day, played between commercials to keep television viewers seated. (There were no remotes back then.) “Earn ten percent interest on your checking account. Stay tuned for the news.”

Over a cup of coffee, she filled in the details for me. “Treasury notes were trading at 12 percent or around that, so paying 10 percent wasn’t really that generous, but regular ‘bungalow people’ didn’t have access to it. They had money, but nowhere to put it. I made that connection for people.”

She offered to send a list of companies offering free checking for accounts with a minimum balance, plus an interest rate that was double what banks could offer. Viewers had only to include a self-addressed, stamped envelope. (Another blast from the past.)

I saw the mail flood in. Terry was still “the new kid on the block.” When she asked for help to stuff those envelopes, she found no takers in the newsroom. I agreed to take a late train home and help her. She bought pizza.

Only this spring did I learn this little tidbit: “Management didn’t like being surprised, so they made me pay for the photocopies out of my own pocket,” Terry laughed. “And photocopies weren’t cheap back then!”

I tell this story now because that moment of licking envelopes marked an important shift in American and world economics.

She gave “bungalow people” access to money market mutual funds, which were relatively new at the time. Most offered a limited number of checks each month to make withdrawals at any time with no penalty.

It proved wildly popular. My late return from Chicago that night was proof of that.

Ordinary investors soon found they had access to the same companies’ “no-load” (no-commission) mutual funds — those not sold by brokers, who at the time earned an 8% up front commission! Suddenly, ordinary people had access to the stock market at low cost.

Until this shift occurred, there were two savings economies. People with plenty of money, sophistication, and spare time invested in the stock market. But regular people steered clear, for several reasons. The additional risk may have been off-putting, but mostly the barrier to entry was too high. They needed too much money to get in and it cost too much money to make trades. Remember, this was decades before the advent of discount brokerage firms.

And it all started with money market mutual funds, which offered a significantly higher rate of return than banks, and free checking, to boot. People loved it, leaving passbook savings behind. Retirement funds followed and soon the distinction between how people saved their money collapsed.

Now there is only one savings economy and corporations are central to it. Whether you’re a schoolteacher with a union-managed retirement plan or a young family saving for your children’s college expenses, you can’t afford to see the businesses around you do anything but succeed and expand.

We pretend that our economy pits the 99 percent against those who live at the top, but the truth is they bought our loyalty to their interests decades ago.

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Don Kahle (fridays@dksez.com) writes a column each Friday for The Register-Guard and blogs