HOW E-Z MONEY CAN K-O YOU! (Feb, 1958)
HOW E-Z MONEY CAN K-O YOU!
Cut-throat moneylenders, charging up to 1000% interest, drive cornered debtors into crime . . .
BY GENE TAYLOR
“DO YOU NEED CASH?” the bright neons ask with a cold glare. “It’s E-Z!”
You can get money in the most unlikely places today, but you’d better beware, brother!
You’re buying trouble with that “personalized small loan” whether you get it over or under the counter. You were broke when you started after it. But you may end up with broken limbs, or even dead in the gutter!
Maybe you’ve been unusually lucky and the day you need a loan is still to come. But, whatever the exact time, odds are you will borrow money at intervals throughout your life!
The blunt truth is that millions of Americans are in the hands of ruthless moneyleaders, paying far too much for loans — because they have to borrow but don’t know where and how.
Those neons and newspaper ads tell you the money tree is just around the the corner. All you have to do is shake it a bit and you get the dough you need.
There are over 8,000 banks specializing in small personal loans. The number of small-loan companies (up to $500 a throw) has increased 72 per cent since 1940 and today has risen to over 8500. In addition, there are innumerable shady operators “ready to help” at a moment’s notice.
Help, indeed! Despite the cool dig- nity of the banks and the occasional decency of a handful of ethical loan companies, moneylending is a cutthroat racket — as Harry Binder of Astoria, New York, could tell you if he were still around.
But Harry Binder is dead!
He cut his own throat — first figuratively when he borrowed money; and then literally, with an old-fashioned razor — when he could no longer pay even the interest a Shylock demanded LIVING ON CREDIT The true-life story of Harry Binder reads like a melodrama with a gruesome ending. It’s the story of something that is happening every day all over the country to thousands of nice people and it could happen to you!
A thick curtain of silence protects these vicious racketeers; “tight money’ and the public’s ignorance is spawning thousands of these free-lancing moneylenders who operate in the sewers of this nation’s complex economic system.
They are called loan sharks!
The name is an insult — to the sharks!
See what such a leech did to Harry Binder!
Harry was one of the millions of Americans who live well but way beyond their means — largely on credit.
Their cockeyed economic existence makes old Ben Franklin turn somersaults in his grave.
These people make good money in salaries and wages. But no matter how much they make they can’t pay the butcher, the baker and the candlestick maker. They’re in debt up to their necks!
Harry Binder was living on the installment plan — various credit companies actually owned everything he had: his house, furniture, car, appliances, TV set, even his spits and false teeth.
His wife was expecting a third baby, Harry still owed the obstetrician $60 on their first and $110 on their second child.
DEATH SETTLES DEBTS Harry Binder was a walking collateral. In the middle of it, his aged mother got sick. The old lady wasn’t covered by any health insurance and Spender needed cash to meet the additional expense.
He needed two hundred bucks!
He already had a loan on his insurance policy and owed money at his bank. His relatives and friends had no ready money to help him. The additional $200 became a real headache.
Harry worked in Long Island City at one of those firms which make infrared broilers. One day in the shop he confided his plight to a fellow worker. The man told Harry: “I know a guy who could help you!”
He took Harry to a bar on Amsterdam Avenue in midtown Manhattan and introduced him to a dapper, fat little man with a swarthy complexion and a pair of shifty eyes who showed up for the date in a flashy Cadillac convertible.
A deal was made. Harry got his $200, but not quite. He agreed to repay the loan within a month and, in the meantime, he had to pay an interest at the rate of $2 — per day!
The man deducted the first week’s interest from the principal and handed Harry $186.
At the end of the four weeks, Harry had no money to repay the loan. The moneylender was annoyed.
“I need the dough,” he said in his heavily accented English: “Whatsa matter? I need the dough! You’ll have to pay a penalty!”
“Okay,” Harry said. “How much?”
“Five bucks a day till the principal is paid!”
Harry Binder tried to reason with the man, but it didn’t do him any good. “You pay,” the fat guy warned, “or else!”
In this business “or else” means trouble: denunciation at the debtor’s place of work, stones thrown through his windows, molestation of his kids, anonymous calls to his wife, and worse — brutal violence.
After a few weeks, on an original loan of $200, Harry owed the shark a total of $732. Each week his indebtedness increased by $49.
In the end, Harry Binder paid with his life for what he couldn’t pay in money. He disposed of the debt by slashing his throat.
That is one way of settling these leaping debts.
A 23-year-old New York elevator operator named Edward J. Polakowski settled it another way. He harpooned the shark!
He was earning $85 a week, but needed $150 in a lump sum early this year to pay an insurance premium and buy a new suit. He grew up in an area of New York infested with loan sharks. He knew his way around. He borrowed the money from one James Francis Malloy, one of the financial wizards who operate out of shabby West Side bars.
After he had made five weekly payments of $23 each, Ed Polakowski discovered that each $23 represented only interest! He hadn’t reduced the loan principal at all!
Ed persuaded his sister to co-sign a legitimate loan of $300 from a New York bank and last May, he went to Malloy to repay the whole thing. But Malloy told him his debt had ballooned to $550. The shark warned Ed that he’d better keep paying that interest or he would get his limbs broken!
Ed Polakowski had enough. He ambushed Malloy one night, killed him, put his body in a trunk, and addressed it to California via Railroad Express. Polakowski was as inept at murder as he was at borrowing. Malloy’s putrid corpse betrayed him and Ed was quickly caught. The outcome of this experiment in usury is that Malloy is dead and Polakowski is in prison, maybe for the rest of his useful life.
The mess the wretched Binder and the miserable Polakowski made of their lives should be a warning to the countless hundreds of thousands of other fools who are in the clutches of loan sharks now or who are tempted to turn to them. It’s a timely warning!
For the grim fact is that all of a sudden loan sharks are busting out all over the country like a rash. Said one banker: “We don’t know whether it’s a reflection of high living costs, an indication of general unrest, or what. But we’re all terribly concerned about it.”
GANGSTERS DOUBLE AS SHARKS The loan sharks represent a hidden national menace. They are the source of more vicious crimes than passion or human frailties like drinking or gambling. In recent months, banks have been robbed and babies kidnaped by desperate men who have become do-or-die criminals, even murderers, to meet the insatiable demands of the loan sharks who held them in a relentless vise.
Who are these leeches and what makes them tick?
The shadowy character Ed Polakowski killed wasn’t quite typical of the professional moneylender. A house-painter from Philadelphia, a bitter and lonely man, Malloy became a “six-for-five man.” He had a morbid obsession about making a “cool million.”
He started out with $2500, but never really amounted to anything, despite the 1000 per cent interest rate he charged his hapless clients. At the time of his sudden death, Malloy’s bank account contained $250 and a diamond ring he once bought for a gal who jilted him.
Regular loan sharks, these parasites of the last resort, are actually gangsters with every characteristic of the fraternity from cauliflower ears to sawed-off machine guns. Many are actively engaged in some criminal activity and do loan-sharking as a profitable sideline, to compound their illegitimate earnings.
In Harlem, the biggest numbers racketeers double as loan sharks. In Dallas, Texas, several minions of the notorious Benny Binion are eking out a good living by loaning money at 1040 per cent. In midtown New York, a racketeer whose main line is shaking down garages also thrives as a moneylender with rates ranging from 350 to 800 per cent.
STOP SHORT OF MURDER He’s the aristocrat of the profession. He never appears in any of his transactions. He operates with “dealers” and collects with ex-members of the Mafia. There is plenty of rough stuff in the wake of those seasoned collectors.
The New York police estimate that a substantial portion of Manhattan violence short of homicide — muggings and stabbings — is attributable to them. These are the “dunning notes” the sharks send out. They are careful to stop short of murder, however. After all, they don’t want to kill off the geese that lay the golden eggs.
Unorganized, unlicensed and unscrupulous, loan sharks are lone wolves. They operate singly, with out-of-the-pocket loans. They hang out in shady bars, seedy barber shops and crummy cigarette stores, waiting for touts to bring in the customers.
The basic idea is never to let a borrower repay the principal, but keep him on a chain by extracting stifling interest from him that exhausts his financial resources.
In Alabama and Mississippi, loan sharking is a means for bringing about modern form of peonage. Money is loaned to a worker to tie him down. As long as he owes money, he cannot move out of town and isn’t even permitted to leave his job. The runaway debtor is today as common a figure in the South as the runaway slave once was.
In the wake of the frightful Polakowski scandal, a prominent New York financial writer pointed out that Ed could have gotten the money he needed from other, more legitimate sources without mortgaging his body and sou) to Malloy the Shark.
In fact, however, most of the “legitimate sources” are also loan sharks in a real sense, except that they are licensed and have, a respectable front. Because of the absence of effective Federal curbs and the laxity of State legislation these legit loan sharks flourish everywhere, and especially in the twelve states which have no pertinent legislation. They put a glass of respectability on usury, but they are loan sharks in all but name.
Texas is among the worst! The Dallas Better Business Bureau warned against the spurious moneylenders when it found rates as high as 1,131 per cent, with the average 271 per cent.
But Texas is unregulated and deuces are wild. Things are a little better in the regulated states. The usual interest rate allowed the legit small loan companies is an average of 3 per cent per month on the unpaid balance, or 36 per cent a year. The licensed moneylender is no Good Samaritan and he’s the first to concede it.
“I get by,” one of them told this TOP SECRET reporter. “What the hell, it’s a business! It’s an institution! America is built on credit, and we are doing our part.”
DETOUR TO PAWNBROKER Big profits on small loans attract plenty of newcomers to the business. In a single year 510 new firms joined the already swollen national small loan field. There are now 186 in Manhattan alone. The biggest, the “international” Household Finance Corporation, now has over 800 branches, in forty states.
It was held up by the above-mentioned financial writer as one of the few ethical loan companies. According to her, if Ed Polakowski had borrowed the $150 he needed from HFC instead of that louse Malloy, for a year, his monthly payments would have come to $14.50 all told, instead of $23 a week just for interest. His interest for the whole year would have been $24.72 against the $23 he had to pay Malloy for just one single week.
A $500 loan (the maximum) with HFC, to be repaid in twenty-four months, costs $125 or about 25 percent of the borrowed principal. In a sense it is an unsatisfactory loan and by normal banking standards, the HFC is a glorified “loan shark” despite its smooth front. The same $150 for which HFC would charge a rate of $24.72 interest a year would have cost Ed Polakowski only $6.38 over the same period at a bank. The $500 loan which cost more than $125 at HFC, costs only about $30 at a bank.
Still, the 860 branches of HFC are crowded, as are the other small loan companies. Last year more than 8000 moneylenders in thirty-eight states peeled off $3 billion to ten million customers, at monthly rates ranging from 2 per cent in Massachusetts to 31/2 per cent in Arizona, New Mexico and Florida. What does this mean?
It means that at least ten million Americans are in the clutches of loan sharks (legitimate or not), using $3,000,000,000 of their money and paying them an annual $1,000,000,000 A detour on the way to the loan shark is a trip to the pawnbroker. This is widely regarded as the least desirable of the legitimate sources, often as bad as an underground loan shark You must turn over your asset to the pawnbroker during the life of the loan. Ordinarily, he’ll lend you only 60 per cent of the auction value of your possession, and he charges from $24 to $120 on a $100 loan for 12 months Let’s see how this operates in the case of a $100 typewriter pawned with broker in mid-Manhattan. Its auction value being about $40, the pawnbroker gives a maximum of $25 on it. There is a flat 50 cent charge for some obscure purposes of “protection,” $4.50 interest for the first six months and $3 for the rest — a total of $8, or 35 per cent of the vastly reduced loan-value of the pawned article And yet, because of their liberal loan policies and flexible human relations, small-loan companies and pawnbrokers are necessary evils, available in dire emergencies — at a price.
Loan sharks are different! They feed on ignorance, despair, stupidity and fear. They exist mainly because so many Americans simply fail to realize the true nature of the racket.
Think of Harry Binder and Ed Polakowski! Think twice before you approach these despicable creatures, no matter how badly you need dough.
You’re flirting with ruin or death when you borrow money from a shark!