Amalgamated Bank

lmagamated Bank is a national bank owned by the Workers United labor union. It was founded by the Amalgamated Clothing Workers of America in 1923. It is headquartered in New York City.

Amalgamated Bank is the only bank in the United States wholly owned by a labor union. Located chiefly in New York City, but with branches in California, the District of Columbia, and New Jersey as well, Amalgamated Bank offers free checking accounts, no minimum balance on savings accounts, low monthly fees, low rates on mortgages and auto loans, and low or no fees on ATM transactions. In addition to its full line of commercial and individual banking services, Amalgamated Bank provides trust, investment advisory, custodial, and benefit remittance services for employee benefit plans.

The Amalgamated Bank of New York was founded in 1923 by the Amalgamated Clothing Workers of America (which later became the Amalgamated Textile and Clothing Workers Union, and, still later, the Union of Needletrades, Industrial and Textile Employees-UNITE). The first labor bank in New York, it was also said to be the first bank in the city to operate on a profit-sharing basis with the depositors. Amalgamated Bank was originally located on East 14th Street in Manhattan but took a lease in 1925 on the five-story Tiffany Building adjoining Union Square. Still in Manhattan, but in a different neighborhood, the bank's headquarters now sits at 275 7th Avenue in Chelsea.

Amalgamated Bank of New York--and its sister bank in Chicago, the Amalgamated Trust and Savings Bank--were among the 36 union-backed banks founded in the United States during the 1920 (22 in the first four years of the decade alone). Most of them failed to survive the Great Depression because they were run by union officials who made poor investments and often put ideology before prudence--for example, by financing strikes and making unsecured loans to union members and supporters.

The Amalgamated Bank of New York, founded with $300,000 in capital, offered such services as low-interest loans to workers and debt-consolidation services to police and firemen. Because many of the parent union's members were immigrants, Amalgamated was the first to introduce a foreign-exchange transfer service allowing them to send remittances safely to their relatives in Europe, payable in dollars rather than local currency. Within three years, over 400,000 individuals and 200 banks were using this service, and during the first 20 years more than $50 million was sent to 1,273,931 distressed persons abroad. Amalgamated also established a travel agency for the same reason. In 1924, it was the first New York City bank to offer unsecured instalment loans based on the borrower's employment history and future earnings potential. It also financed the first union-supported housing project in the United States, in New York City's borough of the Bronx. Eventually the program grew to three cooperative projects--the other two in lower Manhattan--providing low-cost housing for 2,536 families and serving as a model for much larger housing developments financed by big insurance companies.

Amalgamated Bank of New York had prepared itself beforehand for what proved to be the panic period of the Depression by selling securities for cash and liquidating loans, even at a loss, until its holdings were all in cash and short-term federal Treasury bonds. As a result, it was always able to reimburse depositors closing their accounts and was one of the first banks allowed to reopen following the bank holiday declared by Franklin D. Roosevelt following his presidential inauguration in March 1933.

During the next 30 years, Amalgamated Bank of New York provided loans for workers who wanted to buy apartments in its three housing cooperatives. It started managing trust funds for other unions in the early 1960s and extended banking hours for the convenience of workers. The bank also established professional investment counseling for the managers of the union's growing pension and welfare funds. By 1963, when Amalgamated Bank celebrated its 40th anniversary, it was--along with the sister bank in Chicago and a Kansas City, Kansas, institution--the only survivor of the many fully owned union banks that had been founded in the 1920s. The institution's assets came to $115 million (compared to $1.44 million at the end of its first year). Amalgamated's rates for auto and personal loans were the lowest in New York City. It had a customer base of about 30,000 depositors and borrowers in 1965.

Amalgamated Bank of New York began offering checking accounts in 1973, becoming the first in the metropolitan area not to charge a fee either for the service or for checks without requiring a minimum balance. Also in 1973, it created a division for trust and investment services to serve employee benefit plans, providing trust, investment advisory, custodial, and benefit remittance services. A tradition of special help to labor and liberal groups continued into the 1970s and 1980s. Amalgamated Bank of New York once opened its vault on a Saturday in order to provide $300,000 in bail for pickets arrested the night before. The National Association for the Advancement of Colored People received $800,000 to post a cash bond within 24 hours. In 1973, bank officials worked all weekend to come up with bail checks so that striking Philadelphia teachers could stay out of jail. Nine years later, Amalgamated gave the striking National Football League Players Association a $200,000 loan even though the association did not have a bank account.

Since Amalgamated Bank of New York had no private shareholders--the parent union remained sole owner--it felt no pressure to abandon its conservative way of doing business in order to increase earnings. "We're probably the most liquid bank in the country," Edward M. Katz, the bank's president and chief executive officer, told Mario A. Milletti of the New York Times in 1978. Over 90 percent of its assets were in cash, temporary loans to other banks, and government and municipal securities. Amalgamated made practically no commercial or industrial loans, and its mortgage loans were only up to a maximum of five years. In all, loans came to only 15 percent of assets, compared to about 52 percent for non-labor banks of comparable size. Amalgamated encouraged thrift among its small customers by allowing pooling of funds to buy U.S. Treasury securities, so that a depositor with only $500 to invest could buy a certificate with a maturity of as little as nine months, yet receive 7 percent in interest. The bank had four offices and $720 million in assets at the end of 1977.

Amalgamated Bank of New York's practice of concentrating its investments in short-term securities was a wise policy during the inflation-ridden 1970s and early 1980s, when interest rates rose into the double digits. Its fully discretionary pension assets grew from $365 million in mid-1978 to $500 million in mid-1980. Amalgamated was managing pension funds for 93 unions by late 1983, almost entirely in the New York metropolitan area. Although it also had a few such nonunion accounts, none were personal trusts or estates, corporate employee-benefit accounts, charitable trusts, or state or local retirement funds. "We're selective as to who we take on," Katz told Cathy Capozzoli of Pensions & Investments. "We don't accept funds with stipulations about equity or long-term investments."

In 1980, as Japanese-made automobiles were flooding the U.S. market, Amalgamated offered purchasers of domestic cars a half-percentage-point discount on 24-to-36-month auto loans. "We just think it is important to help the American worker get back on the job," Katz told the New York Times. "It is important to give a helping hand." In 1982, after the New York Times quoted a Citicorp officer as saying, "A person with $200 or $300 in savings shouldn't be in a bank," Amalgamated took out an ad in the Times expressing outrage. Katz told Alice Arvan of American Banker that the statement was "philosophically inconsistent with the spirit of good community banking," adding that "in fact, one of the reasons labor banks were founded was to provide banking services to people not considered acceptable to other banks." Speaking to Lawrence Van Gelder for a 1985 Times profile, Katz summed up what he saw as the bank's philosophy in these words: "What differentiates a labor bank from any other bank is that while we are a profit-making institution, we feel that some portion of our profits should go into areas where you don't always have to maximize your earnings. In a sense we have become the conscience of the banking community."

When sharply lower inflation rates belied Katz's belief that the annual cost of living increase would never drop below 5 percent, Amalgamated Bank of New York found itself deprived of the higher yields that other investors had locked in from long-term corporate bonds and Treasuries. Nevertheless, the bank continued to make steady profits and few mistakes. In 1986, it charged off only $195,000 in bad loans out of its portfolio of $313.5 million. Only 11 out of 13,034 auto loans were 30 days or more delinquent, perhaps because Amalgamated's interest rate was the lowest offered by any bank in the city. The annual yield on its money-market rates was higher than the average paid by ten big institutions tracked. Amalgamated also charged no fees on savings accounts with a $5 minimum. In 1992, the bank initiated what it called a unique equity index mutual fund that it said would push for enhanced shareholder value by encouraging business boards to pursue sound governance policies and hold managements accountable to high social and corporate citizenship.


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