How to Avoid Messing Up Your Own Bank

You've now decided that you're going to go ahead and set up your own family banking system. You want to become your own bank. Congratulations, great for making the decision. However, wouldn't you want to know how you could screw this thing up? You know, real banks can screw things up too. So you don't want that to be you. And we're going to teach you all about what are some of the pitfalls and things you should be aware of in order to make sure you can be a good steward of your family banking system. When we're looking at explaining all these details, we always go to the source material. The source material being Becoming youg Own Banker by R. Nelson Nash. And so today we're going to reference page 19 and 20, which is creating a bank like the ones you already know about, Jason. We're going to talk about some of the ways that you can screw this thing up real good. And Nelson does a great job of telling a story right here in the book about, of course, one of the highest, most profitable per capita banks in the United States back in the 80s, the first national bank of Midland, Texas. What can we learn? What lessons can we take away from the epic failure of the First national bank of Midland, Texas?

When you access a loan, repay it. If you go back to that particular case. So this goes back to, as Nelson described, September of 1983. He's talking about the First national bank of Midland, the richest city in America per capita at that time. They had a loan portfolio of 1.5 billion. And 26% of those loans were non performing, meaning no payment streams were coming back to repay those loans. And they discovered that that non performing set of loans was largely a basket of loans lent to the board of directors of that company of that bank. And so Nelson was really teaching in this moment to say if you think about your own family banking system and you have multiple policies within that system and you've built this aquarium of capital and you're utilizing policy loans from the life insurance company and you can imagine for a moment you've got more than 26% of all your outstanding policy loans are not being repaid.

So what you're doing, if you think back to the grocery store example, is you're stealing the peas. And so when you create a system and you think about these folks at the First Midland bank, they were in the banking business.

Banking business, 101. Put money in the system, create loans.

Make sure that you're lending money to people with a high degree of confidence that they're going to actually repay it. And if you shop at your own grocery store, if you do business at your own store and you're accessing loans.

If you're not repaying them, what example are you setting for other customers that shop there? Most important, your own family. And so you can really mess this up if you're not an honest banker. And Nelson says in the book, if you destroy your own banking business, don't go pointing the finger at anybody else. That's all on you.

Well, the thing that's interesting about the lessons that we can take from the First National bank of Midland, Texas, again, 1983, obviously there was a big economic shift that happened right there in that early 80s period. Everyone knows about, everyone's heard about it. You've heard stories of what happened in the early 80s. And so it's really important to understand that the capital of this bank, there was a lot of stuff going on in oil, especially in Texas at that time. That's one of the reasons why it was the wealthiest area per capita, because a lot of oil happening in that area. And these stockholders, you know, Nelson actually would tell the story in a seminar. You know, he went to go see a client at the time and I remember he'd flown, he'd flown down to see this guy and he was sitting in the guy's waiting room because the guy came in, he says, hey, you know what, Nelson? I've got an important crisis that's shown up in the business. I just got to step out for, you know, about an hour. Can I deal with this, you know, important issue? Do you mind waiting for a meeting? I'll be right back and we can have a, you know, very focused meeting. So Nelson was in the guy's waiting room and he looked over and of course there's magazines, you know, sitting in the chair. So he starts flipping through a magazine. I don't know if it was Business Week or it was one of those like an oil producer type of a magazine. And so he's flipping through it and he says, you know, halfway through the book, and you know, this last half of a paragraph is the, is the full story of what actually happened at the bank, the First national bank in Midland, Texas, which is why he put, put that commentary in here. And so that's where he learned he knew about the bank failure already, but he learned that it was, it was really the reasoning, it was that these 26% non performing loans, and then it was the stockholders themselves who had used it because they all thought they could get rich in the oil business.

That's right.

They were already getting wealthy in the banking business, but they tried to double dip on things and they didn't realize that they also needed to be paying their loans back. They assumed that they would get paid back from some future profits. And in other words, they were taking money out of the bank that could have been lent to other good customers. And they themselves were not good customers. But the size of the loans they were taking were dramatically larger than what the average customer was taking for, say, a mortgage or a typical loan at that time. And so that's how the situation became very abysmal, very quick. And so bank failures, There was a lot of bank failures down in the states in the 80s, of course, slight differential between how we operate banks in Canada and the U.S. i mean, we have some slightly, a little bit more regulation, as it were, but the lesson is the same and it's you can kill a business real quick by taking all the capital out of a business.

That's right.

Not putting any new, new capital back in. You know, Nelson would say in his seminars all the time, Jason, all the time. How many times have you heard of a business failing because it had too much capital?

Yeah, it's a very good point. Doesn't happen. The board of directors.

Should have been.

The board of stupidity.

You mean the very group that understood that the most. And Nelson describes it in the book where he talks about how.

They were accessing those loans, as you said, to invest in the oil and gas business. And not only was there a significant.

Energy crisis that happened, which obviously severely impacted the companies that they invested this lent money in. And so they lost both the investment and the banking business. And so frequently we talk to people who are interested in implementing this process because they want to create a system and from that place they want to invest.

In other things. And Nelson always said that this process is all about how you go about financing those things.

Which can certainly include investments. But there has to always be a stable or a prudent relationship between what you have outstanding as a loan balance in relation to the capitalization of your system. And so money has to flow. And if you're only borrowing against an accumulating value in your system, but you're not replenishing the system, you can still achieve your objective of investment.

However, if the investment goes sideways and you're still not replenishing your system, you're in trouble. And he remarked best at the bottom of page 20 when he said, remember this because.

In the banking system, I am going to tell you about. You can also destroy it by not obeying the basic rules of banking. Loans have to be paid back or you can kill the best business in the world. It's up to you. But don't try to blame others when it happens. And you know, the, the First national bank, they tried to hire a new chief executive officer, they brought that CEO in. By that point it was just beyond salvageable. And what happens, I can count on one hand the number of times that I've seen this occur over the last 14 years. When something like that occurs and the policy owner reaches out, they're trying to bring in the new CEO. At that point, things are horrible here. The business is just, we don't know what's going on. We need to bring a new CEO in to help us fix things. And by that point it's too late. And so when you create a system of policies or even just have a single standalone policy in your system, it's meant to be treated like a business. You are the owner of a business that never existed before. And so you've got to treat that business as properly. And now of course we talk about passive income time, where we want the death benefit to extinguish an accumulating loan balance. But that is done on a level withdrawal amount, very strategic in how it's done so that the system doesn't implode. It's not willy nilly we're just going to take out a loan every now and then. There's actually a plan to ensure that the death benefit can extinguish that loan balance and still leave a windfall behind. But what can happen is that if you don't really truly understand and study the business of banking because people get excited about the attributes of a policy, oh, it's going to grow cash value. I can borrow against it, I can do that almost immediately. Let's get started. Let's do that. But if you haven't put in the time and effort to study the business of banking, you can go out and achieve whatever objective it is that you had in mind, but you won't know how to run the very business that you started. And so that's why going back to the book is so crucial. You've got to go back to the book and you've got to read it. Because I promise you, if we were to take a poll of a thousand people that have read this book who are brand newly exposed, they've read the book one time. And Nelson said one reading just won't do the job. If we asked all thousand of those people, can you describe to us what happened with the First national bank in Midland, Texas? People are going to be like the first.

What, he'd have crickets. You'd hear crickets in the background.

And so everything that Nelson wrote in here was intentional. It was intentional to share.

Knowledge, to help you rethink your thinking so that you could catch on and say, oh, I get it, yeah, if, much like if I get into the grocery store business, if I take the product out the back door, I'm stealing from my own business. So what are my family members going to do? Well, they're going to say, wow, if he's going out the back door, I should do that too. That's what a business owner does, isn't it? Not a responsible one.

And Nelson again, being very intentional. He's not just showing you in the book and in all of his, you know, all the videos that are available to watch of Nelson online, etc. He's not just showing you how to become your own banker, he's also showing you how not to become your own banker. Right. In other words, the whole purpose of this is to understand how would you, if you didn't have the ability to work with it, work with an authorized practitioner, a coach, to strategically help you implement this process in your life, to go and get high quality, dividend paying, participating, whole life set up in an appropriate fashion. If you didn't have the ability to do that and you still wanted to go become your own banker, how would you have to go do it? Well, he starts off by explaining, well, first you got to go and get a whole bunch of capital, capital, money together. You know, you need maybe 20, 20, 30, $40 million and then you got to go get a bank charter. Well, you know, they just don't hand those things out. You don't just have to have a big giant bank account and then you say, excuse me, hello, knock, knock, I'm just phoning in, commissioner, can I get a bank charter, please? And then like two weeks later, it just shows up in the mail and you can go operate a business. No, you got to grease the wheels. There's a whole bunch of activity that happens. You have to actually, you know, do some, do a business plan. You probably need some investors, you need tier one capital resources. You need to explain how you're going to, you know, how you're going to manage, how you're going to deal with the regulations, etc. Etc. You got to go through all of that effort so first of all, you got to accumulate the money that could take a long time through your own efforts and then investors efforts. Then you got to go make the application, then you got to wait. Meanwhile, you're looking for a place to open up your first branch, all those kind of things, everything shoots forward. Now you've gone through that whole process. You're probably five to seven years in before you've actually got, you know, you're building a construction of a building. Now your building's up and running. Now you got to hire staff and stick them in the building. You got to get a computer system, ATM machines and the whole works. And you got to train them. Then you can now move the sign that says close on the door to open and you can start attracting people. But nobody knows who you are and exists. You haven't built trust in the marketplace. No one's going to want to come to your bank to provide a deposit because they don't know who you are. So you have to incentivize them. So now they give iPads and tablets and Galaxy Sevens and whatever away. It used to be toasters, you know, 50 years ago. So there's always a marketing aspect that happens there, that's more capital you have to put up. And you still haven't got your first deposit yet. So Nelson says very clearly a banker cannot make a loan unless he has a deposit. The whole thing hinges on the deposit. Okay? Banks don't lend money their money. They lend the money that someone else has left there. That someone else is you. Okay? So if you've ever borrowed money before in your life, that's what's happened. You're borrowing money that someone else has left in custody of that bank's control. Now if you want to go and create your own banking system, you have to create that capitalization of deposits. You have to build those deposits up so you have a reasonable value to start working with. You access a policy loan from the, from the insurance carrier that you're a co owner of. So you're a co owner in the same company that makes this whole machine run. You didn't have to go get a bank charter. You didn't have to go build a building. You didn't have to deal with any employees. You don't have to handle the technology and the systems and the applications and find the distributions or marketing doors. You don't have to do any of that because it's already done for you. It's already pre constructed in the design of the insurance contract. What a beautiful thing. That's what Nelson's trying to teach us is that all the mechanics to create the same environment by which you can harness the power of banking where capital deposits can continue to grow and you can have access to capital from an entity at your discretion and control, it all exists under this one contract that is real intrinsic power. Something really interesting that Nelson mentions. It's a few pages later he talks about creating a system using dividend paying whole life insurance. It's on page 24. He says if a policy owner objects that it's my own money and I'm not going to pay any interest at all, or Maybe I'll pay 1.9% as seen in those television commercials like they do for car commercials. Now then the agent, the insurance agent must remind him of the grocery store at the beginning of this book and explain it to him one more time. If he still doesn't understand, then the agent needs to have him revisit the story of the failure of the First national bank of Midland, Texas. If he still doesn't understand, the agent needs to resign from working with him because he is not teachable and or is a thief. Neither of these characters is a desirable business associate. So Nelson is telling you, you know, we're not even at the, we're not Even at page 25 yet of the book. We're a quarter of the way into the book and Nelson's telling you, look, if you can't get this, these fundamentals, you shouldn't be doing this. So if you've watched any videos and any content or you read some material and you're maybe you're excited about Infinite bank, that's fantastic. You know, don't lose that excitement. But don't go into this process thinking that this is a some kind of get rich quick thing. It most definitely is not. Or that you can game or manipulate the system. You have to. The, the whole premise of this thing working rests right in here, in between your ears. It's your mindset that is the core determining factor of whether or not you'll have success, not the design of the insurance contract. Now that will help. There's some things that can be done there to make that very effective and efficient. But the best policy design under the sun or the moon, whatever, is irrelevant. If you have no earthly idea what to do. And you're just going to destroy everything that was put together by a good agent anyway. So you are the banker. It's becoming your own banker. And you know, people, they, you know, we need to talk to people about setting a Proper foundation. You wouldn't build a skyscraper on a weak foundation, right, Jason?

That's right.

Something we learned from Nelson. And so that foundation begins over@watchibc.com now if you head over to watchibc.com, you will actually learn and you'll hear some of these stories that we take from Nelson and, and then we expand on in that, that online session that you're going to get there is a ton of great content and you need to get a copy of this book. Becoming your own banker. Now if you look in the description down below, you'll see a link that you can click on to go and access a copy. But you have a ton to learn and thankfully you're here getting this information in because Nelson's book is the source material. We're here to just be a steward of helping people understand the good context of that source material.

Yeah. And you know, we were blessed to be mentored directly by Nelson for many years. And each time we go back to the book, each time we speak to a colleague who had occasion to spend even more time with Nelson than we were blessed with, we're always learning something new. And what most people will find, you know, when they're out researching the process, they'll come across more than enough product related information to fill them up. You'll find it out there because whenever the conversation of infinite banking, infinite banking concept for Canadians, the process of becoming your own banker, whenever that comes up, it's not long in terms of when the conversation shifts to product. Make sure you have the right policy, make sure it's designed properly, make sure you're maximizing your cash value, make sure that you only deal with somebody who dresses nice and has a good barber and like it's what it the conversations that are not happening to the degree necessary is make sure that you've developed a deep understanding of the problem, make sure that you take the time to study the business that you're planning to open and make sure that you've read Nelson's book more than once and that whomever the authorized practitioner is that you're working with.

A suggestion to you would be.

Take your copy of your book.

Pick a point, stop, look at the page number 53 in this case and say, Mr. And Mrs. Advisor, could you maybe take a moment and walk me through page 53 of Nelson's book and explain it to me from your vantage point.

And if the conversation quickly and immediately goes back to product, find another practitioner. Because none of that matters unless you have a strong foundation a strong understanding, especially the grocery store example. Because if you understand the grocery store example, the rest of becoming your own banker is a piece of cake.

And the icing on the cake is the bank example that Richard led this video off with.

And I find that the more often we encounter someone who's read this and gone through the content in our ecosystem.

The last thing they're asking us about is product.

It's all about how this process can help them achieve the outcomes that they desire to help them create the lifestyle that they want, which is a peaceful, stress free way of life financially.

And so.

Continue your journey of learning. And make sure you do that@watchibc.com that's watchibc.com and when you get there, if you like what you see and you like what you hear, you'll have an opportunity to get connected with the right person on our team.