The First National Bank of Midland, TX

Credit to R. Nelson Nash, Author of Becoming Your Own Banker; Unlock the Infinite Banking Concept, 5th Edition,2008


A case comes to mind. In September, 1993 the First National Bank of Midland, Texas (the richest city in America per capita at that time) had a loan portfolio of $1.5 Billion. And 26% of those loans were non-performing, i.e. they were not getting the money back.

This is a big “downer” in the banking business. When this sort of thing happens, someone has to support the situation, which is normally a function of the stockholders. Because of losses the stockholder’s equity lost 87% of its value down to $12 Million. Remember the prudent relationships that Adam Smith outlined above. $12 Million in capital in relation to $1.5 Billion in loans is a shaky bank! When the public found out about it, you can predict what happened to bank deposits at First National at this time? Right! They decreased by $500. Remember, this is what banks lend — deposits made by customers. This accelerated their decline.

This all sounds pretty ominous, but you have seen anything yet. You must add the “multiplier effect” of bank lending practices. Practically no one is aware that, when you make a deposit of $1,000 at your favorite bank, they can now lend out $10,000 as a result of your deposit. It is called the “fractional reserve lending system” that is, they are creating money out of thin air. (My own description of what they are doing is the world’s largest con game). It is all predicated on the theory that “everyone is not going to withdraw their money at the same time.” For a complete treatise on what is going on in banking I suggest, no, I beg you to read The Case Against The Fed by Murray Rothbard. You can get it at the Ludwig von Mises Institute in Alburn, AL.

The First National Bank hired a new CEO to come in and “put out the fire: but it was too late. Two months later they were out of business. A more complete picture of what happened to this bank appeared in the December issue of a drilling magazine. Reading “between the lines” it was pretty evident that a lot of those non-performing loans were made to the members of the board of directors. They were making loans to themselves to invest in the oil business where they were going to “make a killing” and neglecting to repay the loans. There was a big energy crisis just a while before this. When the oil business returned to normal, these people lost bother their oil business and their banking business. Hd they just repaid their loans plus interest, their bank would have still been in operation but greed prevailed and “did them in”. All banks that went bankrupt during that period (in record quantities) were just a variation of what happened here.

Does all this sound somewhat like the grocery store example that you read about earlier? If the owner and his family take groceries out the back door without paying for them he will probably go bankrupt. It happens in the banking business, too. Remember this, because in the banking business 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.

Dividend Paying (Participating) Whole Life Insurance

There is a much easier way to accomplish the creation of your own banking system and the mechanism has been around for over 200 years. It is tried and true. It is called participating (i.e. dividend-paying) whole life insurance. But the problem is that very few people know how the business works, including the home office folks in the life insurance companies!

At this point, it will help if you understand what is meant by the word “co-generation”. It is a term used in the production of electrical power. As must everyone knows electrical power is produced in plans using fossil fuels (coal and petroleum products), nuclear fuelds or water to turn turbines. But there is another source of electrical power that is significant — the word-products plants — sawmills and paper mills. Trees are harvested for the wood they contain  bu the bark on the outside of the tree and the sawdust from the sawing lumber has little economic value, but they make a very good fire! This source of heat can do the same thing that fossil fuels do to turn dynamos to produce electricity. Every sawmill of significant size and all the paper mills have a “co-generation plan” to make their own electricity.

Imagine that you own a paper mill and that your co-generation plant can produce 125% of you mill’s need for electrical power. What do you do with the surplus power? Yes, you can sell it. but, do you erect power distribution lines, get a sales force, etc. and ask potential customers if they would like to buy power from you instead of their customary power supplier? Heavens, no! You understand how the power distribution systems all work and simply tie into the established system and sell them the power. It is much more efficient than trying to do it any other way. Creating your own banking system through the use of dividend-paying, life insurance is much like co-generation. All the ingredients are already there in place. All you have to do is understand what is going on in such insurance plans and tap into the system.



  • Banking systems can fail if you steal from your own bank, just like in the grocery business.
  • The use of dividend paying, whole life insurance has all the ingredients in place so all you have to do is tap into the product and take advantage of what it can do.