What’s the Latest Development?

Fed up with your local bank? One Pittsburgh business owner decided he’d had enough and opened up his own bank, inside his coffee shop. “Ethan Clay, a 31 year-old Steel City native, began running the Whalebone Café Bank out of the Oh Yeah! Ice Cream and Coffee Company in January and says so far he's taken in around $660 in deposits, mostly from regular customers. He also performs cash back transactions and for a $4 fee, check-cashing services.”

What’s the Big Idea?

Mr. Clay’s business is not FDIC insured, which means he cannot advertise as a bank, legally take deposits under Pennsylvania law, and his good word is the only insurance he has to back deposits. But Clay insists that he isn’t breaking any rules “because he's using gift card accounts to hold customers money.” The gift cards accrue a 5.5% average rate “which can then be used for in-store purchases, including ice cream, waffles, and coffee.” While this venture is an interesting alternative to the normal banking system, one economist, Dr. Chester Spatt, a professor at Carnegie Mellon's Tepper School of Business, weighed in. “"Realistically, could somebody pay out 5.5% a month, even in commodities? Of course not.” But he also added that if this whole banking scheme was meant to promote more food sales, “then yeah, that could work.”

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