Cutting Down the Draft

To few institutions do so many British gentlemen owe so much as they do to the overdraft. As peculiarly British as cricket, the overdraft is undefined but tradition-hallowed, its rules as precise and respected as though set in stone. The gentleman who finds himself short of funds simply writes a check on his account. The bank honors it (charging interest on the overdraft, providing the gentleman has been reasonable). If he hasn't, he is summoned to the bank managers' paneled chambers for a discreet chat, emerges knowing just how many pounds he may overdraw in the future.

A sign of financial instability in the U.S., the overdraft in London is a sign of strength. The larger the overdraft the greater the confidence the bank has reposed in its client. To go to the moneylender is a virtual admission that one is not trusted and has poor credit. In this fashion, Britons--notoriously acute bankers--have happily muddled along for centuries. No responsible Briton is exposed to the shock experienced by the American who overdraws: to . have his check marked "Insufficient Funds" and ignominiously bounced, his account stiffly fined.

Last week Britain's hallowed institution suffered a rude shock. Responding to a request by Chancellor of the Exchequer Rab Butler, bank managers dispatched polite letters to their clients: "If it is convenient" would the clients reduce their overdrafts by an amount specified to meet the particular situation? The purpose: shrink Britain's bank credit (estimated at some $6 billion) by at least 10%, thus help Butler's war against inflation (TIME. Aug. 8).

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