Society Brought Dignity to Borrowing : Pawnshop Opened by Tycoons Is Still the ‘Poor Man’s Bank’

In the depression year of 1892, 40 years after Karl Marx urged the workers of the world to unite in revolution, Alfred Bishop Mason urged the millionaires of New York to unite in pawnbroking.

“I would have a pawnshop which would be the poor man’s bank,” he wrote his fellow philanthropists, “where it shall not be shame and ruin to borrow, and where loss of self-respect shall not make a part of every pledge.”

Although pawnbroking was probably not previously contemplated by the likes of J. P. Morgan and Gustav Schwab, seven of the tycoons put up $35,000 each to form the nation’s only nonprofit pawn brokerage.

Today, the Provident Loan Society of New York still has a Morgan and a Schwab on its board. As always, the borrower is treated with respect, items are “pledged,” never “pawned,” and “hock” is a dirty word.

The Provident still charges interest rates far lower than commercial pawnshops (23% annually, compared to 36%) and it is as reputable and dependable as a bank.

A Well-Kept Secret

Yet, given its traditional aversion to publicity and reluctance to encourage borrowing, the Provident remains a well-kept secret.

Maybe too well. For two years the Provident has run a deficit and has had d to forgo its usual year-end contribution to charity.

“We’ve got to let more people know we’re here,” said Samuel F. Pryor III, chairman of the board.

That never used to be a problem. The Provident’s sterling reputation attracted pledgors such as:

- Theodore Dreiser, evicted from his $1.50-a-week room for non-payment at the turn of the century, pawned his watch for $25, enough to pay for shoes, a hat and a hotel room. He went on to get a job and write “Sister Carrie” and “An American Tragedy.”

- A drunken Frank Fay staggered in to offer a pair of star-sapphire cuff links. The actor needed money to check into a clinic and sober up so he could try out for a part in a play on Broadway. He got the loan, entered the clinic and won the role. The play was “Harvey,” the story of a drunk whose companion is a 6-foot-tall rabbit that is invisible to others.

- Newspaper heiress Evalyn Walsh McLean pawned her Star of the East diamond in 1932 to raise $50,000 in an unsuccessful attempt to ransom the kidnaped son of aviator Charles A. Lindbergh. She at first put up the Hope diamond, but the ultraconservative Provident assessors decided that the Star would better collateral in case McLean defaulted and the stone had to be auctioned.

Trophies, Crown Jewels

The Provident also was the place where tennis star Bill Tilden pawned bags full of silver trophies and King Farouk’s queen put up her diamond tiara and matching necklace for $70,000. Legend has it that Olympics athlete Jim Thorpe pledged two of his gold medals there.

The Provident’s primary clientele, however, has never been the rich or the celebrated.

In 1892, with destitution stalking many of the city’s 2.5 million people, Mason had envisioned a place where “the poor man . . . could go when he has been robbed of his tools, when he has been smitten with sickness, or when he saw before him a chance of rising from man to master by borrowing a little capital to start a little shop.”

Or to buy a little food. Before public aid, cash machines and credit cards, many people needed credit to buy necessities. Money panics periodically kept the poor from borrowing except at ruinous rates.

Two years after Mason made his appeal, the Provident was established by a special act of the state Legislature. Morgan, Schwab, Cornelius Vanderbilt and other founders advanced the operating capital with no assurance they would get it back.

An Overnight Success

As it turned out, that was never in doubt, because the Provident was an immediate success. All its operating capital had been loaned out four months after it opened, and by the turn of the century it was lending 100,000 pledgors a total of $2 million annually.

The Provident reached its peak volume in 1930, when it made loans totaling $44 million. By the end of the Depression, 22 Provident offices together were making about 750,000 new loans a year, one for every 10 New Yorkers and more than all the city’s licensed commercial pawnbrokers put together.

This was not surprising, for the Provident was as reputable and discreet as most pawnbrokers were sleazy and callous.

The Provident tried to find branch office locations slightly off the beaten path to preserve the borrowers’ privacy. On the outside they looked like small, classical temples. Inside they looked and felt like banks, with chairs, plants, pictures on the wall--all designed to instill confidence in a borrower who was leaving behind his Stradivarius or her engagement ring.

Eleven of the original 15 trustees died in office, and today, some of their descendants sit in their leather chairs in the dark, paneled board room in the society’s stately headquarters at 24th Street and Park Avenue South.

Trustees Pick Members

The society has 50 members who, as a group, do little more than choose the 12 trustees, who decide who will be admitted as members.

Robert Mulreany, the Provident’s president, said most of the members are “people who know somebody who knows somebody” socially or professionally. About half the members are on the Social Register. A disproportionate number are Yale-educated. A few of their names: August Belmont, Thomas E. Dewey Jr., Donaldson Pillsbury.

Occasionally, there are other connections. One trustee, a successful financier, had an ancestor who got through a tight spot with the aid of a Provident loan.

Although the Provident is down to seven offices today, its role is more vital than ever. Since 1960, about 90% of the city’s commercial pawnbrokers have gone out of business, mostly because of inflation and volatile interest rates. Only 15 remain.

The Park Avenue pawnbroker remains the “poor man’s bank” that Mason envisioned, even though more profit could be found in larger loans. About two-thirds of loans are for $200 or less; the typical pledgor is a middle-class wage earner, many are immigrants.

Some of the best customers are Gypsies. The king of one clan regularly pledges a 10-pound belt made of gold coins soldered together. He redeems it for ceremonial dress occasions.

Market Crash Pledges

The Provident will loan up to $15,000, and it gets some upscale clients. When the stock market plunged on Oct. 19, 1987, several harried investors appeared at the Provident’s Park Avenue office, mumbling about margin calls and offering gold or diamond jewelry for cash.

Although the Provident once accepted almost anything that could be stored and resold--furs, recordings, shotguns, sewing machines--today it mostly confines itself to items made of or containing gold, silver, diamonds or precious stones, and U.S. stamps and coins. Mail business outside New York is discouraged.

When presented with an item, a Provident teller inspects it and offers a price. Because the Provident can lose money if the item is not redeemed and must be auctioned, the offer is very conservative--usually only 20% of the item’s retail value.

If that’s not enough, the teller hands the item back with a smile. If the customer accepts the offer, he receives a loan ticket--written by hand because the Provident is not computerized. The borrower has one year to pay off the loan with interest and reclaim the object.

Small Emergencies

Unofficially, the Provident is a sucker for a sob story. In an emergency a branch may hand over a few dollars for an item such as a radio, along with a recommendation that it be reclaimed as soon as possible.

If a loan is not repaid after a year, the Provident is entitled to auction the pledged item, but it tries to avoid doing so.