Where cash is king

At Three Brothers shopping plaza in East Baltimore, residents buy groceries, tools, wine, bus passes, socks, cherry slushes and wedding rings. They get their cars washed, or wash their laundry. They cash Social Security checks, pay utility bills and get their license plates.

Longtime customers often hand clerk Michael Ruby their paychecks, bills and spare cash and ask him to sort it out.


More often than not, he knows their brand of cigarette or liquor, or their favorite scratch-off lottery ticket, and has it ready for them.

This is a neighborhood where one-fourth of the households live on less than $10,000 a year. Few residents can afford to get out to the suburbs where there are more options for shopping, so they depend on Three Brothers.


It's the tale of many inner-city neighborhoods that have been abandoned by banks, grocery stores and retailers.

Just as the neighborhood's lot is cast with Three Brothers, so is John Rothenhoefer's lot cast with the store named for him and his brothers, Tom and George, who also worked there.

John Rothenhoefer grew up on Morley Street a few blocks from the store, and though he no longer lives in the apartment above the store, he still tends to his place as if it were his garden.

Now the store that has served the neighborhood for nearly 48 years is having its own troubles.

If cash is king anywhere, it is king at Three Brothers. Many residents don't have checking accounts or credit cards, so to buy things, they need their checks cashed.

But after being burned for more than $1 million in losses in a check-kiting scam that has shaken up the local banking industry, the Rothenhoefers' bank decided to drop all business with check cashers - and gave Three Brothers notice it would soon shut down its account.

Other regional banks had already dropped check cashers, saying they posed too much of a risk and required too much monitoring.

The store is still cashing check, but the family is scrambling to find another bank willing to process the enormous flow of checks coming in and money going out. If it can't cash checks, Three Brothers might be forced to close.


"I guess my son could hop along," said John Rothenhoefer, who has transferred majority ownership of the store to his son Mark, though he still comes most days to help out.

Mark Rothenhoefer takes a dimmer view: "If we can't do check cashing, I'd say we're out of business, or we'd have to greatly downsize."

Three Brothers shares its block on Frederick Avenue with three bars and package liquor stores, two churches, one bail bondsman, a McDonald's and Mount Olivet Cemetery. Only two bank branches are in the same ZIP code as Three Brothers, and both are about 2 miles away.

Tikeia Ben, 14, cashes checks at Three Brothers from summer jobs. One day last week, she was doing laundry at the store. "The people who work here are nice, and it's mostly people from around here who come here," she said. "The rest of the neighborhood is like liquor stores and fast food."

"It's got a lot to do with the area, with socioeconomic factors," said customer James Fleming, 63. "Many people don't have cars to get to the bank, and Three Brothers is convenient. You can pay your utility and phone bill there; that's something banks won't do for you."

The business was started when John Rothenhoefer was working as a soda jerk at Rossberg Pharmacy and studying to be an electrical engineer at the University of Maryland.


He had heard about a liquor store going out of business down the street, and while chatting with a local banker at the counter, he said he'd like to be his own boss.

"How are you going to own your own business with no money?" Rothenhoefer recalls the banker asking.

His reply: "I'll borrow it from you."

And he did. He got a $14,500 loan along with about $2,000 from a two aunts and his parents, and he bought that liquor store in 1959.

He branched out with two gas stations, a crab shack and a discount retailer, eventually selling or leasing out those businesses to other proprietors. Three Brothers remained and expanded in its own right. It's one of the few enterprises he started that made money.

Along the way, John Rothenhoefer stopped hanging out in bars at night and married Charlotte, a former nun. In 1982, he tried his hand at politics by running for governor as an independent, a bid that ended when state election officials said he was 11,000 signatures short of getting on the ballot. He campaigned on a zero-based budget, limiting real estate tax increases and legalized sports gambling.


Meanwhile, his neighborhood underwent its own transformation, mirroring a demographic shift in urban America.

In 1950 the area around Three Brothers was predominantly white; only two "nonwhite" residents were recorded by the Census Bureau. Today, about 70 percent of residents are African-American. Nearly 28 percent of families live below the poverty level, three times the national average. And only 50 percent of residents have graduated from high school, compared with 80 percent nationwide.

Rothenhoefer remembers the neighborhood of his youth as "upper lower-class." Most men had manual jobs; his father was a milkman. John attended St. Joseph's Roman Catholic school. "The worst thing that happened in those days was people drank too much and fell into the gutter," he said.

Today, most of his childhood friends have left, and drugs and crime plague the neighborhood. In a two-week period last month, three stolen vehicles, four aggravated assaults, one robbery and three burglaries were reported to Baltimore police within a half-mile of Three Brothers.

The Rothenhoefers say they've been the victim of petty theft, but never a holdup. The store is monitored with 48 cameras that John Rothenhoefer installed, plus another 20 that his son, Mark, added.

Some of the cameras are mounted on nearby rowhouses that Mark bought. He is renovating them to rent and one day sell to employees. With those back streets being watched from inside the store, drug dealers who once frequented the area have moved on, the Rothenhoefers say.


Most days John Rothenhoefer opens the store after clearing the trash outside, and he's constantly tidying throughout the day. He usually wears a T-shirt that's stretched at the neck, his breast pocket weighed down by a glasses case, small datebook, pens and his daily list of things to do.

"If you own your own business, you've got to be there, and never quit," he says. "My store might look old-timey, but we vacuum this place out every day."

When he walks around the store, he points out the things he says the community really wants, or needs. Customers can arrange for a Social Security check to be printed in the store rather than mailed to their doorstep, where it can be stolen. And customers can use a port-a-potty erected at the back of the parking lot.

On the shelves: a Harley-Davidson beer stein, Campbell soup, sunglasses, dog food, diapers, CD players, aspirin and greeting cards. "If you can't get it from here, you're just [expletive] out of luck," said customer Eddie Johnson, 31. "If you need it for your house, car or body, it's right here at Three Brothers. If they can't get it, you don't need it."

Michael Ruby has been a clerk at Three Brothers for 35 years, the only job he's ever had. He says the Rothenhoefers have made payments on a new car for him, on the condition that he give his old car to a co-worker. Store employees can get medical benefits, and after three years, the Rothenhoefers start contributing to a retirement fund for them at T. Rowe Price. Ruby said he has more than $170,000 saved.

Monique Humphrey, who rents space for the massage and tattoo parlor, and Stefon Robinson, who runs the beauty shop, say the Rothenhoefers give them a break when they are late on rent.


Then there's the service. Three Brothers employees carry bags to each customer's car and deliver food to elderly regulars who can't make the walk over.

But perhaps the most important service at the store is check cashing, John Rothenhoefer says. He rattles off scenarios where a check casher might be the only choice: A customer receives a tax refund but doesn't have a bank account and needs the money quickly, or a small-business owner is paid for a job by check late on a Friday and needs cash to pay day laborers.

Sometimes, people do write bad checks. But Rothenhoefer, a self-described strict Catholic who doesn't believe anyone is going to hell, says he usually doesn't report them to the police unless it becomes a habit.

Instead, he gives them a call or visits them at home to ask them to make good. "Most people say, 'I'm a little short but in a few days I'll come down and pay,' " he said.

Three Brothers was a competitor of A&B; Check Cashing, a Baltimore chain suspected in the alleged check-kiting scheme that bilked a total of $10 million from Carrollton Bank, Baltimore County Savings Bank and Global Express Money Orders of Silver Spring. The FBI is investigating.

Soon after the scandal broke in June, Carrollton, where Three Brothers banked for decades, and Baltimore County Savings began shutting down the accounts of all check cashers.


A&B; has declared bankruptcy and closed its 20 stores, including one down the street from Three Brothers, prompting many customers to go there instead.

The check cashers' plight caught the attention of Maryland's top banking regulator, Charles W. Turnbaugh, who got a call from John Rothenhoefer and met with him recently to hear him out.

Turnbaugh's office grants charters to state-regulated banks as long as they "promote public convenience and advantage." He said it's not his role to tell banks who to serve. Still, Turnbaugh said he called banks to encourage them to look at the check cashers.

Since then, John Rothenhoefer says, a First Mariner Bank officer came to the store and asked if he wanted to apply for an account, and Wachovia Bank is reconsidering an application it had denied days earlier. Bank of America also is processing his application, he said.

"Banks say they can't afford to open branches in really poor neighborhoods because the money is not there," Turnbaugh said. "But if they can't have a presence in these neighborhoods, I want them to provide the services to the check cashers that are there."

Roughly 10 percent of Americans don't have a bank account. In the financial industry, they are known as the "unbanked." Either they don't want the hassle of a checking account, or they can't get one because of a history of writing hot checks.


Economists and policymakers have tried to prod the unbanked into the "financial mainstream." Bank accounts provide communities stability, they say, by helping people build up assets and shielding them from the risk of holding uninsured cash savings.

The Treasury Department promoted low-cost deposit accounts after Congress made it possible in the 1990s for Social Security and other payments to be made electronically. A few years later, though, fewer than 1 percent of unbanked people who receive federal benefits had signed up for an account.

The Rothenhoefers and their customers say the economists and policymakers simply don't understand. For people who live hand-to-mouth, balancing an account can be tricky, and failing to do so means being hit with bounced-check fees that neared an all-time high last year of more than $27 on average. In contrast, cashing a $500 check at Three Brothers costs $10.50.

"There are two different societies out there," John Rothenhoefer said. "Banked people don't understand this."

For the record

An article in the Business section Sunday incorrectly reported the location of Three Brothers shopping plaza. The store is in West Baltimore.The Sun regrets the error.