Bermuda Industrial Union president Derrick Burgess' public call for the two major banks to lend the Bermuda Housing Corporation $6 million - interest free - has put the banks in a difficult position.

Mr. Burgess, employing some old fashioned class rhetoric, suggested that making profits of $500 million over ten years is wrong, and that some of that money should be given to "our people" instead.

Mr. Burgess is incorrect on two counts. There is nothing wrong with making a profit; indeed, the profit motive is what gives people incentive to build businesses, create jobs and to circulate money through the community.

Secondly, the vast bulk of the banks' profits come from international businesses and overseas customers. Mr. Burgess seems to be inferring that the banks have been getting fat at the expense of the Bermudian worker. This is wrong.

Banks need to make large profits in order to have sufficient reserves to weather a liquidity crisis or a major default by a borrower. If it were not for that, the Island's entire financial system would be placed in jeopardy.

Secondly, banks have a responsibility to their shareholders, who are the owners of the banks. These shareholders would not be impressed if a bank, which makes its living by pooling depositors' funds and lending them out for a charge, started handing out money interest free.

In spite of that, Mr. Burgess' call may cause the banks some difficulty, not because they do not have consciences, but because they do.

Few would dispute that the banks have been extremely generous over the years. They have given hundreds of thousands, if not millions, of dollars away in university scholarships to the best and the brightest on the Island, while the Bank of Bermuda's Centennial Foundation has given just as much away to deserving charities and projects.

Without the banks, Bermuda would be a far poorer place and the banks should remember that before caving in to Mr. Burgess' demand. Of course, it may be that Mr. Burgess and the Housing Corporation may not be expecting the banks to lend all that money at no interest. But in the old age tradition of labour negotiations, Mr. Burgess has set the first negotiating demand ridiculously high, in order to give the banks the idea that lending the money at three percent instead of the six to nine percent most people have to pay is quite a good deal.

Bermuda would be a poorer place without the unions too, although their methods have sometimes caused more harm than good. But the Bermuda Industrial Union, both through its representation of workers and through its own operations like the Credit Union, has helped to give many Bermudians a better standard of living.

Its decision to give the land between Union Street and Court Street to the Housing Corporation deserves praise. It is an uncommonly generous gesture, even if the property has given the BIU some headaches over the years.

However, Housing Minister Nelson Bascome and the Housing Corporation should think twice before developing low cost homes on the site - regardless of how they are financed.

It is debatable whether it is ideally located for low cost homes. It is in the middle of a busy commercial district surrounded by bars and nightclubs. And while Court Street has shed some of its reputation for drug dealing and violence, outbreaks of crime continue to occur there.

Is it wise to put young families - for it is young families, often headed by one parent, who are most affected by the housing shortage - in such a location? Would it not make more sense for the union, or some other agency, to develop the site for a commercial use which would contribute to the revitalisation of the area - much as the BIU's own headquarters has - and use the profits (that word again) to fund low cost homes in another area which is better suited for homes and families?

The danger is that low cost housing on Court Street might help a few people in need of housing in the short term, but could end up as ghetto over the longer term. One need look no further than the well meant but socially disastrous public housing projects in the US and the UK to see what can go wrong with low cost housing.