As Community Lenders Sell Out or Go Under, Can Publicly-Owned Banks Restore Local Control?

San Jose Inside talks to California Public Banking Alliance organizer Jake Tonkel with South Bay Progressive Alliance.

Silicon Valley Bank opened in 1982 to serve startups shunned by big lenders, which saw the fledgling tech sector as innately risky. But Roger Smith and Bill Biggerstaff, the Wells Fargo defectors who founded the small bank with Stanford University professor Robert Medearis, had deep roots in the derring-do culture that would transform Santa Clara Valley into the world’s innovation capital.

Now with more than $60 billion in assets, Silicon Valley Bank long ago outgrew its provincial status. Still, those early days wove it into a rich tradition of community lenders that make decisions based on nuanced understanding of specialized markets and close relationships with borrowers.

Small banks have since become an endangered breed.

Once awash in neighborhood lenders and credit unions, the South Bay has lost the vast majority to mergers and acquisitions. Beloved local brands such as Saratoga National Bank, Peninsula Bank, San Jose National Bank and the Bank of Santa Clara gradually consolidated out of existence. Cupertino National Bank and Mid-Peninsula National Bank were rolled up into Greater Bay Bancorp in the 1990s. In 2007, the 41 Bancorps branches were slurped up by Wells Fargo. Borel Private Bank & Trust was sold to Boston Private Bank. CEFCU of Peoria, Illinois, acquired Valley Credit Union. The list goes on.

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