March 11, 2023

That time my Bay Area Bank Failed

Bank Failure

RIP Tamalpais Bank, 1991-2010

Gone but not quite forgotten. Born into the most boring and stable of decades, eventually succumbing to bank failure as one more victim enabler of the dodgy real estate loans of the financial crisis. I arrived in America about the same time Tamalpais Bank was opening. Through the 1990s, I would walk into my own bank, see the sad dusty notices saying ‘FDIC’ and think to myself “Like that is ever going to happen here?”

Tamalpais Bank was named after true bedrock – the one and only mountain in our County. I had most of my accounts at Tam (Tamalpais Bank) when they went under – Business Checking and Savings, Personal Checking and Savings, Side Hustle Checking. I moved there five years earlier when I opened a new business. They claimed to be carbon neutral. I was impressed by that. But on a practical level, I was even more impressed by their their online banking. They allowed me to download transactions straight into QuickBooks with meaningful names and data. Today, I can hear a collective eye-roll. So what? The transaction came in saying:

“Staples 2009-10-22”

Today – no big deal. But in 2005 I was leaving a bank who thought I’d be grateful to sort and manage transactions labeled:

“20091022 Sta#$%^”

Tamalpais Bank before the Failure

People say the nicest things in eulogies. Tam branded themselves helpful and friendly. The bank had a play area where I could (almost) park my kids and take my eyes off them while I approached the teller. Not quite, of course – they’d have houdini’d right out of there if I ever had. The bank always had hot drinks available for the customers. Look at what I just told you – I was a parent of grade school kids with my own business and a side hustle. They had me at coffee.

Maybe all of that extra overhead and investment contributed to their demise? Officially it was a story of relatively small inter-bank loans. They seem to have gone down for less than $50m. About 5% of their total cash and assets. Of course that is a whole lot more than I had in there. I was healthily broke enough that all my accounts together barely added up to $25,000, let alone the $250,000 to need the FDIC.

After the Bank Failure

When I first heard about Silicon Valley Bank (SVB) , I assumed that it would be a similar story to Tamalpais Bank. Sadly for everyone involved, it will not be.

Tam had a bank failure, but they did not have a bank run leading up to it. The total of their assets and liabilities were attractive enough that another local institution, Union Bank, was willing to strike a deal with the FDIC and take everything on. As in a foreclosure sale, the new owner had big enough pockets to invest and turn things around.

‘We the customers’ were collectively moved over to Union Bank. It was a bit of an admin pain for the next few weeks, trying to access everything. We the customers lost a lot of time and emotional energy over it, as I expect the Union Bank staff did too. But within days or weeks we regained access to our money, statements and online banking. Not just up to $250K. In that particular deal, Union Bank honored the deposits over $250K as well. There was a lot of collective whining about the process, but we got off lightly. The system worked for us.

The Different Bank Failures of Tam and SVB

Prospects do not look as rosy for SVB customers as they were for Tam

  • The leading indicator of ‘bigger trouble’ is that there is no other bank willing to take it all on. If SVB was equivalent to the good-bones fixer-upper that Tam was, some other bank would be all over the deal.
  • Tam was sold to Union before we the customers heard a hint of a problem. The SVB announcement came with the news that the FDIC had to step in and create a new bank
  • The Friday announcement of the Tam Bank failure included the promise that we could ALL access ALL of our money if we so chose the very next Monday morning at Union Bank. The SVB announcement includes a promise that customers will be able to access up to $250k at a new bank that had to be created to deal with the SVB fallout.

I don’t walk into banks very often now. So I don’t actually see the FDIC notices any more. And it’s not as if I often ever have $250k routinely accumulated. But occasionally we have bought or sold property. Occasionally six-figure transactions have passed through our bank accounts. Evey damn time, we transfer the money in $250k increments and spread it out around different banks. Even for one night. If it takes driving across town with a cashier’s check, I do just that. It feels a bit paranoid and 1930s but I do it anyway.

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