When I joined the Detroit News in the mid-80s one of my first assignments was to cover the annual Michigan Bankers Association convention at the historic Grand Hotel on Mackinac Island. I had only recently moved to Michigan from Montreal and the state’s banks seemed rinky dink to me. Royal Bank of Canada, one of the banks I previously covered, was bigger than all the Michigan banks combined.

In those days, when newspapers covered the cost to send a reporter to a luxury hotel for a couple of days it was with the expectation that a story or two would be filed. My editor had blocked out a sizeable chuck of space in the Sunday section with my name on it, and it was my job to fill that space, or I quite possibly would be out of a job. Trouble was there were no news announcements worthy of coverage.

Necessity is the mother of invention, and I opted to do a human-interest story about what bankers were like when they weren’t running their banks. The Michigan bankers were pounding drinks with abandon, so I tracked down the hotel’s food and beverage manager to see if I could quantify just how much booze had been consumed. Turns out, the Michigan bankers had set a record for alcohol consumption in the landmark hotel’s storied history.

I filed the story, and the reference to the booze record was made in passing. Frankly, being a drinker myself, I intended the alcohol consumption as a compliment. In the mid-80s, heavy drinking carried no stigma. But when I entered the newsroom Monday morning, an editor yelled that Eugene Kuthy, who headed Michigan’s Financial Institutions Bureau, had been holding on the phone for about 15 minutes waiting for my arrival.

“Who the hell do you think you are,” Kuthy bellowed, barely able to contain himself. “The bankers you wrote about are pillars of their communities and the convention is the one time of the year when they can relax and have some fun. You unfairly embarrassed them. I don’t know anything about you or who you are, but I can assure you no one in Michigan banking is going to have anything to do with you.”

Kuthy then slammed down the phone.

Reading up on the collapse of Silicon Valley Bank got me thinking of Kuthy’s call and how the image of U.S. banking and bankers has so dramatically changed in the years I’ve lived in the U.S. This will come as a shock to millennials, but bankers were once the most trusted and respected members of their communities. And there were once regulators like Kuthy who closely watched over their state banks and were very protective of their wards’ reputations and how they were publicly perceived.

It’s unfortunate that most Americans don’t understand what precipitated the collapse of Silicon Valley Bank. The technical reason is the bank had a liquidity crisis, meaning it didn’t have enough money on hand when their customers suddenly demanded the money they had deposited. But a simpler and more accurate version of what caused Silicon Valley Bank to go under was the supposed pillars of the Bay area’s privileged and mega-wealthy venture capital community chose to burn the place down.

That realization came to me reading this article in the Atlantic, a publication I’m typically wary of but writer Derek Thompson did a masterful job explaining who was ultimately responsible for torching the bank.

Here’s some relevant paragraphs:

One week ago, SVB was technically insolvent but far from doomed. Without a massive run on its deposits, the bank likely would have puttered along as its long-term bonds matured. Surely, SVB had put itself in an awful position by tossing fresh cash into the Dumpster fire of the 2022 bond market. But actual bank death required one further step: Clients, led by the venture-capital community, had to turn on a trusted financial partner.

That’s exactly what happened. As SVB’s leadership scrambled to raise funds, Founders Fund and other large venture investors told their companies late last week to pull out all of their cash. When other start-ups banking with SVB caught wind of this exodus on group chats and Twitter, they, too, raced for the exits. On Thursday alone, SVB customers withdrew $42 billion—or $1 million a second, for 10 straight hours—in the largest bank run in history. If SVB executives, regulators, and conservative politicians built a barn out of highly flammable wood and filled it with hay and oil drums, venture capitalists were the ones who tipped over the barrels and dropped a lit match.

After some VCs helped trigger the bank run that crashed SVB, others went online to beseech the federal government to fly to the rescue. “YOU SHOULD BE ABSOLUTELY TERRIFIED RIGHT NOW,” the investor Jason Calacanis bleated on Twitter. David Sacks, another investor and a regular panelist on the popular tech podcast All In, chimed in by blaming Treasury Secretary Janet Yellen and Fed Chair Jerome Powell for jacking up rates “so hard it collapsed a huge bank.” (Never mind that the CEO of SVB was on the board of directors of the Federal Reserve Bank of San Francisco.) On Sunday night, the tech community got its wish when the federal government announced it would backstop every dollar of every depositor in SVB.

The media has allowed the Biden Administration to lie that U.S. taxpayers aren’t on the hook for bailing out the venture capitalists who torched their own bank. Patrick Anderson, a Michigan economist, posted a thoughtful commentary on LinkedIn calling out Joe Biden’s dishonest claims in the president’s televised address assuring the safety and soundness of the U.S. banking system.

Although SVB promoted and adhered to the progressive values Bay area denizens claim to hold dear, there was obviously was no emotional bond between the bank and the community it served. The disconnect was such that the richest people in town took a certain delight destroying it.   

I eventually was able to make nice with Michigan’s bankers and I met some extraordinary people whose commitment to their communities I admired and respected. No one in Michigan would have delighted burning down the banks of these bankers.

Charles Fisher

One of them was Charles Thomas Fisher III, the CEO of NBD Bancorp, the parent of National Bank of Detroit.  Fisher was a descendant of the Fisher Body family, and he had that patrician air of someone who came from great wealth. But he was genuine and down-to-earth. I was taken aback when I visited his modest office at NBD headquarters in downtown Detroit and he offered me a coffee. I figured he’d ask his elderly secretary to brew some, but he got up and prepared it, and asked his secretary if she wanted some, too.

When Fisher ran NBD, the bank was dedicated to the city and its businesses. In researching this post, I was sorry to learn that Fisher died in 2014, but I was blown away reading about all his business and civic pursuits listed in his obituary.  He was a truly extraordinary human being.

John Canepa

Another extraordinary person was John Canepa, who ran Grand Rapids-based Old Kent, a nationally respected banking outfit when he was in charge. Canepa, who I’ve learned died in 2018, was a die-hard Grand Rapids booster, even though he was a Massachusetts transplant.

Comerica was the one bank I didn’t take to, and they didn’t take to me. Some of the bad blood had to do with the bank being a lousy corporate citizen, moving much of its operations to the suburbs, which hastened Detroit’s decline. The bank was also nailed for extensive redlining, the practice of denying loans to creditworthy Blacks. Comerica came to really detest me when I revealed that the bank had converted the vault at its downtown Detroit headquarters into a climate-controlled wine cellar to store the vino collection of its CEO.

When Fisher retired, his successor wasn’t committed to Detroit and agreed to merge the bank with First National Bank of Chicago, which through a series of mergers is now Chase. Old Kent was acquired by Fifth Third Bank in Cincinnati. In 2007, Comerica flipped Michigan the bird and moved its headquarters to Dallas.

As for Kuthy, who headed Michigan’s Financial Institutions Bureau, he went on to launch an organization called the Community Economic Development Association of Michigan, which has an annual award in his memory. I’m not certain when Kuthy died, but I remember his phone call as if it were yesterday.

I still feel badly about the drinking story.

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