Remember George Bailey, the character Jimmy Stewart played in It’s a Wonderful Life, the movie everyone watches at Christmastime? Bailey was the 1940s Bedford Falls banker who seemingly did everything right: loaned money to local businesses, encouraged the town’s charities, even—and here he was ahead of his time—advocated for affordable housing.
Meet Russ Colombo, president and CEO of Bank of Marin.
“I was born in Marin,” Colombo said, “and went to San Rafael High School where my dad was a teacher for 35 years.” In 1974, Colombo graduated from nearby UC Davis with a B.S. in agricultural science and business management; later, after marrying Lynn, his college sweetheart, he added an MBA in banking and finance from Golden Gate University. “I have two grown children,” the 56-year-old banker added with pride, “Angela, 28, who’s about to be married and is Assemblyman Jared Huffman’s field representative in Sonoma County, and Kevin, 25, who’s in commercial real estate in San Francisco.”
Matching George Bailey’s persona, Russ Colombo has civic involvements that include roles as a director of Sonoma’s Hanna Boys Center; chairman of College of Marin’s President’s Circle and treasurer of the Marin Workforce (read “affordable”) Housing Trust.
Yet unlike Bailey, whose shaky Building and Loan was constantly hounded by the film’s evil Mr. Potter, Colombo’s Bank of Marin has ridden a solid wave of success to where it is now: Marin’s largest independent bank. “Including Mill Valley, our newest location, we now have 12 branches,” he says, “and we’ll soon be opening in Greenbrae’s Bon Air Center.” With more than $1 billion in assets, Bank of Marin had first-quarter ’09 profits of an impressive $3.2 million, up from $2.8 million for the last quarter of 2008.
Are you aware a national recession is taking place? Possibly leading to a depression? What is the secret of your bank’s business model? There’s no secret—we just keep things simple. We bring deposits in and we lend money out. Big banks have made banking way too complicated.
Can you continue to “keep it simple” and tell us what has happened to the economy? The thread running through all the problems we now face are the big real estate developments along with the concept that’s been driving this economy for many years: that everyone should own a home. Unfortunately, that concept got out of control and the sub-prime mortgage industry grew. This resulted in people buying homes they couldn’t afford and developers building like crazy. In California—in Sacramento, Stockton, Modesto, even Santa Rosa—there was overbuilding and buying with 100 percent financing and even negative amortized loans. It was crazy. People were counting on real estate continuing to appreciate, but unfortunately the market went the other way. In turn, this negatively impacted commercial real estate that was built to support these residential developments. As a result, there have been millions of foreclosures, businesses have closed and people have lost their jobs and declared bankruptcy. This has happened throughout the country, even throughout the world.
How has Marin County fared in these times? Marin has fared better than most in California, maybe even in the country. This is a fairly affluent, high-income area. Also, Marin doesn’t have the big new developments. Like it or not, our no-growth attitude enabled us to dodge that bullet. However, Marin is not an island—everyone will be impacted. There have been more foreclosures than before and unemployment, which is usually at 5 percent, is now up to 7.4 percent. On the other hand, Marin nonprofits and businesses enjoy strong community support. Look at Book Passage: in spite of the economy and “big box” retailers, they seem to be doing fine. Accountants have a saying about recessions: “last in, first out.” I believe that will be the case this time.
What about the recession as it affects the country? Here’s a sobering statistic: America needs about 1.2 million housing starts a year to remain static—that is, to replace old homes and provide for newly created families. Yet in past years, with the overbuilding, we’ve far exceeded that and now, with foreclosures, our current housing supply far exceeds demand. It’s estimated there are over 4 million unoccupied homes in America today. Do the math: this means it will take two and a half years just to regain equilibrium. It’s ugly now in many places and it’s going to remain ugly for some time. That’s very unfortunate.
Any observations about the recovery process? Let’s be honest: the nation is trillions of dollars in debt and creating more debt. What concerns me is it’s hard to spend our way out of a problem. That’s because a massive debt and spending has the potential to create inflation. It will take time, but in a year or two you’ll start to see it. And inflation is the cruelest form of taxation because it particularly impacts working people the hardest. Their fewer dollars will have to go much further.
Let’s discuss the global economy. I’m not an economist—but as I see it, in their attempt to generate more profits America’s financial community created these subprime mortgage products and Wall Street sold bonds based on their cash flows to China, Ireland, Iceland, Germany and other nations, states, even cities. The crash of the subprime market has impacted the entire world and it’s a very complicated problem.
As for a solution? I’m not even close to a person who has the ability to analyze the global situation. As to how the United States will get out of this, I tend to think community banks, like us, will have a big role to play. What’s already happening is that the nation is trying to get back to the simple basics I mentioned earlier, but it’s hard for big banks to do this because they’re so big. However, there are a lot of banks, again like ourselves, that are doing the right things for their communities and, in return, the communities are supporting their banks. For me, that’s a big part of how we’ll recover as a nation.