Richard Brenneman’s Feb. 1 article on the Reagan-era Savings and Loan crisis details his 1980s research into the failure of a California S&L that made Stockton, in his words, “Ground Zero” of that financial collapse. He compares this to a recent “60 Minutes” piece focusing on Stockton as a present-day epicenter of the current real estate crisis.
This is all a useful reminder of the financial scandals and instabilities that seem to regularly blossom under Republican administrations which are otherwise tirelessly touted for their alleged business acumen.
But should Stockton really command the spotlight when our own Berkeley might have a better claim to being the place where both of these financial catastrophes, although certainly not of our local doing, nonetheless first became publicly manifest?
In the early 1980s I had a bank account at Fidelity Savings and Loan, a statewide S&L then headquartered in San Francisco, but historically a Berkeley institution, founded here in the 1920s as a vehicle for financing local housing development and homeownership.
As a depositor, I received a letter noting that Fidelity was in financial difficulties and Federal regulators had arranged for its sale to Citicorp to stave off possible insolvency.
Soon after, on Reagan’s watch, the S&L crisis exploded and hundreds of financial institutions across the country collapsed or had to be propped up at a cost of tens of billions to taxpayers.
Fast forward to the era of Mr. Bush and 2007 when, as a small depositor in the Cal State 9 Credit Union, based in Berkeley, I received a letter stating that it had been taken into conservatorship by the National Credit Union Administration, apparently because of trouble with real estate loans.
I don’t know for certain if Fidelity was the first S&L to start to fall apart in the 1980s, or if Cal State 9 is the first or one of the first financial institutions to border on insolvency in the current crisis. Perhaps someone with an expertise in financial history could research and establish the relevant dates and details.
If they were indeed the first in their respective eras, then Berkeley, not Stockton, might well be the best symbolic “Ground Zero” for these two important events in banking history.
This is an exciting prospect since Berkeley has a long history of “firsts” and a somewhat shorter, but still distinguished, legacy of being treated badly by right-wing presidents.
We even have a spot where this legacy could be publicly commemorated. The original Fidelity building on Shattuck Avenue, a Walter Ratcliff, Jr. masterpiece, fortunately survived the dissolution of the institution. It still stands, and is now scheduled to become a restaurant.
A modest historic plaque there—or near the Cal State 9 branch a few blocks north on Shattuck—could permanently remind Berkeley residents and visitors that once again, it all started here, and also serve as cautionary reminder of what a previous local paper—the Berkeley Daily Gazette—warned its readers about in early 1933, after the financial debacle of the Hoover era had fully unfolded.
"In the rich years, investors, officials and public examiners alike became careless in these matters...It would be a fine thing if we could learn from this depression’s failures not to lean so heavily on the profits of speculation hereafter, or to trust to luck that such fires will go out of themselves.”
Steven Finacom is a local history buff.