Regulators and financial analysts continue to probe the reasons for Silicon Valley Bank’s collapse earlier this month, with particular criticism landing on the bank’s high proportion of uninsured depositors. SVB’s sudden implosion has also raised questions about the easy capital that flowed to the tech industry, which made up a large percentage of the bank’s client base. On this week’s episode of Now & Then, “Why Americans Hate (and Love) Banks,” Heather Cox Richardson and Joanne Freeman discussed American reactions to the aesthetics and mythologies of banking, from the Greek Revival-inflected debates over the Second Bank of the United States to the dangerous euphoria of 1920s Art Deco bank palaces. In San Diego during the 1960s, the tragic tale of banker C. Arnholt Smith’s National Bank of the United States encapsulated many of the fault lines of a shifting city and nation. 

Conrad Arnholt Smith dropped out of high school in San Diego at 15, around 1914. He then began an astonishing rise. He got a job at the checkout counter of Heller’s Grocery Store. He worked as a teller for Merchants’ National Bank, which was soon bought by the enterprising Bank of America founder A.P. Giannini. After a brief but successful foray into oil speculation, Smith – confident in the knowledge he gleaned by working in Giannini’s vaunted institution –  borrowed $50,000 in 1933 to secure a controlling interest in the struggling United States National Bank. 

As Smith grew his banking operation in the late 1930s, he also took control of National Iron Works. The company struck gold repairing battle-damaged ships during World War II. After the War, Smith got into tuna boats and crab-packing. In 1953, he also purchased and refurbished an old yacht club on San Diego’s Shelter Island and renamed the site Kona Kai Country Club, which soon grew into a world-famous jet set spot. 

Smith started cornering the yellow cab market across California. He bought silver mines. He acquired data storage firms. And he soon united these diverse ventures into the Westgate-California Corporation, a $185 million conglomerate at its 1960s peak. 

Even with all the diversification and growth, however, Smith was still operating his bank out of a five-story building where he had been since the 1930s. “Our puny little headquarters kind of made people come in and say, ‘Gee, this is a bank?’ It looked like a hock shop,” Smith recalled in a remarkable and rambling 1992 oral history published in the San Diego Reader magazine. He decided to enter into a horse race with other local big banks for architectural supremacy. 

“Of course, all banks reached for an identity or a landmark or whatever, and I was kind of concerned about whether we were stepping into too big a fight.” Smith said about his decision to build a new home for the institution. 

In Summer 1963, the 25-story United States National Bank Building opened in downtown San Diego. The edifice was one of San Diego’s first skyscrapers since the Great Depression and edged out its local bank competitors to become the tallest building in the city until 1969. The bank soon reached $786 million in deposits. 

Smith kept going. Just months after dedicating the U.S. National Bank Building, he announced plans for a 235-room, $14 million Westgate Plaza Hotel, the first new downtown San Diego hotel in four decades. Upon opening in 1967, the hostelry won worldwide hospitality awards for its hand-cut lobby Baccarat chandeliers, for lending Rolls-Royces to pick up important guests, and for offering personal butlers.

And Smith got further involved in politics. He had been close to Richard Nixon since his early congressional career; Smith later orchestrated $1 million in fundraising for the 1968 Nixon-Agnew presidential campaign. In turn, Smith was one of the select invitees to the election night returns watch party in Nixon’s Waldorf Astoria Towers suite in Manhattan. “All these dispatches and reports were coming in, and everybody was higher than a kite and drinking champagne,” Smith remembered in his oral history. “It was really quite a gala.”

Then, there was sports. Smith had purchased a small minor league baseball team called the Padres back in 1955 for $300,000. In 1969, he brought the team into Major League Baseball, putting up much of the $10 million in capital to secure their roster and their home at the multi-use San Diego Stadium. 

By the end of the 1960s, however, Smith’s empire was showing some signs of weakness. An April 1969 Wall Street Journal exposé by staff reporter Byron Calame carried a very critical headline: “Self-Dealing Tycoon: How a Californian Uses Publicly Owned Firms to Aid Private Ventures.” 

Calame had worked for six months on the story, which intricately detailed how Smith had created small private companies that he self-dealt to the Westgate-California conglomerate, often tying in loans and stock options from the U.S. National Bank. 

Given that the Bank (and Westgate) were publicly-traded, these types of maverick entanglements, often kept from shareholders, appeared instantly legally dubious. 

Smith largely dismissed the self-dealing complaints in his oral history: “U.S. National Bank did loan money to these subsidiary companies of Westgate California, because why the hell would we go somewhere else when we had a bank to finance things?” 

But the walls were closing in. Nixon stopped calling as often. San Diego’s young mayor, future Senator and Governor Pete Wilson, avoided Smith, telling the press during his 1971 campaign, “I don’t find his power to be so great anymore.” 

San Diego’s progressive rags began to look into Calame’s findings, leading Smith to allegedly tell a group of high-ranking employees, “I wish I could bomb them clear to the other side of the Coronadoes.”

In March 1972, during the confirmation hearings for Nixon’s Attorney General Richard Kleindienst, legislators brought Smith’s name up in conjunction with allegations that Kleindienst, while Deputy Attorney General, had interfered to quash investigations into Smith’s political contributions to Nixon’s 1968 campaign.

Kleindienst ultimately shook off the allegations, but not before a LIFE magazine special report on March 24th, 1972, titled “Tampering with Justice in San Diego,” dove deep into a $2,068 contribution to Nixon that was allegedly funneled illegally through an advertising firm run by a Smith lieutenant, Frank Thornton. 

The piece, by reporters Denny Walsh and Tom Flaherty, further contended that the Nixon Department of Justice had turned a blind eye to far more egregious Smith-adjacent corruption in the city. San Diego Mayor Frank Curran, for example, resigned after taking a bribe from a formerly-Smith-owned cab company in exchange for raising rates, but was ultimately acquitted after a federal investigator was barred from testifying. 

And Walsh and Flaherty contended that the DOJ had slowballed a tax evasion case against Smith’s close ally, John Alessio, who owned the Del Mar horse racing track and the famed Hotel del Coronado just outside of the city. 

Perhaps influenced by the growing evidence of illegality in San Diego, the 1972 Republican National Convention, initially slated for San Diego, relocated to Miami Beach. 

Smith seemingly viewed the growing attention on his business practices as politically-motivated, being quoted in Ramparts as saying, “The people who have supported the President the last eight years are targeted and singled out by those damn bureaucratic agencies.”  

The lawsuits against Smith came quickly. In August 1973, the IRS charged Smith with $23 million in tax evasion for 1969 – also then an all-time one-year record. The SEC also charged civil securities fraud. 

Then, the real ax fell. In October 1973, the United States National Bank, then the 83rd largest bank in the nation, collapsed with $400 million in debt.

The deficit came from loans, often interest-free, that Smith had given to struggling Westgate-backed businesses to keep his self-dealing scheme afloat. The failure signaled the most costly bank collapse to that point in American history. 

The FDIC took over the bank’s debt and immediately auctioned off the bank for $89.5 million to the massive San Francisco-based Crocker National Bank

“I think when the storms come and blow, I mean, they just use every damn reason or excuse to tear somebody down as you go along,” Smith declared in his oral history. 

As his empire crumbled, Smith scrambled to sell off assets. He sold the Padres – which were suffering from terrible play and equally bad attendance – to McDonald’s founder Ray Kroc for a lowball $12.5 million. Smith, who did not realize who Kroc was until after he had agreed to the number, expressed more regret for the cheap sale than anything else in his oral history. 

More serious charges from the fallout soon followed. In July 1974, the Department of Justice indicted Smith in a $175 million criminal fraud case connected to the faulty U.S. National loans, later slapping on campaign finance violations for some of the illegal contributions to Nixon. Given his age – 76 – and his contributions to San Diego, Smith initially got off with probation and a five-year suspended sentence. 

Humor magazine National Lampoon made fun of Smith’s seeming cakewalk, feigning shock that he got more than a two-year suspended sentence and haranguing Smith’s  old boy’s network: “What threw us was the judge. A Nixon man, And a good pal of Smith’s. What kind of pals suspend a five-year sentence when they can suspend a two-year sentence?” 

But in December 1975, Smith was handcuffed in his 19th-story office in the renamed Crocker National Bank Building and indicted on 58 new counts of fraud. After years of delays, he went to prison for a year in 1984, found guilty on a single count of felony grand fraud. 

Smith, however, still viewed his career with a certain idealism at the end of his oral history, showcasing the same thrill of capital and collapse that has led Americans to love and hate banks over the centuries: “I think I can say that whatever the hell I was involved in was creative, it was not destructive,” Smith said in his oral history. “I wasn’t milking the goddam companies and sticking it in a hole in the water or shipping the money to Switzerland or anything like that.”

For more on C. Arnholt Smith, read both Part I and Part II of his completely singular 1992 San Diego Reader oral history. 

And head to the Twitter account of Now & Then Editorial Producer David Kurlander for supplemental archival threads on each Time Machine piece: @DavidKurlander.

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