Paul Bass Photo
DeStefano (right) with his new bosses Tuesday afternoon: Bank board Chairwoman Rolan Young Smith (left) & President Placke.
John DeStefano’s Rosebud.
After 20 years running City Hall, John DeStefano plans to move into an office a mile west on Whalley Avenue — to help run a community development bank he brought into existence.
DeStefano (pictured above) plans to become executive vice-president of START Community Bank on Jan. 1, the day he stops serving as mayor of New Haven.
He made the announcement formally before 60 well-wishers at a Tuesday afternoon press conference at the bank’s 299 Whalley Ave. headquarters.
“I couldn’t imagine leaving New Haven. Everyone I care about and love and know is in New Haven,” he told them. He said he wanted to “make a difference” in his next job: “Being on the 14th floor of some corporate place was not going to do it.”
DeStefano will shift from overseeing a workforce of around 5,000 people and combined budgets of over $700 million to helping to manage a bank with 22 employees and $44 million in assets.
In a newly created position, DeStefano will report to bank President William Placke, the man he brought to New Haven to run START. DeStefano will be charged with growing the bank and making it profitable; and “furthering [its] community development activity.”
State regulators, who must approve executive hires at start-up banks, recently OK’d DeStefano’s position. He said in an interview Monday that he decided to go public now — seven-plus months in advance — in the name of public “transparency.”
For the “next act” of his career, DeStefano said, “I wanted to stay local. I wanted to do something [in which] my participation would be meaningful. I wanted to do something I was connected to in the past.
“START for me was a good fit to do all these things. It came out of my experiences. It’s hyperlocal. They’re going to be a successful bank no matter what; perhaps it more fully and more quickly gets there” with his help.
The mayor said he also hopes to do some teaching on the side starting in 2014, to keep his hand in policy and to remain in contact with idealistic young people.
DeStefano said he will conduct no business with START bank during his remaining City Hall tenure so as to avoid conflicts of interest; he also promised to avoid doing any business with City Hall during his first year at START in 2014.
Meanwhile, START President Placke said the bank in turn will not seek any new city government business during the rest of 2013 above the approximately $1.5 million in deposits already there. “I’d just feel very awkward” about soliciting, Placke said. “So we’re just going to be content with what we have and see how things develop.” Placke called START’s hiring of DeStefano “one of the most exciting developments in my banking career.”
START opened in December 2010. It grew out of a contentious battle years earlier over the sale of the old New Haven Savings Bank, the city’s last major mutual (depositor-owned) community bank, to then-NewAlliance bank (now First Niagara). DeStefano helped lead a protest movement against that sale; the ensuing negotiations with state regulators led to NewAlliance agreeing to set aside tens of millions of dollars to form a not-for-profit institution committed to lending money to businesses and families in the city. That institution, First City Fund Corporation, formed in 2004. It in turn formed START as a for-profit subsidiary.
START follows in the mold of other “community development” banks in the country modeled after Chicago’s Shorebank, City First in D.C. and North Milwaukee State Bank . The banks tend to exist to spur development in poorer neighborhoods by lending to home-purchasers and small-business owners who otherwise might have a harder time finding credit. In New Haven, START has also worked on “financial literacy” for young people and alternatives to predatory “payday lenders.” (Click here, here and here to read about some of its activities.) DeStefano served as a founding director of First City and continues to sit on both First City’s and START’s boards of directors.
Placke and DeStefano declined to divulge DeStefano’s bank salary.
Charlie Terrell’s Inspiration
Paul Bass Photo
In describing his interest in community banking, DeStefano displayed a 51-year-old momento and invoked the memory of a legendary New Haven business leader.
The momento is a passbook for a savings account his parents opened on his behalf with $25 at the old New Haven Savings Bank in 1962 when he was 6 years old. DeStefano remembered depositing a few bucks at a time in that account beginning in 1966, when his parents started giving him an allowance. The bank would send a representative to St. Bernadette School on a regular basis; the nuns would send kids down the hall to meet him to deposit money in their accounts and develop an appreciation for saving for the future.
The business leader is the late Charles Terrell. With a patient and conservative lending approach but a commitment to local customers, resisting the high-flying speculative development deals of the go-go 1980s, he built sleepy New Haven Savings into a large bank — courted by out-of-state corporate suitors who had to wait until Terrell’s death to get their hands on it and take it public. Terrell leveraged the bank’s success to support community causes after other local banks were gobbled by far-flung corporations with broader geographical philanthropic commitments. He set up a bank-affiliated charitable foundation. As a foster parent and philanthropist, Terrell was a respected civic figure.
After Terrell died in 2001 and New Alliance swooped in to buy New Haven Savings in 2003, DeStefano described the bank’s role in a letter:
“New Haven Savings Bank … performs many vital functions that no other local financial entity can. It takes the deposits of our local residents and turns them into local homeownership, job creation, and entrepreneurship. It is also a committed stakeholder in the city in its philanthropy and sponsorship of community events, but also in many intangible ways. Those intangibles — like giving a low-income worker’s mortgage application an extra look — are a distinct result of the bank’s ground in this city and region. …
“Years ago, the streets of downtown New Haven were lined with locally-owned banks whose leaders and mission were committed to the city. First National Bank, Community Savings Bank, Tradesman’s Bank, Mechanic’s Bank, Connecticut Bank and Trust, Founder’s Bank, Connecticut National Bank, First Federal, Bank of New Haven, and so forth. Because their economic self-interest was interwoven with New Haven’s fortunes, they provided the civic stewardship to strengthen the city, and they went the extra step in ensuring that local capital created local growth. All of these banks have either gone out of business or have been acquired by larger entities, making New Haven Savings Bank’s mission even more important.”
DeStefano called Charlie Terrell one of his “heroes.” He said he hopes to help START gradually achieve profitability and grow so it can eventually play a similar role to the old New Haven Savings.
START bank lost around $2 million in its second year, not unusual for a new financial institution. It aims to grow to $60 million in assets by the end of 2013, $85 million by the end of 2014, $107 million by the end of 2015. The goal is to reach profitability in 2016.
“I hope to help accelerate that — and get there safely,” DeStefano said. A community bank’s mission isn’t to engage in extending risky credit, he said. Rather, it’s to “get answers quickly and have a personal relationship” with New Haveners.