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GULLIXSON: In defense of those college ‘brats’

By PAUL GULLIXSON
THE PRESS DEMOCRAT

“A good man leaves an inheritance to his children’s children.” — Proverbs 13:22

Frank P. Doyle was such a man. No one should dispute that.

Paul Gullixson

Rather than leave his controlling interest in Exchange Bank — 50.39 percent of common stock — to relatives, Doyle left it to the community. He directed in his will that it be put in a perpetual trust and that the dividends be used to help “worthy young men and women attending Santa Rosa Junior College.”

Since 1948, that scholarship has doled out nearly $80 million to such worthy individuals, more than 115,000 in all. Quite an inheritance.

But that gift came to a halt in 2008. And last week, scores of students descended on a branch of Exchange Bank in Santa Rosa demanding that the scholarship be reinstated. Last Sunday, Page One of The Press Democrat Sunday featured bank president Bill Schrader meeting face to face with the students, explaining why the bank has not yet begun issuing dividends and thus can’t resume giving scholarships.

Schrader deserves credit for not hiding behind a desk and a closed door. Times are tough. We need to face facts.

What bothered me, however, is what happened next: People started scolding the students.

One letter writer accused them of wanting everything handed to them. “Here, the Exchange Bank, which was started by local people, has been voluntarily giving Frank Doyle scholarships over the years … No one owes you a living.” A writer on WatchSonomaCounty.com accused the protesters of being “yelping brats” while another called them “screwballs.”

“A gift … is not an entitlement,” wrote one.

Hey, I’ll be among the first — and was — to criticize Occupiers for being all over the map with their demonstrations. But if anybody has reason to protest these days, it’s young people, students in particular.

First, let’s be clear about something. Those who run Exchange Bank are good people. But the Doyle Scholarship is not their “gift” to give out. There is nothing voluntary about this. They are stewards of a fund that Doyle created, a product of his benevolence.

No, this is not an entitlement. But it’s also true that the people who have been running the bank are not above reproach for how they’ve managed the bank’s assets.

For years, Sonoma County’s oldest and largest bank had a reputation as a risk-averse institution that did well by its shareholders. But that changed during the past decade when the bank decided, at the worst possible time, to go after a piece of the action in the Sacramento area.

At one point in 2008, as this newspaper reported, Exchange Bank was responsible for more than half of the $94 million in bad real estate loans reported by local lenders. As a result, the bank reported losses of $18.5 million in 2008 and $3.9 million in 2009. In addition, the bank accepted $43 million in bailout funds from the U.S. Treasury, money that has yet to be paid back.

The good news is the bank has recovered nicely, posting profits of $10.2 million last year and $9 million through the first three quarters of this year.

I don’t fault Exchange Bank executives for wanting to make sure they’re on solid footing before issuing dividends and scholarships again. At the same time, one can hardly blame students for being eager to see these funds renewed while seeking a little transparency about what the bank is doing to ensure this doesn’t happen again.

Yes, the scholarships have helped students for generations and will again. But that’s small comfort for those who are going through SRJC now and will have to do so without any Doyle help. For all the years that the scholarship has been around, history is likely to show that this is the generation that needs it the most.

Students face escalating fees not only at the JC but on other campuses, while classes are getting tougher to get. While legislators wage war over minor tax hikes, no one seems to have taken a pledge to protect students and oppose increasing tuition. Sonoma State University students, some of whom came from the JC, are likely to see tuition increase 9 percent next fall. That’s on top of the 10 percent hit they took this fall. California State University trustees are about to hoist tuition by another 9 percent. Sonoma State University students, many who come from the JC, already were hit with 10 percent tuition hike this fall.

Nationwide, college students are graduating with an average debt of $25,000.

Meanwhile, the job market for young people remains dim. Nationwide, unemployment for those between the ages of 25 and 34 is at 9.2 percent while for those between 20 and 24 it’s in excess of 14 percent.

It’s common knowledge that many graduates who are fortunate enough to land jobs aren’t doing anything closely related to their degree.

And no, these “screwballs” probably aren’t getting much help from their parents either. Household net worth fell another 4 percent during the last quarter while home equity, the single biggest source of wealth for American families, continues to take a beating.

And some day, when graduates do land a decent job, you can bet they’ll receive benefits — health, retirement, etc. — that are a far cry from what their predecessors received. At the same time, they’ll be stuck with a monster bill for the excesses that came before them. Here’s the running tab:

Sonoma County debt: $1.25 billion, including $249 million in unfunded retirement benefits and $515 million in pension obligation bonds.

California debt: $400 billion, including $240 billion in unfunded liabilities.

U.S. debt: $15 trillion.

Those are staggering encumbrances that are going to be passed down, in part or in whole, to the next generation of workers, employers and government leaders — some of whom were standing out in front of Exchange Bank last week. So, let’s cut them some slack for voicing their frustrations about a scholarship that ranges between $1,000 and $1,800 a year.

Instead of calling them “brats,” it seems to me we should be calling them and apologizing — for the mess they’re about to inherit.

Paul Gullixson is editorial director for The Press Democrat. Email him at paul.gullixson@pressdemocrat.com.





20 Responses to “GULLIXSON: In defense of those college ‘brats’”

  1. The Oracle says:

    Thanks Dan. I’ll look up that article to see if it explains where EB’s recent profits have gone, especially if it’s true that no TARP funds have been paid. I am of the opinion, though, that they’ve paid about 1/3 of it. I guess there is a technicality I’m missing.

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  2. Dan Delgado says:

    Paul,
    I heard a presentation by Steve Jenkins at Exchange a few years ago in which he said the Doyle Park memorial was actually the primary beneficiary having been designated a flat sum of $10,000/yr. It was thought at the time the $10,000 would exhaust any dividends the stock paid, but in the event there were ever any funds in excess of the specified amount, they would be used for SRJC scholarships. The SRJC was thus only a secondary beneficiary. As time went by, the residuary gift became the lion’s share. I’ve never seen the actual trust document so I can’t confirm this.

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  3. Paul Gullixson says:

    I would like to clarify something.

    In response to Greg’s questions: “Did he leave them any other funds, real estate, or property? Or did he leave them nothing? If he left nothing, why? Were they miserable twerps, or was he holding an unjustified grudge?”

    Frank P. Doyle had only one son who died at the age of 13. Doyle Park was created as a memorial to him, and I believe the bank still gives money to the city each year to help with the upkeep of the park. There were other relatives with whom he could have left his money. But since he had no children of his own to put through college, he left his controlling interest in the bank to be used as scholarships to help other kids in the community. There was no grudge.

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  4. Dan Delgado says:

    Oracle,

    I think everything you’re asking has been well reported. To date, none of the TARP funds have been repaid, which I guess by default renders the answer to your next question “all.” As far as when dividends will be restored, the Bohemian article I cited earlier contains a pretty thorough discussion with Bruce DeCorona (Exchange’s CFO) on that point. There’s a three-prong test the bank uses in determining when to issue dividends. One of those prongs is a rather vague provision regarding confidence in the local economy, which seems to be the sticking point right now. I don’t think any lack of coverage is the problem.

    But since we’re asking questions, here are a few more. First, what responsibility does the SRJC have on behalf of it’s students (who are the designated beneficiaries of the Doyle Trust) to ensure the trustees of the trust are doing their job? Second, why didn’t the SRJC petition the court to reform those trust provisions prohibiting the disposition of Exchange Bank stock and reinvestment of the proceeds in a safer portfolio? Third, if the trustees include the bank president (Bill Shrader, currently, but Barrie Graham before him), doesn’t that create a huge conflict of interest? As trustees, Mr. Shrader and Mr. Graham have/had a duty to protect the student beneficiaries by diversifiying the trust portfolio, but as bank presidents doing so would jeopardize their jobs by making the bank vulnerable to a takeover. I like Exchange Bank as much as everyone else in the community, but this stinks.

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  5. Joe Right says:

    They need to change their name from
    “Occupy” and use the more accurate
    “Entitled To..”

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  6. The Oracle says:

    Some good questions posted in these comments. Here’s som others: How much of EB’s TARP funds have been paid off? How much of EB’s profits have gone toward anything other than its TARP debts? When will Exchange Bank begin issuing dividends again? Imagine the PD focusing on these important questions.

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  7. Dan Delgado says:

    The Bohemian on line has a very interesting and seemingly informative article about the Doyle Trust.

    http://www.bohemian.com/northbay/weakened-trust/Content?oid=2200372

    Seems the trust instrument contains language expressly prohibiting the trustees from selling the Exchange Bank stock, which would seem to relieve them of the duty to diversify the investment portfolio. But at the same time, the trust also directs that the three trustees will also serve on Exchange’s board of directors “to ensure a conservative management of affairs.” The question is thus raised whether the trustees while serving as directors and approving the risky lending practices in the Sacramento area that caused Exchange’s losses breached their duties as trustees by failing to ensure a conservative managment of affairs. Sure sounds like it to me. This could get interesting.

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  8. Greg Karraker says:

    A few questions about Frank Doyle:

    After reading more about Doyle, a few natural questions popped up. I Googled around, and couldn’t find any answers, so let me ask anyone who posts here:

    The bank’s website and the PD articles imply that he put all his stock into the trust and left nothing to his heirs.

    Was there other Exchange stock that he did leave them?

    Did he leave them any other funds, real estate, or property?

    Or did he leave them nothing?

    If he left nothing, why? Were they miserable twerps, or was he holding an unjustified grudge?

    This isn’t intended as criticism, I’m just curious.

    But finally, this is criticism. He said the scholarships were to support “worthy” students at SRJC. I wonder if he would consider the group that marched on his bank “worthy.”

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  9. MOCKINGBIRD says:

    For those of you who say students are greedy for even thinking of looking for “free” money, I think the selfish ones are YOU. If a student comes from rich parents he/she can go to any college they want. Those of the middleclass and poor can’t. The Doyle scholarship doesn’t give them much. Have you been watching the news and seen how much tuition has gone up? Do you realize that books and materials can cost a student upwards of $1000? Living expenses are through the roof!

    Why is it that other countries see the value of educating all their students and give exceptional students the opportunity for higher education but this country only allows it for the rich? Don’t you understand that the health and welfare of this country depends on an educated populace? That’s what makes this country strong.

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  10. Commonsense says:

    What are the specific terms of the Doyle Trust? Are the investment vehicles limited by the Trust? It seems to me, that Exchange Bank has been transparent in how the money was invested, whether it was invested wisely is easily critized after the fact. However, we all seem to be aware of how is was invested. I still see an opinion article very short on facts supporting it. In my humble opinion, this is a red herring, to distract from the real issues that I believe challenge a higher education today, such as institutions that are so top heavy, there are more administrators then teachers, where administration salary seems to raise in concert with tuition increases, where quality of education takes a back to seat to political correctness and politics in general, where we as a state spend well over 60% of our General Fund on education but continue to see a reduction in teachers and education quality.
    I think maybe Paul should focus on other more pressing issues, and give up on trying to make a small one a big one. And, yes, it’s not small to the student who may go without, but as someone paying off student loans myself, a more pressing issue is the ability to earn a living that allows one to do so and of having a job opportunity afterwards, which were addressed in very limited fashion above.

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  11. MOCKINGBIRD says:

    As someone who left Bank of America for the Exchange Bank 36 years ago (for good reason), and have had excellent service from them ever since, I think you all should move your money. There are several excellent small banks in this county as well as credit unions who WANT YOUR MONEY AND WANT TO SERVE YOU.

    Yes, the Exchange Bank made some unwise investments. Yes they took TARP money they need to pay back. Maybe you didn’t know they used that TARP money to loan out to small businesses in the community unlike Bank of America that spent it on themselves. I have stuck with them and they still offer me great service.

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  12. sarkyfish says:

    “Hey, I’ll be among the first — and was — to criticize Occupiers for being all over the map with their demonstrations.” Paul Gullixson. This is grievously misleading statement by Mr. Gullixson, but it’s typical of PD editorials, which cloaked in the false camouflage of balance, state both sides of an issue while arguing strenuously for one. Gullixson has been a cheerleader for Occupy everything since it began and his readers know it. As to the tears of the Junior College students, how many JC students in California over the years graduated without weeping for free money? Answer: just about all of them.

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  13. The Oracle says:

    It’s nice to see Mr. Gullixson defend the college’s students after his previous piece’s misrepresentations prompted these remarkable attacks. I wish I didn’t have to turn to today’s
    reader letter of the day to find an accurate portrait of Exchange Bank’s mismanagement. It’s time for the PD to act like a community newspaper… I know… I know… it’s not their business model. We at Delphi are well aware.

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  14. The Oracle says:

    Mr. Gullixson should be applauded for portraying the Doyle Trust accurately… this time. The bank issues those dividends to the trust. The scholarship is run by the trust, not the bank. I hope the bank does right by our community by acting responsibly so it can start issuing those dividends. I hope their management doesn’t give itself a bunch of bonuses while it fails to issue its dividends. It’s time for those in our financial sector to stop such corrupt practices.

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  15. Do We Believe in Magic says:

    I see the red banner still flys high over the offices of the pressdemocrat. It is especially tall in the cubicle of one Paul Gullixson.

    Students crying about a Doyle scholarship most of them would never qualify for is total claptrap. This just another complaint against a bank that the occupy crowd see as screwing them.

    It is too bad the editorial staff swallows this bilge and follows it up with a defense of the indefensible.

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  16. GAJ says:

    No question the greed of the Baby Boom generation will be paid for by the next generation.

    We are not willing to raise taxes on ourselves and politicians are not willing to make the tough decisions to stop the waste of taxpayer dollars they already receive. I’d have no problem paying higher taxes to pay down the debt, however, until there are some serious reforms in place I’m afraid any tax increase would simply be squandered.

    More and more of our taxes on a local, and State level, are being eaten up by paybacks to Public Safety thanks to Gray Davis in 1999 and his disciples at the local level shortly thereafter.

    At the State level the main beneficiaries have been the Prison Guards who squeezed another sweetheart increase in their already outrageous benefits from Governor Brown this year.

    “The budget for the California Department of Corrections and Rehabilitation increased from about 3 percent of the state’s general fund in 1980 to 11.2 percent for this fiscal year, according to figures prepared at the request of The Bay Citizen by the state Department of Finance. Meanwhile, funding for UC and CSU dropped from 10 percent of the state’s general fund 30 years ago to about 6.6 percent this fiscal year.”

    Source: The Bay Citizen (http://s.tt/139kh)

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  17. Dan Delgado says:

    The protestors raise a valid point I overlooked. Trustees are under a duty to diversify the trust portfolio so as to distribute the risk of loss. Does/can the Doyle trust exempt the trustees from this duty?

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  18. Brown Act Jack says:

    the trouble is that the students are forgetting that the exchange bank owes $43,000,000 to th3 Government, and that $10,000,000 earning is pie in the sky when the debt is hanging over the banks head.

    when the Feds get their money, and the debt is paid, then the students will be able to get the scholarships.

    Providing ,of course, that they qualify.

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  19. Greg Karraker says:

    As the writer who called these people yelping brats, I have a few observations.

    First, I detest the casinoization of Wall Street as much as any Occupier who fouled a public space anywhere.

    But I have equal contempt for the vileness of their tactics. When I went to the first Occupy Santa Rosa demonstration with my camera, I saw a number of people hiding behind Guy Fawkes masks and carrying signs that threatened violence. Guillotines, and other references to the unruly mob that was the French Revolution, were a popular theme.

    I could go on about their presumption that they speak for 99% of us who are working harder than ever to get by, and about the $15 million plus in damage they have done nationwide, much to ordinary small businesspeople, but let me return to Exchange Bank and the Doyle:

    Jay Scherf, an SRJC student, demanded that the college and students should be granted more participation in the trust. By that logic, since Exchange Bank holds my mortgage, should I be able to decide what rate I want to pay, and when my payments are due?

    But most telling, after Bill Schrader was decent enough to meet with this mob, your paper reports that most of the dialogue was drowned out by chanting and a brass band.

    So you can fawn over these people and apologize to them as much as you like. As far as I’m concerned, if it walks like a brat, talks like a brat, and yelps like a brat, it must be a brat.

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  20. Not A Chance says:

    Gullixon, I have to admit–you may be one of the most unpredictable writers in town. One day I’m screaming at the screen cursing your name and today I’m singing your praises. You care about what you do which is all I want out of journalists.

    Doyle is a person I think both sides of the aisle could learn from, its not about entitlement, its not about selfishness; its about a person who saw the benefit in education and the knowledge that an educated society is a prosperous society.

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