Wachovia: Charlotte to fear the hornet's sting of banking crisis?

Try to imagine, if you will, how it would feel to see a news story like this one cross the wire services:

Posted at 9:19pm on July 24, 2013

RALEIGH, N.C. (AP) -- The trustees of Duke University announced today a breathtaking combination with Princeton University in the latest reverberation from the higher education market collapse.

The takeover, valued at $8.7 billion (U.S.), comes on the heels of last week's Johns Hopkins-University of Chicago merger.

The Duke-Princeton deal, like the activity in Baltimore last week, was brokered at the eleventh hour by Federal regulators at the U.S. Department of Education concerned about the financial stability of another one of the country's most prestigious universities.

"This is an important step in restoring American's confidence in our higher education system," said Secretary of Education Dan Quayle.

It's utterly impossible to picture -- and no, I don't mean the bit about Quayle being secretary of education.

For better or worse, a university town has some immunity to the economic pain that afflicts the private sector.

Our friends in the Queen City don't have that luxury today, in light of the combination of Charlotte-based Wachovia with New York's Citigroup this morning, the latest domino to fall in the growing banking scandal.

Not that universities are immune to economic pressures; schools like NCCU and UNC are at the mercy of state budgets, while the three most frightening letters to a private research university's budget officer are "N-I-H" -- particularly if followed by the word "cuts," given the role that the Federal government's research grants play in supporting higher education.

It's hard for me, ten years almost removed from the private sector -- from a time when I had major banks as consulting clients -- to really feel viscerally what life is like today, not just for employees of Wachovia in Charlotte, but for the small businesses and residents in its revitalized uptown district and surrounding neighborhoods.

Not that Wachovia's necessarily going anywhere, geographically. But much of Charlotte's growth -- in size, in wealth, in self-worth and image -- have come from its reputation as America's retail banking capital and as one of its largest financial centers overall.

And that's come at the hands of North Carolinians who built banks like First Union and NCNB into national economic figures, and who contributed back tens of millions to Charlotte's growth in return.

Durham often complains about our relative paucity where corporate giving is concerned, given that the mega-corps in RTP tend (though by no means universally) to direct their philanthropy to their home headquarters.

Notably, one of Durham's most generous philanthropists -- Mrs. Mary D.B.T. Semans -- is from the Duke dynasty, Durham's historic source of economic power.

Charlotte will likely be just fine when all is said and done. But for a Sunbelt city that's prided itself on raising high-cost, chilly Northeastern climes for businesses, the outside acquisition of Wachovia is going to sting.

"We are Wachovia, and we are here," went the mega-bank's tagline until recently. Now Charlotte is trying to imagine a future where they might not be.

Quick Update: Wachovia/Citi have announced that retail banking operations will stay in CLT with investment banking HQ in NYC. However, the possibility for job cuts/duplication is very well.  The TBJ's analysis hits this one on the head from an image perspective, while noting that financial services represent 10% of NC's gross domestic product:

 

“But it goes beyond raw job numbers,” Walden says. “It goes to what had put Charlotte on the map.”

Banking is what has elevated Charlotte to “major-league status,” he says. “This is a demolition of that brand.”

Walden expects Wachovia’s support of civic and cultural ventures to dry up. And he believes the housing market will suffer as well.

He thinks the deal will push city leaders to further diversify Charlotte’s economy.

 

Comments

[tina]

I worked in banking (tech side) on the west coast. And there is nothing worse than waking up to read the headlines that your company has just been bought out regardless of it's good or bad economic times. But most people in banking are use to mergers and buyouts. But it doesn't make merging systems and bank cultures any easier. I was very bummed that Citi one out over Wells. IMO, Wells is a much better bank. I won't bank with Citi.

[Phil]

A macroeconomist once told me that university endowments have the second longest investment horizons of any institutions save one: the Vatican.

[Samantha E.]

There is a tangential connection between the news about Wachovia and Duke University that makes your fictional newsstory even more ironic. Robert Steel, Wachovia's chairman, is also the current chair of Duke's Board of Trustees. (Although in 2013, who knows).

[Justin Y]

On the other hand, Charlotte's other megabank, Bank of America, has been gobbling up everyone from Countrywide to Merrill Lynch to LaSalle Bank.

So that should help the Queen City out a bit in terms of its economy.