Wachovia, We Miss You Already

And please don't let Charlotte become the next Hickory

Richard Thurmond's Editor's Note for the November issue: Time To Lead

I was down at the beach with my family in 1981 when my father started searching for a pay phone to call back home to Hickory. He wanted to know the outcome of an important election: the shareholders of First National Bank of Catawba County were deciding whether to accept an offer to be acquired by First Union National Bank in Charlotte. When he hung up the phone, he told me the measure had passed, which was probably good for the shareholders, who were getting a premium on their stock price, but maybe not so good for Hickory, which was losing its largest bank and biggest community booster.

And here we are twenty-seven years later with history repeating itself. Charlotte's second-largest bank and arguably biggest community booster has been acquired by an out-of-town bank. This time, though, the news isn't so good for shareholders, including those of the old First National in Hickory who held on to their First Union shares through all the mergers and morphing into Wachovia.

No, it's hard to see who benefits from this deal except, maybe, the Federal Deposit Insurance Corporation and the Comptroller of the Currency, which won't have to take over Wachovia.

No matter who wins the fight in court, Wachovia will be a shell of its former self, if there is anything left at all. There will be the obvious economic effects of layoffs and job transfers. But the real pain for the community will come from the collateral damage.

In addition to employing about 20,000 in the Charlotte area, Wachovia provided an enormous amount of work to everyone from lawyers and accountants to cleaning services, restaurants, and car rental firms. There is a barber in the Wachovia complex whose business is made up almost entirely of Wachovia executives, some of whom fly in on the corporate jet to get their hair trimmed.

Even my little corporate communications company was part of the economic web Wachovia wove. At one time, the bank was my biggest client.
Yes, the financial hit will be big and widespread. But the psychological hit may be even more painful.

Charlotte has gotten used to being a winner in the merger game. Wachovia and Bank of America led the charge, but Duke Energy, Nucor Steel, Coca Cola Consolidated, and others were there, gobbling up the competition from their Queen City headquarters.

Losing a big player like Wachovia is hard to take. And the way we lost it is even tougher. Not a straight-up purchase, but a tail-between-the-legs dash to avoid the regulators.

And then there is a third element to consider: balance of power. Wachovia on South Tryon Street and Bank of America on North Tryon Street effectively divided the city. It is rare for a Wachovia employee to go for so much as a sandwich on North Tryon. And it made news recently when Bank of America opened its first downtown ATM on South Tryon. Bank of America has its name on the Panthers football stadium. Wachovia sponsors a PGA Tour golf tournament.

The division even extended to philanthropy. Bank of America is a power behind the Arts & Science Council. Wachovia pushes the United Way. (In fact, when the United Way fired its president earlier this year, it turned to a retired Wachovia executive to lead the organization.)

Now Bank of America pretty much stands alone. What will that mean? If you subscribe to the idea that competition is healthy and makes both participants better, then you have to worry that with Wachovia off the field, Bank of America may not play as hard, at least here in Charlotte.
It is funny how things turn out. Several years ago when US Airways went into bankruptcy, there was fear about what would happen if the airline disappeared or closed its Charlotte hub. Today US Airways seems to be doing just fine, while one of the stalwarts of the region has sickened and died.

As for Hickory, it was in the news a few years ago because it had the fastest-growing unemployment rate in the country. Furniture, textiles, and telecom (the three pillars of that economy) all went south at the same time. The region still hasn't fully recovered. It is hard to say whether having First National as a continuing part of the community would have made a difference, but people still wonder.

The Hickory purchase was significant because it marked the beginning of First Union's strategy of growth by acquisition. The pinnacle of the growth occurred in 2001, when First Union took over Wachovia (and its name), which had at one time been the biggest bank in North Carolina.
Ultimately, the strategy of growth by acquisition was First Union/Wachovia's undoing. The $24 billion purchase of Golden West Financial and its investment portfolio riddled with risky loans proved fatal. There is a temptation to cite the old “live by the sword, die by the sword” cliché, but that has an element of comeuppance that is inappropriate. Nonetheless, there will be those who say that Charlotte is finally getting a taste of the medicine it dished out for so many years.

I suspect that in Hickory and Winston-Salem and Roanoke and Philadelphia and Birmingham and the other communities where First Union and Wachovia made their raids, the sale of Wachovia means only that the name on the branch is changing, and little else. They have long gotten used to having someone else in charge.

And now it's Charlotte's turn.