Charlotte: A New U.S. Behemoth of Banking

Bankers have not meant this much to an American city since legendary financier J.P. Morgan helped turn a place called New York into a world money center more than 100 years ago.

Most Charlotteans--from rock music disc jockeys to artists and schoolteachers--revere the bankers here, and the feeling is mutual. Bankers have played an unusually important and aggressive role in transforming Charlotte from a sleepy Southern Bible Belt town into one of the most unlikely financial centers in America.

Bankers are to Charlotte what movie stars are to Los Angeles or high-tech whizzes to the Silicon Valley. Their moves are closely followed, and the top two are known simply as Hugh and Ed.

“Most banks are run by faceless, nameless MBAs,” said Mitchell Moss, director of the Urban Research Center at New York University. “Not in Charlotte. There is no other city in America where bankers are world-class financial leaders but have maintained such a commitment to their hometown.”

Banks here have flourished for a variety of reasons, including North Carolina’s friendly regulatory climate along with Charlotte’s long history as a money center in the South and its intense competitive environment.

Two Godzillas of American banking are based here--NationsBank and First Union--and they have established Charlotte as America’s second-largest banking center. Most recently, NationsBank and San Francisco’s BankAmerica Corp. agreed to merge in a $60-billion deal that will move the bank’s headquarters to Charlotte.

Charlotte banks now control nearly $850 billion in assets--about half the amount held by banks in New York City and nearly 40 times the amount held by those in Los Angeles. All this in a city that George Washington once dismissed as “a trifling place” and that is still sometimes confused with Charleston, S.C., or Charlottesville, Va.

“We’ve sold ourselves and sold ourselves and finally we’ve been successful,” said Bill McCoy, director of the Urban Institute at the University of North Carolina at Charlotte, as he looked out a window to a main street lined with bank buildings.

Bankers are credited for revitalizing blighted city center blocks with luxury condos and restored Victorian homes, crowning Charlotte with a towering skyline and bringing in two professional sports teams.

“The blood of the economy is the flow of money, and there’s a huge flow here,” said Carroll Gray, president of Charlotte’s Chamber of Commerce. “We’ve developed a higher appreciation of our corporate headquarters. People everywhere should be concerned about theirs.”

No banker is held in higher regard than NationsBank boss Hugh L. McColl Jr. Seen as kind of a New South civic Santa Claus, he’s directed the bank’s investment of more than $1 billion in this city’s center in the last seven years.

“Today, you see our hand in almost everything,” McColl said in a recent interview. “I’ve had more fun building a city than I have, perhaps, in building the bank.”

‘What You Have Here Is Corporate Evangelism’

Charlotte is a fast-growing metropolitan area of 1.4 million that has added roughly 100,000 jobs in the last five years. NationsBank alone has more than 10,000 workers downtown, or one-fifth of the working population. So much of the growth is lending-related that banking has become to Charlotte what the automobile industry is to Detroit.

One radio deejay said on the air recently that he wanted to “personally thank the banking industry for building us a wonderful skyline”--and he wasn’t being sarcastic. There’s a permanent exhibit devoted to “Our Banking Heritage,” at Charlotte’s Museum of the New South--right next to one on stock car racing.

Bankers are even considered socially progressive in a city that spawned Jim and Tammy Faye Bakker’s PTL Club and is the birthplace of evangelist Billy Graham.

The gay and lesbian community is grateful to bankers for standing up to fundamentalist commissioners who voted to cut county arts funding because of a controversy over the homosexual themes in a local production of the Pulitzer Prize-winning play “Angels in America.”

Although McColl is known for his civic involvement, his counterpart at First Union, Edward E. Crutchfield, 56, has taken up education, giving all employees four hours paid each month to volunteer in the schools.

“What you have here is corporate evangelism,” said David Goldfield, a professor of Southern history at the UNC Charlotte, pointing to the city’s firm Presbyterian roots. “You have both the strong work ethic and strong sense of charity.”

Major business deals by McColl and Crutchfield have become increasingly common in recent years. Their banks between them have made nearly 100 acquisitions since 1990.

The weekly Charlotte Business Journal published a daily edition that it passed out free at lunchtime downtown when the Nations/BofA merger was announced in April. Boosters were overjoyed to learn the combined bank would have its headquarters in Charlotte and would be run by McColl.

At Nations’ annual meeting just days after the merger, the crowd clapped for McColl as if he were Jay Leno. Afterward, stockholders asked him to autograph their annual reports.

City Takes Pride in Big Bank Deals

Indeed, each megabank acquisition is celebrated as a win for the city. Deals are considered just as much a victory as if they were scored by the two professional sports teams: the NFL Panthers and NBA Hornets.

“When the Panthers aren’t doing so well, the focus of Charlotteans changes,” said W. Barnes Hauptfuhrer, a former investment banker in Manhattan now with First Union. “Then we think: Who’s Hugh or Ed acquiring next? And that becomes the focal point of city pride.”

Despite the unrelenting civic pride and boosterism, skins remain thin and regional sensitivities strong when it comes to some subjects.

The locals were particularly stung by recent articles and columns in San Francisco papers that bemoaned the loss of their local financial institution--even though the combined bank will retain the BankAmerica name. Columnists belittled Charlotte as a “place of grits and stock car races” and NationsBank as “nouveau riche.”

Many here said they didn’t want to meet with another reporter from California. Not only are those images wrong, they point out, those kinds of potshots are just bad manners.

Charlotteans also point with pride to their new Dean & DeLuca, the New York gourmet food store, surrounded by Range Rovers and Lexuses on Saturday morning. They talk about their new Restoration Hardware furniture store and most of all, their new restaurants.

“In all this civic boosterism, there is a certain amount of defensiveness,” said Goldfield, the professor of Southern history. “There is still a bit of: ‘We’re showing those Yankees a thing or two. You may think we’re hicks but we’re not.’ No Northern banker would talk about the Civil War, but it’s still very much in play here.”

People here still recall when merchants and farmers had to travel north to borrow money and the especially high interest rates New Yorkers charged them. Frustrated, in the late 1800s they organized their own banks substantial enough to finance the area’s growing textile mill industry.

As the area banks grew, they were assisted by a North Carolina Legislature that supported statewide branch systems, unusual in most Southern states. These laws helped create especially strong Carolina banks, which were poised to spring into other states when federal laws on interstate banking were liberalized in the 1980s.

In addition, Charlotte was marked by gung-ho banking leaders driven by the same vision: Eventually there would be only five or six major banks left in America, and they each intended to be one of them.

Aggressive Leaders Give Rise to Superbank

No Southern bank has been more aggressive than NationsBank. Its three strong CEOs stretching back to the 1960s have built the bank through acquisitions. In recent years, the process was accelerated by McColl, whose father, “Big Hugh,” was a banker who kept the “Bank of Marlboro” open during the Depression. McColl’s grandfather was also a banker.

Born in South Carolina, McColl is a tough ex-Marine who climbed Mt. Kilimanjaro for his 60th birthday two years ago. He likes to pepper his acquisitions with military jargon and he’s the kind of man whose Southern accent always gets stronger when he’s in New York City.

It’s McColl who has completed the process of transforming what was mostly a regional bank called National Bank of North Carolina in the mid-1980s into a superbank. Nations even outbid larger New York banks in major acquisitions such as First RepublicBank in Texas, Barnett Banks in Florida and Boatmen’s Bancshares of St. Louis.

Rival First Union responded in kind with its own string of acquisitions. Competition and a history of one-upmanship between the two banks started as each sought to surpass Wachovia Bank & Trust Co., once North Carolina’s largest bank.

One offshoot of all this growth: Charlotte has become a fertile breeding ground where community banks are being started at a record clip. Nine new banks opened in North Carolina in 1997, the most since 1930, often by downsized executives, said Hal Lingerfelt, the state’s banking commissioner, who is now working on five new bank applications.

“You run into bankers everywhere,” said Carlos Evans, an executive vice president at NationsBank. “At restaurants, after hours. It’s ‘who bought who, or what did you hear about this transaction?’ We’re the chip makers here, but we don’t make chips, we make loans and we make deals.”

Some worry that the banking boom is making Charlotte a sterile reflection of corporate culture, a place of mindless civic cheerleading and money men run amok. How will Charlotte retain its soul, asks local columnist Jerry Klein, who writes for the alternative weekly Creative Loafing.

“What do we do, we Charlotteans, now that we’re on the map? What do we stand for? And, as the world comes here, how are we being changed?” he said.

The growing pains from small Bible Belt town to sophisticated money center were most evident in April 1997, when the “Angels in America” controversy captured headlines nationwide, alarming the business community. At the funding hearing, one NationsBank executive asked commissioners: “What in the name of heaven are you doing to this town?”

After the vote to cut funding, Crutchfield and McColl were immediately on the phone. Another NationsBank executive led the arts fund-raising drive, raising a record $6.4 million. The banks then openly backed more progressive commissioners, one of whom was elected on May 5.

From Gold Discovery to a New ‘Fort Knox’

North Carolina’s largest city, Charlotte is located in Mecklenburg County, where the first gold was discovered in America. In fact, when NationsBank was building its 60-story headquarters in 1991, it found chunks of granite with veins of gold.

Partly because of that early gold discovery, Charlotte became home to the first U.S. Mint branch and later a branch office of the Federal Reserve. Called the “Queen City” because it’s named for the wife of England’s King George III, Charlotte’s more telling nicknames include “Fort Knox” or the “Luxembourg of the South.”

These days in “Uptown” Charlotte (considered more upbeat than downtown), crowds gather at lunchtime to watch the construction cranes. The smell of lumber and sound of hammering become a constant.

Nations just developed a 30-story office tower, in addition to the 11 buildings it already has workers in uptown. In fact, it has so many buildings, it doesn’t put its name on all of them, although Nations is often the major tenant. Too boastful.

Nations donated a building to house a new art museum and is transforming a burned-out church into an artists’ colony. Next year, it will complete a 15-acre “urban village” with up to 400 condominiums, priced about $120,000.

Charlotte’s growth may eventually dilute the influence business types, especially NationsBank, have here. In fact, it may be wishful thinking, but many San Franciscans hope to get their bank headquarters back if BankAmerica CEO David Coulter, 51, takes over in two years on McColl’s scheduled retirement date.

Still, not many Charlotteans expect McColl, 62, to step down that soon, and he himself suggests he still has a lot of work to do. One day, he said, Charlotte itself may become a world financial center, just like New York, London and Frankfurt.

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U.S. Banking Centers

Here’s how U.S. Cities ranked by the amount of assets held by financial institutions headquartered in those cities:

TOTAL ASSETS (in billions)

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End of ’96 End of 1997 New York 1,190 1,800 Charlotte 340 845 Columbus, Ohio 137 267 S.F./Oakland 470 240 Boston 191 220 Cleveland 146 210 Minneapolis 163 184 Seattle 94 157 Chicago 179 100 Los Angeles 93 23

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Note: Data has been adjusted for pending mergers & acquisitions announced during 1997 and 1998.