Charlotte -- What's next?
I moved to Charlotte right in the middle of its Golden Age. Hugh McColl and Ed Crutchfield two local good old boys had built not one but 2 international banking empires in the same town and it looked like there was no stopping them from becoming even bigger. Charlotte was calling itself the 2nd largest financial center in the US, second only to New York City. Most of the locals were reaping the benefits of the large dividends from Nations Bank and First Union. If you didn't work for one of the 2 banks you owned a good chunk of the stock.
They both endorsed a brand new, young and charismatic mayor named Pat McCory and the 3 together got funding for ever thing Charlotte needed to be a great city. We were getting mass transit, the downtown was bringing back people after dark to a football stadium, new arena, dining and entertainment venues. The Arts & Science Council and United Way were receiving full funding from everyone. The local joke was that the official bird of Charlotte was the Building Crane. They were sighted all over town, in flocks.
I knew I'd made the right decision to move to Charlotte when I couldn't buy a house. Every time we found what we wanted, before we could make a written offer it was sold; often above the asking price. Every February luxury car dealers and jewelers set up displays in all the downtown atriums hoping to get a large piece of all the bonuses the banks handed out every Spring. Most of the bank executives' kids went to one of the 4 major private schools. Life was good. All that has changed.
The two good old boys retired and left two MBAs in charge. Through acquisitions the names got changed to Bank of America and Wachovia. Things were going fine until they started making some ill-fated acquisitions like Country Wide and Golden West just as the real estate market was about to collapse. The financial stocks began to plummet so acquisitions with stock dried up. The Feds engineered the acquisitions of Merrill Lynch by BofA and Wachovia by Wells Fargo. These had been rumored in the works for years but when they happened prematurely it came to light that no one had actual merger plans in the drawer and the pipe dreams weren't ready to be implemented.
A financial brain drain started, beginning with Wachovia's Cece Sutton, one of the most influential women in banking jumping to Morgan Stanley. Soon one announcement after the other was made as bankers, commercial lenders, investment bankers and financial analyst jumped ship and left town. As transfers and pink slips flew we discovered there were no succession plans in place at either bank.
Ken Thompson wasn't replaced with an insider and now that Ken Lewis is leaving the BofA board is also looking for an outsider. Charlotte has always had a fear of outsiders. "You aren't a native Charlottean are you?" was the first question a new neighbor was always asked. The mayor ran an ill-fated campaign for Governor so the last of the Charlotte Trinity is gone. Charlotte is a ship without a captain.
The paper is filled every day with announcements on building loans for both commercial and residential real estate in default. The Building Cranes are disappearing. Projects are stopped in mid construction. The lot around the corner from my house that was supposed to be a high end luxury townhouse complex but hasn't had a worker on it in over six months. Pink slips are still handed out, bonuses aren't what they used to be. No luxury auto and jewelry displays this past Spring. All of the finance committees at the private schools are worried about next years enrollment as the students' parents are transferred or pink slipped.
Charlotte has survived a lot. It survived Cornwallis, the Civil War - locally known as the War of Northern Aggression (the last meeting of the Cabinet of the Confederate States of America was held here). There is a plaque on a downtown sidewalk that says:" Jefferson Davis stood on this spot when he was informed Abraham Lincoln had been shot". The gold mines and the Federal Mint have long closed, the cotton mills are gone and soon everyone fears the banking money mills will move on too.
Is Charlotte the victim of bad decisions or just providence? Providence just happens to be the name of one of Charlotte's oldest communities, founded long before the Revolutionary War. Will tomorrow's headlines be good or bad?
Well that's the news from Lake Woebegon folks, what's happening in your city?
Jim Van Meerten is an investor and amateur writer on financial subjects on Financial Tides, MSN Top Stock Blog and Seeking Alpha. Please let me SEE your comments below or email them to FinancialTides@gmail.com.