Big Cities' Hometown Banks Disappear
Brown, Jennifer, THE JOURNAL RECORD
PHILADELPHIA -- The decade's rush to consolidate large financial institutions has left some of the country's bigger cities without a hometown bank. Now that trend has hit Philadelphia, the birthplace of American banking.
With each mega-merger, doomsayers predict economic problems and a loss of prestige.
And yet, while the community suffers in the short run with job layoffs and a loss of philanthropy, consolidation has allowed smaller niche banks to prosper. In the long run, analysts agree few cities' fortunes are linked to major hometown banks. "Banking structure -- whether it's branch banking or a holding company -- isn't really tied to economic welfare or economic well- being," said finance professor Jerome Darnell at the University of Colorado in Boulder. Last week, First Union of Charlotte, N.C., announced a $16.1 billion merger with Philadelphia-based CoreStates Financial, the biggest banking merger in U.S. history. If the merger is approved by shareholders and regulators, the new corporation would be the sixth- largest U.S. banking company and the biggest on the East Coast, with 2,600 branches in 12 states. It would keep the name First Union and have its quarters in Charlotte. "Who would have thought that Charlotte and Columbus (Ohio) would be the headquarters of three of the largest banking companies in the country? There's been a change in the whole banking landscape," said banking expert Peter Burns of the University of Pennsylvania's Wharton School. Charlotte also has NationsBank and Columbus is home of Banc One. Denver has felt few repercussions from losing its two major banks since 1991, when Colorado first permitted branch banking. Relics of late 19th century populism, many state and federal laws prevented multi-state banking until the 1970s and `80s for fear of concentrating financial power. Norwest of Minneapolis acquired United Banks of Colorado and Minneapolis-based First Bank Systems merged with Colorado National Bank, now U.S. Bank of Colorado. Phoenix also lost major hometown bank headquarters when Valley National was absorbed by Banc One and Wells Fargo took over First Interstate. "Our fear (historically) was that if we had no local banks left ... the out-of-state banks controlling the allocation of money would favor the areas they're headquartered," said Herb Kaufman, chairman of the finance department at Arizona State University. "But that turns out to be absurd." Kaufman pointed out that what attracted big out-of-state banks to Denver and Phoenix was their skyrocketing growth and booming economies. …