Charlotte in same predicament as Wall Street
February 14, 2009 6:57 PM ET
CHARLOTTE, North Carolina (AP) - The financial collapse has hit hard in the city known as Wall Street South.
For years, Bank of America Corp. and Wachovia Corp. helped turn Charlotte into a financial powerhouse. Now, the big banks have thrust it into the same predicament as the real Wall Street — the city is losing thousands of jobs and an unquantifiable amount of prestige. Residents who invested heavily in the banks have seen their wealth dissipate and lifestyles change radically.
"It's kind of sad, disheartening because the banks have been the backbone of Charlotte for so long," said Carl Clayton, a 55-year-old retired school teacher.
The loss of so many bank jobs is causing upheaval in other industries. Consumers who have been laid off or fear being out of work are curtailing their spending, forcing restaurants and retailers to close — among them Morton's, a high-end steakhouse, and a 15-month-old Home Depot Design Center. Even some of the Charlotte's lively night clubs have shuttered their doors.
"There's a bit of a state of disbelief," said Bob Morgan, president of the Charlotte Chamber of Commerce. "We are seeing things happen that no one else has contemplated before."
Charlotte remains the second-biggest U.S. bank town by assets — second to New York, and in front of San Francisco. But, Morgan said, "we don't know what the city is going to look like once we emerge."
"We do know that tremendous wealth has already been lost."
A big reason why is the amount of banking shares owned by people who have worked for Wachovia, now owned by Wells Fargo & Co., and Bank of America. Both have used their stock to compensate employees.
Bank of America's shares have been among the hardest hit among financial companies. The company has lost more than 56 percent of its value since it closed on its acquisition of investment bank Merrill Lynch & Co. at the beginning of the year. The stock is down nearly 85 percent from a year ago.
Last year, before Wachovia was acquired by Wells Fargo, its shares had slid 85 percent.
Clayton estimates he has lost about $60,000 because of stock holdings in the two banks, along with other North Carolina banks, including BB&T Corp.
"I had a lot of bank stock, but now it's gone," Clayton said. "What wealth I had, is gone."
Residents and employees never expected such a downfall. Wachovia, once headquartered in Winston-Salem, North Carolina, joined the Top 5 ranks of national banks after it was acquired by Charlotte-based First Union Corp. in 2001. The combined company took Wachovia's name.
Banker Hugh McColl Jr. led NationsBank Corp. through some 70 acquisitions starting in the early 1980s. His biggest coup was San Francisco-based BankAmerica Corp., a financial institution bigger than NationsBank. He adopted the name and also moved the headquarters to Charlotte.
Some say Charlotte's troubles began in 2006, when Wachovia acquired mortgage lender Golden West Financial Corp. for roughly $25 billion at the height of the housing boom. With that purchase, Wachovia inherited a $122 billion portfolio of deteriorating mortgages, leaving the company with huge losses. Charlotte residents were unnerved as they watched Wachovia falter and then be taken over by Wells Fargo in what amounted to a fire sale late last year.
Down the street, at Bank of America, things were looking just as bleak. A series of bad bets in the investment banking unit over the past year sank companywide profits, and as Bank of America completed its acquisition of struggling investment bank Merrill Lynch & Co., shareholders watched its stock price slide to historic lows.
Both Wells Fargo and Bank of America have said they remain "committed" to Charlotte.
Wells Fargo, based in San Francisco, has said Charlotte will be its eastern headquarters, though it remains unclear exactly what that means. The fear is that Wells Fargo, as it completes its integration of Wachovia, will keep shedding Charlotte positions. Wachovia has about 20,000 employees in the city.
Bank of America, meanwhile, with about 15,000 employees in Charlotte, is eliminating some 35,000 jobs companywide.
North Carolina already has nearly 400,000 unemployed workers. The jobless rate was 8.7 percent in December, the highest since 1983, according to the most recent available data.
Charlotte, with a population of nearly 700,000, is the 20th-largest city in the country. About 45 percent of the residents of its home county, Mecklenburg, make more than $50,000 a year, according to data supplied by the Charlotte Chamber of Commerce.
Outside the downtown offices buildings filled with bank employees, there's a sense of disbelief as people huddle together drinking coffee or smoking cigarettes and then shuffle off to their jobs. When a reporter approached employees for interviews, they declined to speak, or said they didn't want to give their names, worried about keeping their jobs.
Charlotte relies on the banks for more than employment — its lifestyle, even its skyline has depended on Wachovia and Bank of America.
Wachovia sponsors the city's annual PGA tournament, among the most popular on tour, while Bank of America's name is on the football stadium and the bank is a sponsor of one of NASCAR's top auto races. Both fill towering downtown office buildings — Wells Fargo, now by way of Wachovia, is building a 48-story headquarters and adjoining city arts campus. The bankers and traders who work for both helped create the demand — and now vacancies — for the high-rise condos near by.
"I have received more calls over the past month from people wanting to list their homes, with a majority of them having financial problems," said Rich Ferretti, a broker at Jamison Reality in Matthews, a suburb of Charlotte.
Stores in the city's affluent SouthPark area are less crowded on the weekends. And a recent happy hour at Capital Grille, located just across from Bank of America's headquarters, was sparsely attended.
Charlotte also faces civic and philanthropic repercussions. Unlike Wachovia, Wells Fargo's executives have few North Carolina ties. Bank of America typically offers up the lead gift on projects.
"We will honor our existing commitments and we are still in the process of determining any future commitments," Wells Fargo spokeswoman Mary Eshet said.
Now, the city is waiting for major changes.
"A lot of our friends work for the banks," said Leslie Hunter, a 38-year-old mother of two. "People are not stopping everything, but their awareness has increased."
After being laid off from his bank consulting job 11 months ago, Jim Edwards' daily routine of networking, applying for jobs and going to the gym keeps his spirits up.
"I've been out of work and living on my retirement income," said the 62-year-old, who added it's been a struggle finding employment because no one is hiring.
While many unknowns remain, Mayor Pat McCrory is optimistic.
"Charlotte does have very strong resilience and I anticipate that a lot of the talent that's moving out of the banks will stay," he said in an interview with The Associated Press.
Some job relief may be moving in. GMAC Financial Services and Morgan Stanley are rumored to be looking to move at least parts of their companies to the Charlotte area.
GMAC Financial Service's chief executive, Al G. de Molina, used to be Bank of America's chief financial officer. Morgan Stanley has already hired at least four former Wachovia executives to help the New York-based firm's retail banking expansion effort.
McCrory wouldn't talk about the two firms, but said the large amount of talent in Charlotte will "attract others in the financial services industry to set up here."
"We're going through a major adjustment, but when the economy rebounds, I think Charlotte will rebound the quickest," he said.
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