Arkansas
State Bank Department
State Banking Board
Meeting
Minutes for February 6, 2003
Appendages
(updated September 2, 2003)
Appendage #1
February
3, 2003
To: All Commissioners
cc: All Other Supervisors
From: Neil Milner
Re: Virginia
The following is an excellent
piece that Joe Face sent to us. You may want to review it and then
forward it on to the bankers and legislators.
The Virginia
way killed statewide banks The Virginian-Pilot, Norfolk, Virginia
January 31, 2003
http: //www.pilotonline.com
And then there were none.
The
commonwealth's last statewide bank, First Virginia, is being bought by three
initials from North Carolina: BB&T Corp.
First Virginia follows in the
footsteps of Crestar, Central Fidelity, Sovran and Signet, once-great statewide banks that became financially
obsolete thanks in no small part to the shortsightedness
of state lawmakers. Plenty of credit will still be available to Hampton Roads consumers and businesses. BB&T already had a major and respected
presence in Hampton Roads. But this is more than a business story. The passing
of the last statewide bank teaches a harsh economic lesson about the
consequences of political leadership that fails to
adjust to changing times.
Over a
number of decades, Virginia
legislators, bound to their hometown bankers by social and political
relationships, never took seriously the changing trends in finance -until it
was too late. They failed to understand that Virginia is not an island. Believing that
the old banking ways were good for Virginia
and themselves, legislators tried to preserve them. But they couldn't hold back
change forever. In the mid-'90s, banks from states with more forward-looking
banking laws, such as North Carolina, began
feasting on Virginia fare. First Virginia was the last big meal.
Once Falls Church is no longer
the First Virginia headquarters, high-paying executive jobs will depart the state. Local legal firms will lose
business. Decisions that used to be made in Virginia
will be made in North Carolina.
Fewer executives will be available to serve on
community boards. United Way and community causes will have one fewer friend. BB&T
said that its charitable foundation will contribute $15 million over several years
to organizations in First Virginia's market area. But First Virginia looked
after Virginia first.
The Eastern Virginia
Medical School
was not born through the efforts of executives working for out-of-state banks and businesses. It was a local labor of
love, and such projects become more difficult whenever another
headquarters departs.
What
happened to Virginia's banks is what happened
to Virginia's
bigger cities. It's no coincidence that cities in Virginia are fighting the same losing battle against Raleigh
and Charlotte that Virginia
banks fought against the banks of North
Carolina.
For cities,
the legislators barred expansion of borders aid limited means of raising funds.
For banks, Virginia
legislators protected the small ones, on whose boards they often served. Starting in the 1930s, they protected
community banks by keeping larger banks out.
James V.
Koch, a former Old Dominion University president and current ODU professor of economics, said, "If Virginia had different
banking legislation 10 or 20 years ago, we might have
been the headquarters for some of these banks. Legislators were reacting primarily to political influences. It turns out that,
economically speaking, it was probably a bad
choice."
While Virginia
kept banks small by limiting new branches to the parent-bank city or county, North Carolina permitted statewide
branching.
According to a
report by ODU's Regional Studies Institute, the biggest bank in Virginia in 1962 could offer a credit
line of only $1.55 million, whereas an industry in any of 15 North Carolina
cities could obtain a a $5 million loan from a single bank.
As recently
as 1994, 100 percent of Virginia bank deposits were in banks headquartered within the state. But that year, a federal law aimed at
increasing bank competition permitted bank holding companies to acquire banks
in any other state, no matter what that
state's laws said.
Within six years, the ODU report showed, more than
half of all banking deposits in Virginia were
acquired by out-of-state banks, mostly in North Carolina.
In 1994, North Carolina had large banks ready to
profit from the new federal legislation promoting competition. Virginia didn't. North Carolina embraced
the future. Virginia
attempted to hold it at bay. Where North Carolina
looked ahead, Virginia
clung to the past.
