The banking capital that Georgia lawmakers created -- in Charlotte


Credit: Jeff Siner

Credit: Jeff Siner

Last year, Wayne Garner was in downtown Charlotte with his old friend and partner Charlie Watts, admiring the skyline.

“I looked around and told Charlie, ‘They ought to put up a statue to you and me here,” said Garner, a former Georgia lawmaker. “At the time, we were trying to do the right thing. But we ended up making Charlotte the banking capital of the country.”

Only weeks ago, SunTrust Banks, the last great link to Atlanta’s past as a banking mecca, announced it would merge with North Carolina-based rival BB&T. The union means another Fortune 500 headquarters will be leaving Atlanta for Charlotte.

The announcement was unexpected, yet inevitable — the delayed result of decades of internecine warfare waged in the state Capitol between independent community banks and those with larger ambitions.

When he left the Legislature in 1993, Garner was the Senate majority leader. When Watts exited a few years later, he was chairman of the House Banking Committee.

They were among those who sided with the community banks in this nonstop clash of little money against big money. Both now say it was the biggest mistake of their political careers. But they had plenty of company.

Lawmakers often say the role of government is to establish the proper climate for business to thrive and create jobs, not pick winners or losers.

This is the story of how the General Assembly not only picked the winners, but drove away an entire flock of golden geese. Given that the Legislature is currently considering a take-over of the city of Atlanta-owned Hartsfield-Jackson International Airport, it might be something still worth pondering.

Good intentions can quickly go sour.

In 1960, Georgia was ruled by two county-unit systems — not just the one taught in history books. Both were aimed at perpetuating rural clout in the state.

The more familiar one was political. Statewide elections in Georgia were determined not by who got the most votes, but who won the most counties. The U.S. Supreme Court declared the system unconstitutional in 1963 — a violation of the principle of “one man, one vote.”

The county-unit system that governed Georgia’s banking industry would live three decades longer.

Even as Atlanta’s star was rising, and the city was acquiring a major-league baseball team and other bangles, Georgia banks were barred from establishing branches that extended beyond county lines.

You wanted to expand into the new, booming territory of Atlanta suburbia? Unless you wanted to raise a bunch of money to establish a new bank, you bought a bank already doing business there. Call it a price-support system that all but excluded out-of-staters.

A penetrating line from one of my colleagues at the time: “Most community banks don’t want to give up what has become the happy prospect of high acquisition premiums.”

Wayne Garner’s autographed copy of an Atlanta Constitution editorial cartoon drawn by Cliff “Baldy” Baldowski, depicting one of the legislative clashes between community banks and larger ones. That’s Garner in the lower right-hand corner.
Wayne Garner’s autographed copy of an Atlanta Constitution editorial cartoon drawn by Cliff “Baldy” Baldowski, depicting one of the legislative clashes between community banks and larger ones. That’s Garner in the lower right-hand corner.

One small, hard-fought improvement arrived in the 1970s. Banks based in DeKalb and Fulton counties could establish branches across the Fulton-DeKalb line. But nowhere else.

In 1984, Georgia joined other Southeastern states in a compact that allowed banks in those states to acquire others in the region. Banks such as Charlotte-based First Union and NationsBank were able to grow without competing with the large New York banks.

Georgia didn’t benefit as much – because it kept its restrictions on branch banking. One year later, the state’s larger banks pushed for legislation to allow branches to be established in “contiguous” counties. The effort collapsed.

The measure was painted by opponents as an attempt by the Wall Street octopus to extend its tentacles throughout the state. Watts, the former House banking chairman, can still remember a prized line that helped win the day. It sounded better in 1985 than it does now:

“I’ve got this bill tagged as a kudzu bill,” he said then. “If we don’t nip it in the bud before it gets going real good, it’s going to consume everything in its path. It would in fact close the doors on small businessmen and farmers in this state. Next year that kudzu will be too thick to handle.”

They wouldn’t move yet, but it was after that defeat that the big banks of Atlanta began thinking of Charlotte.

“If we had not done that, I think the banks would still be here,” Watts said last week. “I can look back on it, and community bankers probably wouldn’t want to hear me say this, but it was probably the biggest mistake I made when I was down here.”

He and Garner, who went on to become mayor of Carrollton after leaving the Legislature, are now tag-team lobbyists at the state Capitol. You rarely see one without the other.

Populism may have been the language used by supporters of community banks to win that fight in the General Assembly. But self-interest was a factor, too.

With banks contained (mostly) within each of Georgia’s 159 counties, they were plentiful. And because any large bank that wanted to expand was required to purchase an existing one, profits were nearly guaranteed. Many, many state lawmakers indulged, as owners or members of the boards of directors.

A $500,000 investment, after a mandated five-year wait (later shortened to three), could easily bring the investor $2.5 million. “It was an important way for rural folk to make money,” one veteran lobbyist told me last week.

Not until 1996 did the state Legislature remove county barriers to branch banking. “This was the bill that should have been introduced in 1960, which allowed banks to follow their customers, and to be able to grow with their customer base,” said Joe Brannen, president and CEO of the Georgia Bankers Association.

“It would have allowed our regional banks to grow to some size to compete with the bigger banks in North Carolina. The General Assembly felt otherwise,” Brannen said. “We didn’t have a consensus within the industry. So, shame on all of us — Georgia ends up with no large holding company based in Atlanta.”

The 1996 legislation was too little, too late. Bitterness over the longstanding feud lingered, and the bank migration to Charlotte began in earnest.

It makes sense that SunTrust will be the last one out the door. One hundred years ago, the bank – operating as the Trust Company — underwrote the first public offering for Coca-Cola. But even that iconic tie couldn’t last. SunTrust sold off the last of its Coke shares in 2012.

The migration of the banking industry to Charlotte wasn’t the only price of Georgia’s county-unit banking system. Coming out of the Great Recession, Georgia led the nation in community bank failures. Ninety-one banks in the state were shut down by regulators between 2008 and 2016, according to the Federal Deposit Insurance Corp.

We’re past that now, mostly. Charlotte’s skyline is now the primary evidence of our folly.

Perhaps the Georgia General Assembly doesn’t merit a statue in downtown Charlotte. A plaque might do — outside Bank of America Stadium, where the Carolina Panthers play.

They wouldn’t be there without us.

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