To understand why Georgia has lost more banks than any other state during this recession, you need to understand why we had so many to begin with. And why so many seemed addicted to real estate.
Or, as Doug Williams, chief executive of Atlantic Capital Bank, says: “We are where we are because of who we were.”
Georgia has seen 26 banks close since August 2008, when the world’s financial system developed lockjaw.
While the majority of the remaining 312 banks are well capitalized, we could lose another 50 or more before things settle down. And once the worst is over, some of those that survive the regulatory roller-coaster ride will be gobbled up in the consolidation that follows.
Georgia banking will never be the same.
But then, we always were a little different.
Georgia has 159 counties. More than any state except Texas.
Politics being local first, county or home rule decided everything that went on inside a county and most of what went on inside the state.
Not that long ago, banks couldn’t operate outside their home county. This created the potential for a minimum of 159 banks.
Only reluctantly did the county boys running the state allow banks to branch into other counties.
Most of our banking history has been protectionist in nature. Those county banks didn’t want competition. But like all protectionist laws, they eventually result in the opposite of the intent.
Hence we lost out to North Carolina in the banking war of the later part of the last century, as our neighbor to the north was never hampered by such restrictions and consequently its banks were much more adept at operating across a broad geography.
Not only did we have lots of banks, 352 two years ago, they seemed devoted to lending to builders and homeowners alike.
That’s again a factor of history and geography.
We are the largest state east of the Mississippi in terms of land (Florida, Michigan and Wisconsin are larger when they count their waterways).
Land has always been Georgians’ route to wealth.
In our lifetime, Atlanta has always been about real estate.
That’s why as recently as a couple of years ago, we had 14 of the top 100 fastest growing counties in the country.
That’s how we attracted and accommodated 14,000 newcomers a month between 2000 and 2008. That’s adding six Decaturs every year for nearly a decade.
That’s why the regulators who now are acting like old-maid schoolmarms were for years signing off on bank business plans that were upfront about their concentration in real estate.
That’s who we were and what our banks did.
And as Walter Moeling, co-chair of the banking department at the Bryan Cave law firm, says: “There is nothing wrong with any bank now that wouldn’t be cured if real estate borrowers could repay their loans.”
We tend to forget that salient fact when looking for someone to blame.
This crisis is first a failure to pay our bills.
Thomas Oliver writes the Sunday business column. He can be reached at toliver. writeright@gmail.com
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