590 replies to this topic

[monsoon]

^But there is no proof those things would not have come without BofA.   I am not sure that a maserati dealership and neiman marcus are requirements for  a great economy for most people living here or that BofA had much to do with it.   BofA did not pay for the light rail.   This of course is news I supposed to the people inside the downtown bubble, but I can't help to think that for example the 6500 people working at places like the Lowes HQ, it will make little difference other than something to talk about.   There has always been money in Charlotte, lots of it, and its only recently in the city's history that a few employees of the banks have joined those ranks.

[SmellyCat]

moonshield, on Sep 15 2008, 07:08 PM, said:

Do you really think NYC is going to be minimally effected by this whole mess?

Yes, a lot more than minimally.  30,000 job losses is a big nut, especially when those employees are among the highest paid in the city.  Supposedly 3 non financial industry jobs are indirectly created from every 1 financial industry job due to the multiplier effect.  You do the math.

[clt29301]

Commoner, on Sep 15 2008, 10:30 AM, said:

I'll just throw another piece of "generally accepted" information among the 4 blocks around North Tryon regarding the low-cost center of IB in Charlotte v. the center of the IB universe (ignoring London), NYC. It's that projects like the Hearst trading floor, etc. have been a flop. Lower cost center be damned, the banks have had little success in attracting true investment banking ops to Charlotte for the simple reason it's not NYC. Recognizing the futility only sends more and more traditional IB functions back to NYC, where, between ML and BAC, there's massive commercial real estate capacity right now.

When investment banks were making a ton of money, it was easy to stay in NYC and pay 150% more for real estate excluding paying more for FTE's.  But, that model did not work to well.  I do not believe that Charlotte will become the center of the universe for IB but, when expenses are in the equation, you have to ask the question does it make sense to house functions in NYC that came be done elsewhere. A similar argument was made decades ago that auto manufacturing could only be done in Michigan/Ohio etc...However, the landscape has changed dramatically and there are numerous auto plants in the south.

[UPTOWNGIRL]

monsoon, on Sep 15 2008, 07:04 PM, said:

^But there is no proof those things would not have come without BofA.   I am not sure that a maserati dealership and neiman marcus are requirements for  a great economy for most people living here or that BofA had much to do with it.   BofA did not pay for the light rail.   This of course is news I supposed to the people inside the downtown bubble, but I can't help to think that for example the 6500 people working at places like the Lowes HQ, it will make little difference other than something to talk about.   There has always been money in Charlotte, lots of it, and its only recently in the city's history that a few employees of the banks have joined those ranks.

Spot on, Monsoon.  Let's start first with Foreign Cars Italia, the Maserati dealership.  Is BofA the sole requirement to get those folks in here?  Let's be serious -- call the GM over there on Independence and pretend you're with the Dupont Registry and are "interviewing him."  As someone that knows him, he'll tell you that the predominance of his sales come from throughout the Southeast -- primarily from "ballers" as they say -- and that draws players from the Redskins, Falcons, Panthers, and many more.  Charlotte's next closest dealer is here - in Charleston - 250 miles away.  Ask Bill how many sales a month he makes from Charlotteans (or, PER MONTH for that matter, as it only a couple, 1-2 sales sometimes in any given month!)

As for Neiman Marcus - well, take a look at their website for example: Neiman Marcus Store Locator
They have three in NJ -- one of which is in Paramus (ugh) and another in ELIZABETH (yikes!!)  Not exactly your paradigms for "high fashion" and high society, though close in proximity to a great deal of affluence.  

As so astutely put by Tomas, a client and close friend of mine once said to me about eight years ago as he agitated about the "lack of high class shopping in Charlotte" -- he stated, "when I want to truly go shopping, I hop on a plane and either go to Miami and stay in my beachfront condo, or jet over to London and stay at my parent's flat there, shop on Sat and Sun and be back late night so as not to miss class at Charlotte Latin on Monday.  THAT drives economic engines, not BofA employees in Charlotte -- and that kind of exteme wealth in CLT is what has brought such businesses into the Queen City in the first place.  (and I have no doubt about Tomas' assertions, as I attended two of his overseas weekend shopping sessions and had a $28k AmEx bill afterwards!!)  

Anyway, what we're doing here is merely schoolboy semantics, the real issue to be debating is the impending demise of Wachovia ... my sister is a broker who works on the trading floor of the nyse and says that has been the overwhelming chatter of the day, anyhow.

[Miesian Corners]

Losing BofA would be disastrous for the Charlotte economy.  The reason we have "high class retail" is because of wealth provided by specialized banking professionals, not back office jobs.  Take Lowe's, for example.  The Mooresville-based company has lost a great deal of talent to BofA and Wachovia because Lowe's still pays those jobs what they would have paid for them in North Wilkesboro.  Not to disparage Wilkes County, but when you're trying to attract the best and brightest, it is by no means on anyone's radar.  Employment packages (for at least five people I know who made the move from Lowe's to both banks) were substantially better (at least 20% better in all cases) in uptown than they were in Mount Mourne.  Pay, vacation, bonuses, stock, and intangibles such as flexible work hours, access to transit, and the ability to work from home if they wanted.  As much as people might hate the term "human capital", that's what it is.  Having the HQ's of two large banks with highly skilled white collar labor provides a medium-sized city with wealth not seen in cities bigger than Charlotte.  As someone else has already said, the sheer number of jobs that support headquartered bank operations are huge in number.  Why would they need to be here if there was no HQ?  What would they work on?  Hugh McColl's whole reason for investing so heavily uptown was to attract workers who otherwise would have chosen to work in New York, Chicago or San Francisco.  His drive was to develop an amenity-rich location so he could keep talented workers.    

As to the loss of jobs from the recent layoffs, it's happened before and every single time, the banks still end up creating more jobs locally than they had the previous year(s).  And as for Gateway Village, it is by no means empty of Bank of America employees.  It is a single-tenant complex with the only empty space being ground-level retail that was given to Johnson and Wales.

[monsoon]

Miesian Corners, on Sep 16 2008, 07:41 AM, said:

...... The reason we have "high class retail" is because of wealth provided by specialized banking professionals, not back office jobs.  Take Lowe's, for example.  ....  Having the HQ's of two large banks with highly skilled white collar labor provides a medium-sized city with wealth not seen in cities bigger than Charlotte. ....

What high class retail?  What unusual wealth?   BTW, by almost any measure there is a higher standard of living in Raleigh, Charlotte's closest peer city in the Carolinas, yet they do so without a town full of "specialized banking professionals".   Their real estate is worth more, they have a higher house hold income, and they even match Charlotte in per capita income.   So I'm not seeing it.    Also I can't imagine that anyone in Raleigh has less shopping options than that in Charlotte.  Both cities trade off in "firsts" in what passes for, I guess, in trendy shopping.  

The people with real wealth in Charlotte, people for example with helicopters at their homes on Lake Norman, did not do it by drawing an average BofA salary.  I am fascinated by this notion however that Charlotte, Mecklenburg county and the metro revolve around BofA and Wachovia.

[dubone]

Is the crux of your point that a loss is a gain to the city or that it wouldn't be as bad as conventional wisdom thinks?   The city will not cease to exist if it were to lose one or both of the bank HQs, but at the margins, but the loss would obviously still be a loss.  The loss would obviously be at the margins.  That is in comparison to the marginal growth that the banks have contributed to over the decades.

Raleigh and the rest of the Triangle have lots of headquarters jobs in other industries, mostly in pharmaceutical companies which are experiencing a boom in profits in the past decade.  They also have a lot of other drivers for upper middle class/professional jobs, just as the research institutions and universities.  We have some headquarters outside the financial industry (although most of them are also struggling due to the economy), which will be unimpacted by the loss of the bank headquarters.  However, the gross number of professional jobs in the city would be reduced, and with it, would come a marginal decrease in economic activity in the city.

Since none of us have actually done a study of the economic generation by the banks, we can look to the results of others that have.  According to studies, the financial services industry contributes ~10% to our $100 billion gross local product.  In the worst case scenario people are fretting over, most of that $10B GLP contribution would vanish.  10% is not 50%; 10% is not 90%.... but 10% is still 10% and a loss of that number to our economy would be dramatically felt.  The symbolic losses would be higher, though, as the banks have defined this city symbolically for many of the people here.  While that is not real, of course, its psychological could have unforeseen consequences on the decisions of others moving here.

I still don't think either bank will leave Charlotte, but I believe Wachovia will be considerably smaller after all this mess, and obviously Bank of America will be considerably larger.   Bank of America has long been increasing its presence in NYC, but they also have a considerable presence in a lot of cities (count the cities where BofA has the tallest tower in the city, just as a symbolic measure.

[monsoon]

dubone, on Sep 16 2008, 10:50 AM, said:

Is the crux of your point that a loss is a gain to the city or that it wouldn't be as bad as conventional wisdom thinks?   ....

I was responding to the over the top claims that Charlotte's economy would be destroyed if BofA were to move its HQ and that people here would be left with shopping a Walmart because all the "high class" retailers would leave.    If that is what is now considered "conventional wisdom" then is not very wise because there is nothing that I have seen that would indicate this would be the case.   I suspect this wisdom is limited to those inside I-277, and it would no doubt hit that area pretty hard, but in regards to the Charlotte metro as a whole, or even just Meckenburg county,  I would say it wouldn't have that big of an effect.  

By the way, BofA is not the entire finance industry in Charlotte.

[dubone]

"In the worst case scenario people are fretting over,..." = both banks leaving (which isn't going to happen)
"...most of that $10B" = not all, but a majority, because there are still smaller banks and regional centers and branches.

However, I do completely agree with you.  It would not be catastrophic.  The WORST CASE is only 10%, which is pretty much a confirmation of your point.  However, my point is that a 10% decrease would still be significant damage to a city that has only grown for generations.   Part of that 10% would include the multiplier effect from those jobs, and people were just giving random examples along those lines.

However, as for the impact to the 'inside 277' area, most of us posting here believe that uptown jobs have a major contributor the resurgence of urban life in Charlotte.  Has been highly imperfect due to unfortunate trends in architecture, but the downtown job density and economic investment has been a significant contributor to applying the national trend to Charlotte for the rebirth of the pre-Depression neighborhoods in town.  It has also provided an anchor district to drive growth in transit.  But I guess I don't want to belabor each of these, as I suspect contrarian positions will be staked out on each.

For me, the bottom line is that the worst case WON'T happen, and I'm in full agreement that the worst case is not as tragic as most assume.  But it would still be a significant blow to our economy and the symbolic story of our city.  (The oversimplified symbolic story being: Scotch-Irish + gold = banktown).
.

[monsoon]

As a side to this, Wachovia may very well get a reprieve because the Bush Administration has apparently reversed itself and ordered the Treasury to toss $85B towards AIG.   This was a reversal that took place about 24 hours after they said this kind of thing is over.   It's an amazing amount of corporate welfare.   To put just this number into perspective, $85B would build 113 Light Rail systems in the United States that cost the same as the Charlotte's proposed light rail extension to UNCC.  

This brings the taxpayer liability up to $900B so far for this finance debacle.  A debacle that was brought down on us by the likes of BofA, Wachovia, their subsidiaries, and the ones failing on wall street.   Why is this important here?  Because the pall this liability is going to burden working American with is also going to hurt the prospects of these banks from doing any kind of growing.   I don't see how a consumer bank can grow when its customers are going to have to foot the bill of this kind of excess is being dumped right into the taxpayers pockets and its not over yet.   BofA is now caught in the position of managing of the shrinking of a business.   I don't see how this can be good for Charlotte especially if the claims made above, about the Charlotte economy revolving around Wachovia and BofA, are in fact true.

---------------------------

As another side to this complicated issue, a lawsuit was filed in NY State Supreme Ct. to stop the sale of ML to BofA.   They contend the shareholders should have had a hand in making the decision to sell their company to BofA.   If that isn't enough, another NY law firm says it is going to file a lawsuit BofA and ML because the price offered is not high enough.   They contend about the defendants, "have clear and material conflicts of interest and are acting to better their own interests at the expense of Merrill public shareholders."  It will be interesting to see how many more NY law firms are going to jump on this boat.

[Bynocerus]

monsoon, on Sep 17 2008, 04:40 AM, said:

As another side to this complicated issue, a lawsuit was filed in NY State Supreme Ct. to stop the sale of ML to BofA.   They contend the shareholders should have had a hand in making the decision to sell their company to BofA.   If that isn't enough, another NY law firm says it is going to file a lawsuit BofA and ML because the price offered is not high enough.   They contend about the defendants, "have clear and material conflicts of interest and are acting to better their own interests at the expense of Merrill public shareholders."  It will be interesting to see how many more NY law firms are going to jump on this boat.

Hopefully none:  MER had the choice of going bankrupt eventually, ala LEH, or partnering up.  Even though BAC's stock price is down 15%-ish from the announcement - bringing ML's value down with it - it beats the hell out of the alternative; namely getting nothing.  

This is the definition of "nuisance lawsuit."  

Whaah.  We were next on the chopping block but instead we got a reprieve and twice as much as we had before.  Whaah!  It should have been three times.

[RiverwoodCLT]

Where are the people who put us in this mess?  They should be going to jail.

[monsoon]

Bynocerus, on Sep 17 2008, 06:58 AM, said:

Hopefully none:  MER had the choice of going bankrupt eventually, ala LEH, or partnering up.  Even though BAC's stock price is down 15%-ish from the announcement - bringing ML's value down with it - it beats the hell out of the alternative; namely getting nothing....

Not according to Ken Lewis the head of BofA.  He told CNBC that Merrill Lynch was in good enough shape to have made it through this.  His direct quote to Maria Bartiromo about he question concerning the price paid.  "BUT MERRILL LYNCH HAS QUITE A BIT OF LIQUIDITY. AND I THINK THEY COULD HAVE SEEN THEIR WAY THROUGH THIS. AND SO YOU WOULD HAVE THE -- THE ISSUE OF THEM GOING ON THEIR SEPARATE WAY."  This sounds to me like ML did have a lot of choices.

[Bynocerus]

monsoon, on Sep 17 2008, 06:24 AM, said:

Not according to Ken Lewis the head of BofA.  He told CNBC that Merrill Lynch was in good enough shape to have made it through this.  His direct quote to Maria Bartiromo about he question concerning the price paid.  "BUT MERRILL LYNCH HAS QUITE A BIT OF LIQUIDITY. AND I THINK THEY COULD HAVE SEEN THEIR WAY THROUGH THIS. AND SO YOU WOULD HAVE THE -- THE ISSUE OF THEM GOING ON THEIR SEPARATE WAY."  This sounds to me like ML did have a lot of choices.

That's fantastic.  Of course, it entirely ignores the fact that the Feds were saying sell or we're nationalizing you, or that Ken Lewis has a vested interest in: A) demonstrating to his shareholders that MER is worth something, and/or; B) spinning MER back out in a few years when (hopefully) all of this is behind us.

Remember, this is the same man who paid $6B (including cash infusions) for a going-bankrupt Countrywide that he could have gotten for next-to-nothing, and who still - to this day - would have you believe he made a smart move.  

MER was done.  Period.  The end.  Finito.  Assuming BAC doesn't do something stupid - admittedly, a big assumption - this is a good long term aquisition, but only because of BAC's pool of resources behind it.  By themselves, MER was on the clock, but with BAC they live to fight another day.

[JayGee]

Bynocerus, on Sep 17 2008, 07:58 AM, said:

Hopefully none:  MER had the choice of going bankrupt eventually, ala LEH, or partnering up.  Even though BAC's stock price is down 15%-ish from the announcement - bringing ML's value down with it - it beats the hell out of the alternative; namely getting nothing.  

This is the definition of "nuisance lawsuit."  

Whaah.  We were next on the chopping block but instead we got a reprieve and twice as much as we had before.  Whaah!  It should have been three times.

Yeah, I'm really surprised by the Merrill lawsuit.  General consensus is that BOA paid a premium, some are even criticizing him for that, and they escaped Lehman's fate.  They're actually getting something.  And they're complaining?

[atlrvr]

RiverwoodCLT, on Sep 17 2008, 08:06 AM, said:

Where are the people who put us in this mess? They should be going to jail.

That would be a majority of the people in the United States.  Chronologically, the blame falls on purchasers/sellers of Tech Stocks, 9/11 terrorists, The Fed, purchasers of houses, bankers, investors in houses, government regulators, The Fed again, real estate agents, mortgage brokers, appraisers, all major media, investment bankers, The Fed yet again, bankers again, and lastly major media again, and anyone who has sold financial stocks in the last year due to fear.

The whole country was complicit, because consumers over extended, bankers obliged to generate income when it was scarce, and the government set back and let it happen because it was the driver of the economy.

[monsoon]

^Seems like a long stretch to blame the mess caused by banks on the terrorists that caused 9/11.  It does sound however like something that a certain politician(s) might say in order to avoid any responsibility.  As far as I know the majority of Americans who do in fact pay their bills and are working hard to do so.  Also no Credit Union, most mid-sized regional banks and community banks are not involved in this mess which kinda dispels the notion this was across the board everyone's responsibility.

[atlrvr]

Why?  The economy was already in decline because of the cooling of the Tech Speculation, and after 9/11, we had the largest free fall in the stock market and plunge in consumer confidence since 1980.  The result was a dramatic reduction in the fed funds rate, which was designed to get businesses to invest, but that failed, and the side affect was the purchasing and refinancing of homes instead.

Everything in my list was critical to where we were now....without 9/11 (or any other piece) the widely swinging trending of the last 7 years would have been much flatter.

There is no government propoganda involved.  For every action, there is a reaction.  The US didn't crash planes, and the US didn't orchestrate the ensuing weakening of the economy.  They are indepedent but corrolated events.

As to your assertion that community banks and regional banks haven't been affected, I only need to point to yesterday's blurb in the CBJ.  American Community Bank (based in Monroe) is taking a $2.6M charge based on investments on shares of Fannie and Freddie, which now swings the bank of from profit to loss.

[rockhilljames]

That's as concise a description about our current mess as anything I've ever read. There's plenty of blame to go around about all this mess, but certainly current events over the last 10 years have certainly played a part.

[monsoon]

atlrvr, on Sep 17 2008, 10:47 AM, said:

......
As to your assertion that community banks and regional banks haven't been affected, I only need to point to yesterday's blurb in the CBJ.  American Community Bank (based in Monroe) is taking a $2.6M charge based on investments on shares of Fannie and Freddie, which now swings the bank of from profit to loss.

A lot of people and institutions owned shares of Fannie and Freddie that are now going to suffer because of that debacle.  Just like the taxpayers are going to suffer greatly. As far as I know, they are not asking the feds to bail them out.   I didn't say they were not affected by the meltdown caused by the the big banks that caused this mess, I said they did not participate in its making.  A huge difference.  And most like all of them will get through it.   And, as I stated before, no credit union is involved.   They don't make sub-prime loans.

The cause of this meltdown wasn't caused by 9/11, not by the tech bust, not by the average American.  It was caused by the removal of regulations on the banks in 1999 by Phil Gramm and the subsequent bad speculation in real estate that has led to all kinds of excesses by wall street and other firms like Countrywide, etc.  And yes federal regulation on business has all but disappeared over the last 8 years and this is the result.   It was pure corporate greed that operates under the mantra of lets privatize profits but when trouble comes, lets socialize the losses.