Wachovia's downfall changed Charlotte's vibe
In early September 2008, it was clear the U.S. financial market was in turmoil. AIG and Washington Mutual had failed. Bank of America had just bought a weakened Merrill Lynch. But the really bad things had all occurred somewhere else. That changed one year ago today, when Charlotte got news that put a big knot in the stomach of the city's banking community. A year later, some pain lingers. But Charlotte is still standing, and economists are optimistic about its future. On the morning of Monday, September 29th, 2008, anxiety was already high in Charlotte. A hurricane on the Texas coast created a gas shortage that left cars stranded on the side of the road. And worse, there were rumors that one of the city's flagship banks was in serious trouble and might have to be sold. Then shortly after 8 o'clock, the news came. TV news audio: "It says that CitiGroup will acquire the banking operations of Wachovia, and that the transaction is being facilitated by the Federal Deposit Insurance Corporation" Charlotte - a city that had built its reputation on banking - was losing Wachovia. Greg Daly, a Bank of America employee, summed up what many in the financial industry were feeling that morning. "It's gonna be very rough," he said. " I can't forsee what's gonna happen. But I'm scared to think what's gonna happen to be honest with you." The news rocked Charlotte's banking industry. No matter who you worked for, it seemed anything could happen. At the time, Michel Bowen was a Bank of America senior vice president. He says a lot of bankers were just scrambling to find out more. "Of course there were instant messages that were sent back and forth and phone calls that were made as you talked to your colleagues," he says. "But I think in general, any time things get serious and uncertain, people get to work." And people tried, but they knew job cuts would be coming. There were predictions 5,000 Wachovia workers alone could lose their jobs. Some relief came a few days later when Wells Fargo made a competing offer that was better for Charlotte. The city is now the San Francisco company's east coast headquarters. But the damage was done. The national financial turmoil had made a direct hit on Charlotte. By February, Bowen was out of a job. He lost a 6-figure salary. Within weeks, his wife had to go back to work as a nurse. And immediately, the cost-cutting started. Eating out was one of the first things to change. " We're water drinkers," he laughs. "So from soda and tea and a glass of wine to a glass of water." With all the nickel and diming, Bowen says his family has cut monthly spending by 50%. He's been applying for jobs, but nothing has materialized. Bowen says his family has about 6 months before it will have to make more drastic changes. What happened to Bowen has happened all over the region thousands of times in the past year. It's been painful for many. But UNC Charlotte Economist John Connaughton says the hit the city's banking industry has taken has actually been overblown. " People have this feeling that somehow or other Charlotte got badly affected and the financial industry will never be the same," he says. "But when you look at employment levels at the banks today, they're not that much different than they were a year ago, before all this started." Connaughton and other economists estimate that about 10 percent of Charlotte's 33,000 or so banking jobs have been cut as a result of the recession. Based on past employment figures, that would mean a loss of roughly $260 million in banking payroll. But worse they say, are the hits the construction, manufacturing and motorsports sectors have taken. Dennis Appleyard, a Davidson College economics professor, says predictions of how bad things would get for local banking were too pessimistic from the get-go. "I think people were kind of overreacting, saying well we're gonna lose the whole banking sector," he recalls. "Well that's clearly not true. Certainly the personnel are still there, the offices are still there. Just because it's bought by somebody doesn't mean it's going to go away." Still, thousands of banking jobs that existed in Charlotte a year ago, aren't here today. But long term, experts say those jobs will be replaced. It may take a few years, but Appleyard says Charlotte will bounce back. And a silver lining, he predicts, will be a more diverse economy. "The diversification might come through broadening education, community college, UNCC. Other types of financial firms besides banks or consulting firms. Since this is kind of an international center, it could be foreign firms coming in a variety of ways, health services" Both Appleyard and Connaughton though are less optimistic about the blue collar jobs that have been lost. They say many of the manufacturing jobs cut were on their way to being outsourced. The recession only sped up that process.