There's Another Bank Merger In The Works. But Bigger Is Not Always Better.

Feb 11, 2019

I stepped outside the other morning and caught an old familiar whiff in the air. Were the magnolias already starting to bloom? Was it the old cookie factory down the street? I took in another breath. Ahh. It was a bank merger! It smelled like money and danger.

BB&T and SunTrust have announced that they plan to move in together and bring their headquarters to Charlotte. It’s a $66 billion deal that will make them the sixth-biggest bank in America. It’s also the biggest bank merger since the financial crisis in 2008.

Some of you might not remember that financial crisis, because that was 11 long years ago, and we are all so information-overloaded these days that history seems like whatever happened last week.

So here’s a quick refresher: Many of America’s most prestigious financial institutions made billions of dollars in subprime mortgage loans that had no chance of being paid off. Then they packaged those terrible loans and sold them to investors who didn’t read the fine print. When the housing bubble popped, and people started defaulting on all those loans, it almost wrecked the entire American economy. We went into a deep recession.

And as we tried to dig our way out of it, we realized that we couldn’t just let those banks collapse under their own bad decisions. They had gotten too big. The age of the megabank started right here in Charlotte, when Hugh McColl and his team figured out a way around interstate banking rules and started building the behemoth that has become Bank of America. The other big bank in town, Wells Fargo, carries inside it the remnants of the old North Carolina banks First Union and Wachovia. I started an account at First Union when I moved to Charlotte 30 years ago. My money has switched banks twice without ever leaving the account.

These megabanks house so much of our country’s wealth that we basically can’t afford for them to make any big mistakes. And when they did, in the housing crisis, the government bailed them out and propped them up.

This particular merger blends two cultures that were on the opposite ends of the financial crisis. BB&T came through it all pretty clean – the bank accepted bailout money from the government but quickly paid it back. SunTrust had bigger issues. In the midst of the crisis, when homeowners sent in applications begging for help to avoid foreclosure, SunTrust didn’t even open most of the applications – they just stuffed them in a storage room. There were so many that the floor buckled.

And now both banks are getting bigger and richer and harder to hold accountable for their mistakes.

In many ways, the big banks built modern Charlotte. They’ve employed tens of thousands of people here, they’ve made uptown into a destination, they’ve put us on the map as an important American city. But what’s good for the city is not necessarily good for the country. Are BB&T and SunTrust creating another bank that’s too big to fail? Chances are, given recent history, one day soon we’ll find out.

Tommy Tomlinson’s On My Mind column runs every Monday on WFAE and WFAE.org. It represents his opinion, not the opinion of WFAE. You can respond to this column in the comments section below. You can also email Tommy at ttomlinson@wfae.org.