February 15th, 2009 18:04 EST
Wall Street South Is Feeling the Pinch of the Economy`s Downturn
Charlotte, a bustling urban center of nearly 700,000 people, has seen a complete turnaround in the last 10 years. Within the last 40 years, banking and distribution have become Charlotte`s success story and it`s primary means of commerce. Ten years ago, bank giants Bank of America and Wachovia propelled the southern metropolis`s commerce out of the 20th and into the 21st century.
As of the latest estimates, Charlotte ranked as the country`s penultimate city in bank assets, with New York nesting comfortably in 1st and San Francisco as a close 3rd. The previously booming banking market in Charlotte also Both, Bank of America and Wells Fargo as well as a slew of other prominent financial firms, had accounted for over 50,000 jobs in the Charlotte metro area.
But following the crumbling housing and stock assets in Wall Street, the city`s largest financial firms endured a substantial chunk of the losses as well as other Fortune 500 companies nationwide. Bank of America`s stocks were devastated especially hard. In one year, the company lost 85 percent with 56 of it being compromised since they absorbed Merrill Lynch at the beginning of 2009.
Long before the credit crisis reached critical mass, the country saw the biggest hike in housing values in years. Back in 2006 when the housing bubble hadn`t yet burst, Wachovia capitalized on the opportunity by purchasing the mortgage broker Golden West Financial Corp. for approximately 25 billion dollars. Based on the housing market favoring capital returns, Wachovia execs hoped to turn the 122 billion dollar portfolio of toxic mortgages they inherited from Golden West into long-term gains. Unfortunately, as most companies that hadn`t braced for the upcoming economic windfall, the Charlotte-based firm never recuperated from their debts. Wachovia, which at one point had been 1 of the Top 5 national banks in the country, had already lost 85 percent of its assets when Wells Fargo took it over last year after declaring bankruptcy.
Only within the last year did Bank of America begin to slide into the red. Its investment bank division had made a series of disastrous gambles that plummeted profits to new landmark lows in the company`s history.
Since a considerable number of employees for both companies work in and around Charlotte, the city is feeling the brunt greater. Within the last year, Bank of America and Wells Fargo compensated their employees by offering them profit shares in lieu of cut salaries. But as their respective stock prices tumbled, not only did employees see losses in their stocks but also thousands of layoffs.
With Charlotte`s chief industry rapidly on the decline, local commerce and businesses dependent on patronage from many banking employees are now going out of business. High-end restaurants, like Morton`s Steakhouse, have closed up while many upscale retailers, like Octane and Lucky Soles, have also shut their doors. SouthPark Mall, an exclusive shopping area on the outskirts of the city, has also reported that sales are down across the board.
In fact, many questions have arisen on how the impact of the economy`s downturn will also affect the companies` participation in city life. Wells Fargo sponsors Charlotte`s yearly PGA tournament. Bank of America has its name plastered on the Carolina Panthers` football stadium and underwrites Charlotte`s annual NASCAR race: one of the most important races in the racing circuit.
North Carolina, as a whole, had an unemployment rate of 8.7 percent for the month of December: the highest it`s ever been since 1983 with 400,000 people currently out of work.
One investor in particular intimated that he lost an estimated 60,000 dollars of his share holdings in the two banks and other banks based in North Carolina.
Comments from City Hall voiced the exigency of the situation on their city, and its effects for the long haul and returning the financial backbones to their rightful place in the community.
Bob Morgan, the president of the Charlotte Chamber of Commerce, pressed: there`s a bit of a state of disbelief. We are seeing things happen that no one else has contemplated before.
He went on to address the amount of money lost from shareholders and others invested in the failing corporations.
On the other hand, Pat McCrory, the Mayor of Charlotte, seemed overly enthusiastic about the city`s predicament. We`re going through a major adjustment, but when the economy rebounds, I think Charlotte will rebound the quickest.
Perhaps, through the darkest hour in their mutual history, Wells Fargo and Bank of America have sworn that they will remain in Charlotte: a dubiously positive sign for a city so dependent on the struggling companies.