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without interruption, our deposits are protected by the federal government, and the overall impression is one of reassurance and stability. When the FDIC took control of MCorp.’s banks in Dallas and Austin last month, customers were greeted by the same corporate emblems, the same banking personnel, and an advertising campaign with the tagline, “We’re O.K. You’re O.K.” When NCNB came to the state last November, their corporate image-makers launched an ad blitz that sought to portray the institution as a sort of friendly-cousincome-to-town. Their name would be “NCNB Texas” and they were here for a reason all Texans could respect: they were here to do business. As the largest bank in the Southeast, they were used to doing business in a big way. What more was there to say? Thousands of customers who were served by Republic Bank were in jeopardy when the institution became hopelessly insolvent. The feds stepped in, made a deal with a robust bank that had an itch to expand, and before long Humpty Dumpty was back together again. End of discussion? Not as far as Tom Schlesinger is concerned: Schlesinger runs the Southern Finance Project, a two-anda-half-year-old non-profit research outfit in Charlotte, N.C. Since last summer, when the FDIC first announced the First RepublicNCNB deal, Schlesinger has been digging into NCNB’s corporate history and pondering the implications of what the FDIC path wrought, In a report released last fall, shortly before the Presidential election, Schlesinger wrote, “The NCNB-First Republic deal; better than any other single event, crystallizes the most important domestic financial policy issues facing the American people and the next administration.” Schlesinger finds several reasons for concern in the NCNB merger. “The First Republic deal symbolizes”the growing trend of the authorities to encourage bigness and consolidation in all aspects of the financial marketplace,” he said in a recent phone interview. This is worrisome enough, in terms of the effect the consolidation has on service to ordinary customers. But what bothers Schlesinger just as much is the lack of citizen participation in deciding the terms of the deal. “Texans ought to be aware that NCNB was very much a minority partner in recapitalizing First Republic,” Schlesinger said. “First Republic’s problems were by and large remedied by you and me and the rest of the taxpaying public.” The terms of the FDIC’s deal with NCNB called for the feds to maintain 80 percent ownership in this the most rocky period of getting NCNB Texas onto its feet. \(NCNB recently announced its intention to increase its share the bank essentially a publicly owned enterprise. Yet, the financial decisionmaking will rest with NCNB. Just as there was no democratic process in the original decision that taxpayers would help keep the new NCNB afloat; there will be no democratic participation in deciding the course of the new institution. Consumers all across the southeast and southwest now have a stake in’the management of NCNB. But they are expected to sit back and trust the judgement of the bankers. Surely the bankers know what they’re doing, don’t they? Maybe, maybe not. NCNB does not suffer from the lack of strong leadership; the force behind the bank holding company is chief executive officer. Hugh McColl, an H. Ross Perot-like character who plainly wants his bank to become a giant among giants. Until recently, McColl had been determined to expand his empire by taking Over Citizens & Southern Bank in Atlanta, though Citizens did not want to be taken over. “We’d have the largest bank in North Carolina, South Carolina, Georgia, and Texas and the third-largest in Florida,” he gloated in the Wall Street Journal. “We’d have the largest number of branches in America. We’d be serving an area that has 46.5 million Americans in it and growing faster than the rest of the country. From whatever Way you want to look at it, it’s gangbusters.” From the way Schlesinger looks at it, it spells trouble for the average banking customer. “I think it’s not just NCNB’s fate but the fate of most large financial institutions that once they pass a certain size threshold they’re simply too big to be loyal,” he said. Schlesinger contends that NCNB’s history in the Southeast is one, of becoming progressively less faithful to the state and local economies. He cites, for one thing, NCNB’s participation in financing the export of textile production to Third World countries while the domestic industry was left to fall apart. And several years ago, Schlesinger said, NCNB took over a small bank in. Atlanta that was one of the leading lenders to small businesses and then reduced its small business lending “to nil.” Schlesinger also faults NCNB for having been one of the most active U.S. banks in South Africa in the early part of this decade. Though NCNB reduced its involvement when it came under pressure from antiapartheid groups, it has gained new South Africa ties with its purchase of First Republic. According to Schlesinger’s reTOM First Republic was the largest U.S. shareholder in Royal Dutch Petroleum, which is a principal supplier of fuel to the South African military and a target of an anti-apartheid boycott in the U.S. Normally, such issues could be passed off as the kind of business decisions we have no right to question in ‘a ‘ free enterprise economy. But what does’ free enterprise mean in the context of our present banking system? The public interest ought to take on new relevance to a bank that is 80 percent owned by the public. T’S CLEAR that there is no going back to a system of small community banks. We are in an age when we as a nation have little choice but to live with financial behemoths and to bail them out of trouble when they make ill-considered decisions. More cautious bankers look at NCNB’s Hugh McColl and wonder if he’s heading for a fall. But from his perspective, one must ask: what does it matter? Why shouldn’t he be a risk-taker? The beauty of megamega-banking is ‘that it requires a system in which the risk has been socialized. Schlesinger contends that while there used to be only a handful of U.S banks that the government considered Too Big To Let Fail, “we now have 50 or 60 banks that meet that description.” As the Oklahoma populist Fred Harris wrote several years ago, when corporations and banks are allowed to merge into ever’ larger entities, we create “dinosaurs that one day show up at our door saying ‘If you don’t feed me, I will die’ the alternative being a dead ten-ton carcass stinking up our frOnt steps.” But Harris’s metaphor suggests that the other alternative is to live with rampaging dinosaurs. What seems to get far too little discussion as we create bigger and bigger banks is whether the community at large ‘ought to be finding a way to rein these creatures in. None of the steps federal regulators have taken to shore up the U.S. banking system suggests movement in that direction. But there is, in fact, a movement stirring among citizens’ groups across the country, and researchers and activists such as Tom Schlesinger are fomenting it. Last October, a group of 17, including Schlesinger, Duke University historian Lawrence Goodwyn, author William Greider, as well as union activists, Capitol Hill staffers and Jesse Jackson backers, met in Washington, D.C. and hatched plans for a Financial Democracy Campaign. The campaign has emerged as a distinct populist presence in the debate over how to reconstruct the savings and loan industry, especially in a way that would begin to address the housing crisis in America. Schlesinger says the financial upheavals in banks and S&Ls are forcing people to think ‘ of ways the system might operate differently. “This is a set of circumstances we haven’t seen in this country in a long time,” he said. ” . so much corruption, so much fragility, and so much power in the paper economy.” For his part, he has not given up on ‘a smaller scale financial system. “I would like to think it’s not just a utopian pipedream that locally responsive [and] smaller capital can be mobilized and managed in ways that would improve perceptively the lives of ordinary citizens,” Schlesinger said. Nobody seems to know just how to do that yet,. but people are beginning to talk about it. D D 4 MAY 5, 1989