Interstate Banking and the Relocation of Economic Control Points

Abstract

This paper examines the geographic shifts in the corporate control of banking which have resulted from interstate acquisitions between 1982 and mid-year 1986. Ninety-nine transactions during the study period have resulted in the interstate transfer of corporate control of $88 billion i n assets. I n the Southeast, North Carolina and Georgia banks have gained control of assets at the expense of the banking industry in Florida and South Carolina. Within the New England region, Massachusetts banks have made major acquisitions in neighboring states. In the West, California banks have been active with acquisitions in Arizona and Washington. The patternof acquisitions has been influenced not only by the geographyof interstate banking legislation but also by the relative size of banks. The roles of Atlanta, Charlotte, Boston, and Los Angeles as regional money centers have been expanded because of interstate banking acquisitions.

Canada and the International System of Bank Headquarters Cities, 1968–1989

“…The prohibition on interstate banking before 1927, loosened only slightly with the advent of the McFadden, Glass-Stegall, and Bank Holding Company Acts, served to curtail the emergence of a centralized banking system (Lord 1987). With these laws, the U.S. created a system of locally-controlled banks, the result which American lawmakers desired.…”

“…Although poor lending decisions have played a role in placing the U.S. where it is today, a large part of the decline of American banking power may be traced to the laws governing banking in the U.S.. The prohibition on interstate banking before 1927, loosened only slightly with the advent of the McFadden, Glass-Stegall, and Bank Holding Company Acts, served to curtail the emergence of a centralized banking system (Lord 1987). With these laws, the U.S. created a system of locally-controlled banks, the result which American lawmakers desired.…”

U.S. Bank Failures and Regional Economic Structure*

“…Lord (1986Lord ( , 1992 notes that the proportion of commercial bank assets held interstate rose from 2% in 1980 to 15% in 1990, largely in the form of mergers and acquisitions by bank holding companies. Interstate banking is still, however, primarily restricted to regional banking pacts designed to thwart aggressive moves by large, money-center banks headquartered mostly in New York (Lord 1987(Lord , 1992.…”

“…The problems of commercial banks have received scant attention in the literature compared to the better known debacle of savings and loans institutions (eg., Mayer 1990;Sherrill 1990). Within the geographic literature on commercial banking, attention has focused less directly on bank failures than on related issues such as the location of bank deposits (Wheeler and Dillon 1985), the role of deregulation (Holly 1987), and interstate banking (Lord 1987(Lord , 1992. Analyses of structural problems in banking tend to focus on the role of large money center banks concentrated in cities such as New York.…”

The Geography of Mutual Fund Assets

“…Because investment managers can influence the cost of corporate capital, financial control points are considered to be the most influential locations in the U.S. urban system (Green 1995). Centers of financial decisionmaking are identified by several geographic studies (Wheeler and Dillon 1985;Lord 1987Lord , 1992Green 1993Green , 1995. Each study found New York to be the dominant financial center and most studies conclude that Boston, Philadelphia, San Francisco, Los Angeles, and Pittsburgh act as regional financial hubs.…”