Recessions often strike like a hammer – you lose your job, your home or a big customer.
The onset of the worst financial crisis since the Great Depression was more subtle for Pee Dee Sharp, a waiter and bartender at the Capital Grille in downtown Charlotte, N.C.
His customers – the free-spending bankers, traders and deal makers who inhabit the gleaming financial towers of Tryon Street – actually began to pay attention to the cheques laid before them at the chic eatery, where a steak will set you back at least $40 (U.S.).
“Before, no one really cared who paid, or how much it cost,” Mr. Sharp said. “That's all changed.”
On the surface, there's little to suggest Charlotte, the great banking centre of the American South, is hurting.
And yet, the financial crisis has probably hit harder here than just about anywhere outside of Lower Manhattan, jeopardizing the city's status as the No. 2 banking centre in the United States.
In the past year, Charlotte has lost the headquarters of homegrown Wachovia Corp., once the fourth-largest bank in the country. That brought the additional pain of losing some 2,000 high-paying jobs that were cut following its shotgun marriage with San Francisco-based Wells Fargo.
No. 2 Bank of America is still here, but it's in the ranks of the country's many “zombie” banks – still hoarding cash and reluctant to take on much risk as it operates under the watchful eye of regulators.
There's speculation that whoever succeeds Bank of America's chief executive officer Ken Lewis when he leaves at the end of the month will order a breakup of the financial behemoth, delivering another indignity to Charlotte.
(On Monday, Halifax native Bob Kelly, previously vice-chairman of Toronto-Dominion Bank and now CEO of Bank of New York Mellon, quashed speculation he was in talks to succeed Mr. Lewis. In a memo to staff, Mr. Kelly said, “I firmly concluded that my place is here at BNY Mellon.”)
Before the crisis struck, the two fast-growing banks employed nearly 34,000 in Charlotte. The next largest bank headquartered here has just six branches and fewer than 50 employees.
As the banks' problems rippled through the broader economy, the jobless rate in Charlotte has more than doubled. Unemployment now stands at 12 per cent, nearly two percentage-points higher than the national average. Everyone, it seems, knows a family member, a neighbour, a friend or a colleague who's lost a job at one of the banks.
But the depth of banking crisis isn't just measures in lost jobs, as Mr. Sharp is finding out. It's calculated in the diminished prestige, along with a whopping loss of wealth caused by the collapse of Wachovia and B of A shares. Gone too are the dividends, bonuses and the rich stock options that many employees enjoyed.
“Income that was here yesterday is gone tomorrow,” explained Bob Morgan, president of the Charlotte Chamber of Commerce. “There has been a reset that's affecting the public sector, the non-profit sector, and it has affected companies that do business with the banks.”
Housing starts and retail sales are still weak, and remain well below what they were a decade ago.
It's an “open question” whether Charlotte can survive as a banking hub as the fallout from the crisis continues to reverberate, said John Connaughton, an economics professor at the University of North Carolina (Charlotte). Civic leaders have launched a spirited campaign to convince banks elsewhere in the country to relocate here. But Prof. Connaughton isn't convinced it will work long term.
“There's no particular advantage to coming to Charlotte,” said Prof. Connaughton, who does a quarterly regional economic forecast. “You can run a bank out of a backroom anywhere.”
