Business

In poll, jitters over health of the banks

Local residents are worried about the state of the banking industry, though they hold out hope for the broader Charlotte economy.

That's according to this month's Carolinas Poll, a survey of 1,008 N.C. and S.C. adults conducted for the Observer and WCNC.

About 4 of 10 respondents said they were substantially concerned about the financial soundness of the banking industry and whether their money in the bank is safe. Twenty-two percent said they were extremely concerned about the industry.

“Yeah, I'm worried,” said Nan Griffin, 58, of Harrisburg. “Even the big banks aren't safe.”

There's good reason area residents are in tune with the financial industry's fortunes. Here, in the country's No. 2 banktown, Wachovia Corp. and Bank of America Corp. are big employers and play outsized civic roles. And their recent problems are undeniable. Wachovia lost $9.1 billion in the second quarter and is trying to forge a revival plan. Bank of America, though it remained profitable, saw earnings decline 41 percent. Both have written down billions in troubled assets and cut jobs, and Wachovia expects to cut more.

However, there are silver linings. Both banks are well capitalized, and they're proceeding with major construction projects uptown. After Bank of America's second-quarter earnings were released last month, chief executive Ken Lewis told the Observer he expects to add bank jobs going forward.

Griffin, however, said that Charlotte and its banks are overspending on infrastructure, while common workers are hurting.

“They're trying to appear like a giant international city when they're really in trouble,” said Griffin, who said she is on disability for multiple sclerosis and used to run machinery at the Philip Morris tobacco company.

The city, for its part, emphasizes that it is not a one-trick pony. There are other big economic engines here, from major locally based retailers to growing hospital chains. The housing market is relatively healthy, and the area is a popular destination for young professionals. The Charlotte Chamber is fond of pointing out that manufacturing in Mecklenburg County employs almost as many people as the two big banks do.

“I have faith in the economy here, even though sometimes it doesn't look good,” said Frances Owen, 76 and a retired schoolteacher in Charlotte. “I was just born and raised with the idea that you live on what you do have, and you can live on it if you try.”

But Tony Plath, a finance professor at UNC Charlotte, still thinks the local economy is too dependent on banking.

“Losing 1,000 jobs in manufacturing is not like losing 1,000 jobs in finance,” because the financial jobs usually pay much more, Plath said.

And while Wachovia and Bank of America account for only about 6 percent of Mecklenburg County jobs, any of their problems ripple to law firms, real estate markets, even restaurants. All finance and insurance jobs, including the two banks, account for about 9 percent of the county's jobs.

“You can't hitch your wagon to one star,” Plath said.

Worried about own money

Outside of broader economic considerations, residents are also worried about the banks from a consumer's perspective. In the survey, 42 percent of respondents said they're substantially concerned about the safety of their money in the bank they use.

High-profile bad news, like the failure of California-based IndyMac Bank in July, seems to have residents on edge. The failed bank's takeover by the Federal Deposit Insurance Corp. went according to plan, but many people don't understand how the FDIC works. If a bank fails, the FDIC guarantees accounts up to $100,000 per person per bank, and it covers certain retirement accounts up to $250,000.

That's why Adam Barrington isn't concerned about his money. “As long as they don't do away with FDIC insurance,” said Barrington, 33, of Charlotte.

Not everyone shares his peace of mind. When Plath was a guest on WFAE's “Charlotte Talks” show recently, he expected to briefly mention deposit insurance. Instead, he was inundated with questions from people trying to figure out whether their money was insured. “You wouldn't believe the number of phone calls we got,” Plath said. “I thought we would hear crickets. What is a more boring subject to talk about on a Friday morning?”

Nine U.S. banks have failed this year, of a total of 8,500. Earlier this week, the FDIC said there are 117 names on its list of at-risk banks, up from 90 the previous quarter.

In the Carolinas survey, 20 percent of respondents answered like Barrington, saying they had full confidence that their money in the bank is safe. In 1989, when the poll asked a comparable question about the savings and loans, 31 percent had full confidence.

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