The Southern Route to Financialization: Nationsbank and the Deregulation of Interstate Banking

Conrad Jacober, Johns Hopkins University

In 1994, President Bill Clinton signed the Riegle-Neal Interstate Banking and Branching Efficiency Act, ending the New Deal era’s prohibition on interstate banking and inaugurating a new era of too-big-to-fail banks. The Riegle-Neal Act was the culmination of a decades-long war that banks waged against interstate banking restrictions, one fought not in the halls of Congress but rather in state legislatures across the country. Well before federal deregulation, banks lobbied state governments to enact reciprocal interstate banking agreements, allowing banks from each participating state to branch and acquire banks in other participating states. The charge was led not by a large money center bank in New York or Chicago but rather by North Carolina National Bank (NCNB, later NationsBank), a moderately-sized commercial bank in Charlotte, North Carolina. Rallying Southern banks and states to the cause of a Southern Common Market, NCNB led the creation of the Southern Regional Banking Compact, ending interstate banking prohibitions in the South and giving rise to a new financial powerhouse in Charlotte. The prohibition on interstate banking was a cornerstone of the New Deal’s financial regulatory regime, preventing banks from monopolizing and growing too powerful. Deregulation laid the groundwork for the concentration of American financial power and the rise of too-big-to-fail banks. The drastic concentration of finance, whereby the number of commercial banks in the United States halved between 1984 and 2004, is a crucial but underrecognized process in the financialization of the American economy. Bringing this history into focus and placing it within the broader development of financialization, I show that banks played a fundamental role in rewriting the rules of the American economy. Furthermore, I show that regional and state-level politics are a key battleground for the politics of financialization, one that has been overlooked in the literature on the origins of financialization.

No extended abstract or paper available

 Presented in Session 58. Finance and Empire