From the point of view of what we call around here “nachrel rahsauces” the South is the wealthiest, most resource laden section of the United States. We can hold our own agriculturally with the mid-West or California and can grow a wide diversity crops. We have our fair share of oil, especially depending on how you count the Gulf of Mexico and West Texas. Our water situation is over abundant right at the moment and certainly better than most areas in the main. Forest products? Check. We can dig just about anything out of the ground whether it is metal, stone, or coal. Historically, our problem has not lay in raw materials but in the procurement of labor and capital necessary to convert those materials to goods.
On this day when the preliminary Emancipation Proclamation was promulgated by Abraham Lincoln, it is appropriate to acknowledge that our initial solution to the labor question was immoral, unethical, and probably economically unsustainable. Subsequent solutions have not always been a vast improvement, and each has required the entrepreneurial class to view its human resources much more as resource than human. In a testament to the persistence of spirit, laborers have continued to assert their humanity in the face of shameful discrimination, legal persecution, and extra legal violence that continues to be the shame of our region and its more economically advantaged sons.
While the history of labor in the South is relatively unambiguous, at least until fairly recently, the history of capitalization in the South is much more dim. Alexander Hamilton’s original schemes for consolidating the national debt had the effect of transferring the value of Southern natural resources to financial wealth controlled by New England banks and capitalists. It’s no wonder that southerners like Andrew Jackson and John Calhoun were suspicious of the Bank of the United States and the tariffs on finished goods which had the effect of concentrating capital in the northern states. The destruction of capital and infrastructure during the Civil War, while arguably necessary to achieve the freedom of slaves, was not by any means rectified by Reconstruction.
Nothing like the capital investments necessary for economic expansion came to the South until the Depression era projects of the WPA, TVA, and similar programs. In the years which followed, New South businessmen began to see the advantages of controlling those institutions which could convert the natural resources of the region into capital for further investment. Charlotte, North Carolina, site of the nation’s first gold rush, was also home to Hugh McColl and North Carolina National Bank. Mr. McColl saw that his bank, or one like it, could become the capitalist engine the South needed. He proceeded to build this regional player into Bank of America with the help of Ken Lewis, now the bank’s CEO.
As large as Bank of America was by the middle of 2008, there were still areas where it did not have a truly significant presence. Culturally, it was not always viewed with respect by established Wall Street firms. The opportunity to acquire Merrill Lynch in September of 2008 brought with it a chance to address the first issue and at least render the second insignificant. Some might say that Walnut Grove, Mississippi native and Georgia State alumnus Ken Lewis had a chip on his shoulder regarding Wall Street which the subjugation of Merrill Lynch would go a long way to remove.
For quite a few reasons, however, Merrill Lynch needed acquiring at a time when few if any institutions existed which could pull such a thing off. Merrill Lynch has been working desperately to right itself, including bringing on turn around artist John Thain, who lured other Goldman Sachs alumni away from solid positions with the promise of exciting work and great rewards. While selling the firm was not what he had in mind, Thain was better off accomplishing this than going down with the ship. Like Lewis, Thain appeared to have skin in the game.
Not everything in this scenario was personal, however. With the failure of Lehman Brothers imminent, all eyes would be on Merrill Lynch as the next domino to fall. The chain reaction might be cataclysmic. Short of nationalizing Merrill Lynch, the only obvious option was for Bank of America to acquire the firm. In the process of fulfilling some personal goals of Lewis and Thain, this event may well have stood in the way of a true disintegration of the global financial system. The wealth of the South had again been tapped to the advantage of the Union, and in this case, the world.
The acquisition happened quickly, whether measured in terms of the weekend negotiations which preceded the signing of contracts or the three months prior to the closing of the deal. The haste resulted in confusion, conflict, and an inability to assess the whole picture. The same haste was deemed to be due so that faith in the system as a whole could be preserved. And it appears to have worked. Let the pillorying begin.
I understand the anger and outrage that one might feel at the astronomically large figures used to describe the scope of government support of this and other consequences of the recession. These feelings might be justifiably exacerbated by the compensation of the CEOs at the helms of the institutions which were supported through this period. What seems like a lack of courage to me, however, is the failure of some public officials to recognize the vital role Bank of America and other companies played in averting a global depression. More appalling is what seems to be manipulation of public frustration by some politicians, such as the Attorney General of New York, in advancement of their own political careers.
It seems worth noting that today, Bank of America has announced payments it will make to the government because the government offered it money which Bank of America never took. Additionally, there is no indication that Bank of America will not be able to return all of the taxpayer money it did take. We are likely to make money off the deal. Surely Bank of America’s acquisition of Merrill Lynch was not an act of philanthropy. It’s receipt of TARP funds was not a purely patriotic move. But Bank of America did render great service to our country, putting Southern wealth to work in a time of great need when there may not have been any other options. I think they deserve a little bit of credit.
