Abstract

"The Southern Road to Financialization: Regional Interstate Banking and the Transformation of American Finance, 1976-1994"

Conrad Jacober, Johns Hopkins University (jacober@jhu.edu)

In 1994, President Bill Clinton signed the Riegle-Neal Act, ending New Deal prohibitions on interstate banking and inaugurating the era of too-big-to-fail banks. The passage of Riegle-Neal culminated a decades-long war that commercial banks had waged against interstate banking regulations. Their success, however, came not from congressional lobbying but from a state-by-state strategy that began over a decade prior. Unable to achieve federal banking deregulation, banks lobbied state governments to enact regional reciprocal interstate banking agreements, which permitted banks in partnering states to branch and acquire banks across state lines. Leading these state-level efforts were not the large New York banks but Southern regional banks, like Barnett Banks of Florida and North Carolina National Bank (NCNB, later NationsBank). Using archival materials from The NationsBank Records and the records of Barnett Banks of Florida, I show how Barnett and NCNB rallied Southern banks and states around the idea of a Southern Common Market, deregulating interstate banking within the South between 1984 and 1985 and catalyzing a hegemonic struggle between regional banks and money center banks for the future of American finance. The South’s regional banking compact became a model for regionalist banking compacts nationwide, leading to a patchwork system that pressured Congress to federally deregulate interstate banking in 1994.

The prohibition on interstate banking was a cornerstone of the New Deal’s financial regulatory regime, preventing individual banks from becoming nationwide monopolies and growing too structurally or politically powerful. In this paper, I show how regional banks played a fundamental role in rewriting the rules of American finance, laying the groundwork for commercial banks to wipe out their competition, consolidate their power, and ultimately become too big to fail. Furthermore, I show that regional and state-level politics are key battlegrounds of financial deregulation, a scale of development that is largely overlooked in the literature on the origins of financialization.