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Transcript on deposit at The Southern Historical Collection, The Louis Round Wilson Library
Citation of this interview should be as follows:
“Interview
I-0076, in the Southern Oral History Program Collection #4007,
Southern
Historical Collection, The Wilson Library,
University of North Carolina
at Chapel Hill”
John G. Medlin, Jr., CEO of Wachovia, discusses the growth of the Charlotte-based bank. Medlin places the rise of Wachovia in a historic context, describing the management philosophy with which he stewarded its growth, along with some of the details of its national and international expansion. As he reflects on Wachovia's history, he comments briefly on the development of his management philosophy, Wachovia's history with racial integration, and its involvement in politics and charitable giving.
John G. Medlin, Jr., CEO of Wachovia, discusses the growth of the Charlotte-based bank.
[START OF TAPE 1, SIDE A]
This is an interview with Mr. John Medlin in Winston-Salem, North Carolina on Monday, May the 24th for the southern Oral History Program's North Carolina Business History Series. We're here in Mr. Medlin's office in the Wachovia Building in downtown Winston-Salem. My name is Joe Mosnier. This is cassette 5.24.99-JM. Let me actually just turn off for one quick second. I thought Mr. Medlin we might start this morning just with a quick sketch of what the career landscape looked to you when you were a young man coming out of the Navy and thinking about settling into a job and how you came to chose to join Wachovia.
Well, I graduated from the University in 1956, the University of North Carolina at Chapel Hill and went into the Navy having had joined the Naval ROTC upon going to Chapel Hill and had a three year obligation. Upon completing that, I had no real idea of what I wanted to do to be very honest. I had spent six months tour in the Mediterranean from October of '58 to May of 1959. I had a very short time to find a job. I was mustering out of the Navy in the early part of June. I had gotten married in 1957 and had a new child who had arrived while I was in the Mediterranean and so economic necessity drove things probably more than idealistic career aspirations. I came to North Carolina shortly after arriving back home from being gone six months, kissed my wife, saw my new baby and headed South to look for a job. The first stop was Winston-Salem, Wachovia. I interviewed the people. I knew a little something about the bank and it had a great reputation. I met people like Archie Davis, John Watlington, others who seemed to me to display the kinds of values and principles and philosophies that I had sort of in a younger way thought were impressive and were similar to what I would like to aspire to. I went and interviewed with a couple of other companies and really still had Wachovia on my mind. I called them up and said, 'I'd like to come to work for you.' So I arrived here in June of 1959 and felt very pleased with what I had judged the company to be like and to have the potential for.
How in your earlier years growing up, how had you come to gain a sense of Wachovia. Had there been, were these senses you developed mostly studying business at North Carolina at UNC or had other experiences along the way that would've given you a sense of what the bank was about?
I grew up on a farm in eastern North Carolina and didn't know much about
banking, had heard the name of Wachovia. It had a mystique about it. It
had a good reputation. Read about it in the newspaper. Heard about it at
Chapel Hill when I was in college. So when I began to learn more about
it,
Can you talk a little bit about your range of values that you brought to the bank in '59 when you arrived, the kinds of experiences that had mostly shaped you, the things to which you were committed, the sort of career you hoped to put together and the values around which career would be structured?
My earlier work experience obviously on a farm was dealing with the perils of the weather, commodity prices and all the things that make farming a difficult business, year in and year out. At the same time I'd learned the importance of hard work, learned the importance of careful analysis to make sure you were on sound financial footing whether it be the farm or your own teenager personal finances. I had also worked part-time for a newspaper, a weekly hometown newspaper in Benson, North Carolina near where I grew up on the farm. I had gotten to know some people there who had an influence on my life, Ralph Delano and a family, the Wilson family that had bought that newspaper and started. I was the only employee. They were people of very strong values, very good journalists and had sort of reinforced my independent spirit and values that I'd learned through the family. So Wachovia was sort of an extension of that. It seemed like a natural extension of what I had done in my early life.
How did you measure your career ambitions starting as a young professional banker in '59? What types of opportunities in the bank seemed to lie ahead? Did you have any sense then that one day you would be sitting where you are? Did it seem that this was a place that offered this broad range of opportunity?
I had no ambition to be the Chief Executive Officer when I came to work.
I was more humble to that ambitious and humbled from the standpoint of
there was so much to learn and so much growth opportunity. A captain I
had in the Navy named Chester Nimitz, Jr. the son of the World War Two
admiral had a great influence on my values I guess too. He had several
expressions that he said along the way that made an impression on me. He
said, 'Sonny, when they ask for volunteers for dirty jobs, raise your
hand. Those that do the tough jobs and do them well are the ones that
get ahead.' Another expression is, 'Knowledge is power. You know, learn
everything you can and when we came upon the Japanese submarines in the
Pacific, we knew how fast they went, how quick they could turn. We had a
great advantage when we came up to torpedo them.' I could relate this to
credit analysis. One of my first jobs
Do you have a quick sketch of the business culture in North Carolina that you encountered in these early years at the bank? The sorts of types of business owners and leaders you are encountering in those years and what their worlds to look like to them as you could measure it, the business world?
I was so far down in the hierarchy of the bank and of the profession that I didn't encounter outside leaders in any direct interpersonal sense. It was more through someone else's eyes or through reading of the press. But my impression was it was a fairly progressive community in lots of ways. At the same time, very traditional and still influenced a lot by the experiences of the Great Depression. That there was a, on one hand a progressiveness and on the other an underlying caution. That was true of Wachovia; that was true of banking; that was true of many other businesses. You occasionally found a visionary who was willing to step out and do something bold and imaginative and new, but that was not particularly widespread I'd say in the '50s or even the '60s. In a sense my generation, the generation I guess that was born in the '30s, grew up in the '40s, educated in the '50s, went to work in the late '50s, early '60s. We were a little bit of a bridge between the people who were either hired or were working in the Great Depression and through World War Two and in the fifties really hadn't changed that much when I arrived at Wachovia. A lot of the things that were done during the '50s, I mean, '60s and particularly in the '70s were challenging those old premises that you couldn't do that because we got in trouble doing it in the '30s. I think we were that transitional generation that eventually gave way to the even more aggressive change of the baby-boomers and those who've come into leadership positions since.
Tell me about some of the key early roles as you look back, things you did, roles you had at the bank that really in the end in retrospect seem most significant in helping you gain the wide experience that would carry you forward in your career.
I think both inside and outside the bank, the job as a credit analyst. It was a job where your accounting and finance training in college became very important, that you know the numbers, know what they mean, know how to analyze them and read them. That was very helpful. Then I spent about five years in loan administration as a credit analyst sort of going up to higher responsibility while I was there. Then I was put into an operating job, a lending job. I was actually making loans. I didn't deal directly with customers in loan administration. I had started dealing with customers in the Winston-Salem office in 1965 when I was transferred there. I actually made loans and went to call on customers and started dealing with the public so to speak. I began to see the more realistic implications of what I might have seen in a more theoretical or academic sense when I was behind the scenes looking at someone else's, criticizing someone else's work. Then both during that early career in the '60s, I got involved in a number of civic organizations, mostly notably the Arts Council. I became President of the Arts Council in I think, '79 or '69 or '70, somewhere in there. I ran their fund drive in '68 and began to get somewhat involved in political things or public policy matters and through civic organizations. This was not so much that Wachovia required this of you but they hoped that they'd hired people who cared about the community interest as well as the corporate interest, the individual interest. So I, that was a good launching pad I think for subsequent parts of my career.
I guess late '60s as you begin being drawn into these sorts of organizations and contribute your efforts there, Bob Scott's Governor over in Raleigh. Do you remember sort of first taking the measure of the state political leadership in so far as the question of its relationship to business and regulatory decisions say around the issue of business and what measure you took of it in those years?
I was not directly involved with Governor Sanford or Governor Moore or
Governor Scott really in the '60s. That role was generally assumed by
the then Chief Executive Officer, top management, which I was not
amongst at that time. But I was more a sideline observer I would guess
of what was going on and getting peripherally involved through a project
here or there or talking to legislators about public policy issues. I
guess the first time I really got involved was in the early '70s when
interest rates kept going up and hit the usury limits in North Carolina.
Six percent was sort of etched in stone. All bankers had to start to hit
the streets and the halls of the General Assembly and start lobbying
saying, 'Look. Inflation has
Reflect a little bit if you would about that experience. What sorts of reception did you find over there? What types of access were you able to gain? Who were the folks you were talking to as you took the broad measure of the members of the General Assembly in those years?
I was mainly talking to members of the General Assembly and I guess higher ups were talking to the Governor. In North Carolina, the Governor still has limited authority on things like this. He can only use the bully pulpit. I was talking to legislators and trying to convince them that despite the fact that the law, the six percent was sort of a magic number. That this wasn't going to work in the modern world. That had to open up and let banks make a profit, or they weren't going to be able to assimilate and distribute capital. We couldn't pay our depositors enough money to get it. We couldn't charge our loan customers enough money to have a spread and stay in business. It was pretty difficult at first. But finally when you sat down though and really got deep into the issue with most people they understood it. One old legislator I remember. I can't remember who it was, I remember his expression, 'Sometimes you have to forget your principles and do what's right. I'll support your usury bill.' It was early. The regulation of banking became more restraining as time went on as inflation and technology and other factors opened up new services, new opportunities. These regulations held us back. It became a much bigger challenge on a national as well as state scale to try to get some of the barriers to competition removed. They were there mainly to protect bankers from themselves as much as anything because of the behavior perceived out of the twenties and '30s that caused the system to fail. The separation of investment banking and commercial banking and those kinds of things which is still being debated to some extent although it's been pretty much done a way with.
Tell me a little bit about the early phases of your being drawn more directly into the top tier of the bank's leadership, maybe the evolving relationship with Mr. Watlington, with Mr. Davis. How those few years evolved that would lead in the early '70s to your being named to top posts.
Well, I guess in 1970, I was named Executive Vice President, put in
charge of basically all lending for the company. I was the Executive
Vice President reporting to the Chief Executive Officer in charge of
lending. It was called the funds management division. The name didn't
cover quite all. But it
Tell me a little bit about, just to draw you out a little bit more on this issue of navigating those years in the early '70s and those years around '74. Can you sketch your recollection of the bank's board in those years and that generational issue, how it was playing out in the board among the board whom I would presume at that point would have been persons a generation mostly ahead of say you at the time.
The board consisted of people who were peers and of the generation of
the top management who had basically grown up, had started doing
business in the '30s or after World War Two. They were a
Lessons you drew from the '74 experiences.
A confirmation I guess that the way we were approaching it was the right
way. That we had not strayed. We had loan problems like everyone else,
but at least the quantity and magnitude of them was not serious as to be
threatening to the company. But the lessons I think that we had an
obligation to not do extreme and take too much risk because often we saw
people who were permitted in fact encouraged in some ways to get in
trouble by their banks being too liberal with their lending particularly
in the real estate area.
Think back as best you can on what the general business landscape looked like in North Carolina around this time, mid-seventies when you become bank President. I'd be interested in your sense of who seemed to you at the time really to be pushing the boundaries of the expanding North Carolina economy in those years and your sense of where the transition from the traditional sort of textile, tobacco, furniture landscape over to these coming new industries.
Well, I guess in the early '70s textiles and tobacco and furniture were
king. They were the major industries in North Carolina. The textile
industry in North Carolina reached a peak of about 320,000 workers in
1973 right before that recession came. The furniture and tobacco and
there was a smattering of outside industries coming in. The Governor's
all the way back to Sanford that I was aware of had industrial
development programs put out across the country to solicit new workers.
In fact at Wachovia, Mr. Hanes who was president in the 1930s traveled
across the United States and called on the major automobile companies
and appliance companies like GE and said, 'Look how about putting some
plants in North Carolina so our people will have enough income to buy
your products.' Actually it was successful in getting some businesses.
He was both out looking for business for the bank and looking for jobs
for North Carolina. As a consequence, Wachovia had a national banking
department. We had some people who traveled across the country. In the
1960s we built up that department. We gave it some more staff and gave
it some new products, cash management services and so forth in the late
'60s. So by the 1970s, we were sort of humming on having a national
banking effort. So our people traveling across the country had sort of
the dual role of attracting business to where we could lend and do the
local banking for the subsidiaries or plants they already had here. The
banks in the state got into sort of a public/private partnership on that
score. It was really, I did not get really deeply involved in that. My
predecessor was, was a member of the
Right.
That's some of what happened there. I think the public-private partnership on economic development is still a very vital one. Archie Davis' vision in getting the Research Triangle started in 1959. I remember when I was in loan administration as a credit analyst seeing the loan that we had made to Pinelands, Inc., which was Pineland Incorporated, which was to buy the land, that's now the Research Triangle, all that scrub pine. The bank examiners had criticized it and said that we should write it off. In fact, I think we did have to write some of it off. But the vision to do that and to other banks and insurance companies were brought into it, not just us. But look at what happened starting in the late '60s when IBM came in and Burroughs-Wellcome and Glaxo and many others. That's the shining example of diversification, diversification economically and diversification culturally. Because what those people who came in brought in other ways is just as important as what they brought in jobs.
So it sounds interesting. It sounds as if then to what measure you saw it during Holshouser's administration and certainly under Hunt and your work with the economic development Council that the state's leadership both political and business was paying a whole lot of attention to trying to find a way to smooth out this transition away from say the old textile style employment model to a new one, which would necessarily include the introduction of lots of new businesses.
Yes, absolutely.
Can you describe a little bit the ways in which the nature of the relationship that you built with Jim Hunt and the sorts of tasks that he asked you to help with?
I think the fact that we became Chief Executives around the same time. I had known him when he was Lieutenant Governor. He asked me I think it was in January of 1977 as matter of fact. He wanted to have a major economic development conference to make the key note address that sort of laid out the challenge for the future of trying not anyway say we don't like the textile industry, our traditional industries, but try to build diversification for growth as well as for protection against those industries declining in future years. I served on the state goals and policies board. I served on an education blue ribbon commission that he set up and did lots of things formal and informal to try to play a role in this private/public partnership that had sort of evolved over—it's always been true in North Carolina. But it had become more public. We also in 1978, Paul Sticht who was then head of RJ Reynolds Industries and I and a few others started what is now called the Governor's Council of Management and Development. It's a fancy name for a group that met once a quarter, twenty, a think the Governor picked twenty major businesses. The Chief Executive Officers met once a quarter for dinner on Friday night for an off the record, no staff present, meeting after dinner and a Saturday through noon meeting of the agenda issues that were important at the time. I would say that was an important influence on Jim Hunt and an important influence on a lot of the business people who didn't understand as well as they might the political implications of things that they felt should be done. How you couldn't do this the way they would like to have it done. That was one of the most important steps for Jim Hunt and for the business community. I think it was '78 that it started, and it continued today on a similar model. But I think the fact that it was so new back then that it gave each a lesson that they hadn't had exposure to before was important.
Here's an interesting question that has sort of been suggested by some
of these things, I hadn't thought about this before, but you mentioned
that folks coming in from outside bring a certain new diversity to the
culture that has traditionally prevailed in say the business community.
I'm wondering if there was as you measured it early on the relationship
with Jim Hunt, he's quite a young Governor. He was a young man when he
was elected Governor, a Democrat obviously. Was there some period during
which young new Governor Jim Hunt had to work out a relationship with
this group of twenty in the one instance you mentioned senior business
leaders? Were you all on the same page or was there some time that you
sort of had to navigate to get to know one another?
We had to navigate to get to know one another. I think he was, to use a word that doesn't describe things very well, he was more liberal, and they tended to be more conservative. Despite the fact that most of us were Democrats, there were a few, well Paul Sticht who came from somewhere else outside the state was a Republican. There were some Republicans on the Council, and I think it was good for everyone. We had to get to know each other. I think Jim Hunt became more realistic. I don't think about certain things, taxation and regulation and so forth. I think some of the business people became more sensitive about some of the human issues. I think there was a coming together on some of this. Not that they weren't concerned. I think the Governor got enlightened that business people were concerned about human issues just as much as perhaps he was in some cases. But the best way to deal with human issues is to have jobs and income and so forth too, rather than the welfare satisfaction of human needs.
Tell me about in your early years as President and then CEO your assessment of the regulatory environment for the banking industry and the whatever efforts and means you might have used in those years both Raleigh and other places, Washington, to have an influence there.
Well we were very much restrained geographically. You couldn't go
outside of your home state except in certain exceptional things. You
could go overseas with an office, but you couldn't go to Atlanta. You
were restrained in the services we could offer. We were restrained in
the interest rates we could pay on deposits for example. It took a lot
of work in Washington on all those fronts to eventually get legislative
change. But the truth is the market change took place before the
legislative change. The Southeast Compact, the efforts to try to make it
possible for banks among certain states to merge. There was a similar
effort in New England, which really was earlier but not nearly as
effective as the one in the South in bringing about national change. It
was not until the early '90s, the Reigle-Neal Amendment that sanctioned
and legitimized interstate banking on a national basis that this became
a matter of acknowledgement by the United State's Congress. Whereas it
had been done by some southern legislators and New England legislators.
I think banks across the country and politicians across the country
realized their banks were not going to be in the game if they didn't
have broader geographic regulation. The product change, the product and
services change was driven a lot by technology. Money market funds could
do business all over the country by telephone, by fax, by computer, and
yet banks couldn't. The market had a lot to do with the creativity of
bankers and the market participants and the demands of customers really
Tell me, can you sketch just in a broad way the amount of your time that it was taking those years when you were CEO attending to the whole range of regulatory concerns and sort of a general sketch of the ways in which the bank staffed that issue?
I always stopped periodically and said, 'Now, who do I work for?' in a way of ordering priorities and time. Who do I work for? I work for shareholders. I work for employees. I work for customers. I also work for the public interest. In terms of allocating my time, I had to stop and make sure I wasn't neglecting one of these to the exclusion of the other and try on the one hand to know as many people, I tried to know everybody in the company. I tried to know as many customers as possible. I tried to know certain major shareholders and be accessible to certain shareholders. I've tried to participate in the public arena with the Governor or the local alderman or the sheriff, whoever was important. It was possible to delegate obviously a lot of that. People have a way of wanting to talk to the boss or Chief Executive or headman or who ever it is when they call in and have a problem and have a need. So it was a difficult juggling act. You obviously had your family at home too. I didn't list them in my responsibilities, but they obviously take equal priority along with all those others of the constituents I mentioned. I just had to on a given day in a given month in a given year to try to plan and organize my time so that each one got my time and attention and effort.
Key relationships that evolved in these years with say the congressional delegation North Carolina was sending up to Washington.
It was important if someone was going to be deciding your destiny, it
was important to be able to talk with them about it. So back through the
years, Everett Jordan, Senator Jordan was a member of our board at one
time. So he was obviously, he and Archie Davis were very close friends.
I knew him affectionately and reasonably well. Senator Morgan was a
senator back in the late '70s when I first became Chief Executive. We
were dealing with issues like community reinvestment and the things that
took place in the Carter administration where there were attempts to put
even more regulations on us rather than taking the old ones off. Senator
Helms obviously when he came into office always had good reasonably
close relationships. Senator East wasn't there that long but knew him.
More recently Senator Faircloth and [unclear]
Did you always feel generally fair to see that you got a hearing with these folks, had that kind of access to make your point, make your argument?
Yes. Never had difficulty getting a hearing in Raleigh or in Washington. They didn't always do what we would liked for them to have done.
How about the issue about the bank's involvement supporting specific financial candidates with contributions to their campaigns? Was that an issue that was ever difficult to navigate?
No. The bank had a policy of not giving any corporate money to
candidates, soft money or hard money, [unclear]
Tell me about the principal strategic concerns that were occupying your mind in the mid to late '70s as you were beginning to chart your record of leadership here at the bank. There are early rumblings of some acquisitive strategies in the banking landscape even then. Of course the regulatory question about interstate banking has not been resolved in the early to mid '80s—
I think in the time between, the time around the time I took over, well I was put in charge of a major strategic analysis of our business in 1974, about the time I think I became President and Chief Operating Officer. We went to New York, and we hired a consultant named Lou Gerstner, who happens to be head of IBM now. Lou did a terrific job, McKinsey and Company. We said, 'We don't want your best bank consultant; we want your best consultant.' We interviewed the major firms. Lou seemed to be a young fellow. We did a very soul searching strategic analysis of our business at that time, which was somewhat influenced by regulatory constraints that existed at that time. We had previously bought a big finance company, a title insurance company, an insurance agency and a travel company, lots of sort of—
Under that bank holding company umbrella.
The bank holding company structure. Each one of them was, you had to
fight the Fed. It was a regulatory. So what we decided at that time was,
'Look. We're spending more money trying to acquire these businesses and
protect them from being put out of business as a bank holding company
subsidiary, and so we're going to concentrate on the basic banking
business. It's a terrific business.
[END OF TAPE 1, SIDE A]
[START OF TAPE 1, SIDE B]
Okay this is side B of the first cassette with Mr. Medlin.
We opened an office in New York City, which was permitted under the Edge
Act to clear international transactions. We opened check clearing
facilities in Dallas and Atlanta before we were able to go there
otherwise and tried to pierce the veil of regulation wherever it was
possible to do so legally and expand our business nationally and
internationally. But being cautious with the overseas part of it.
Witness what happened in the early '80s with the less developed
countries lending, and we were involved in that but we weren't involved
to the point that it was terribly troublesome. We had covered North
Carolina pretty fully. Wachovia, you have to go back a little bit here
and point out that Wachovia was founded in 1879. Had its first branch
outside of Winston-Salem in 1902 in High Point; in 1903 in Asheboro and
Salisbury; 1920s in Raleigh; 1930s in Charlotte. Then after World War
Two in the '50s, Wilmington, Burlington, a number of other cities,
Goldsboro. Then in the 1970s it pretty much completed the covering of
the state, from Andrews in the far West to Elizabeth City in the far
East. So there wasn't much place to go in North Carolina. So we were
basically intent on using our present North Carolina banks for full
service banking and going outside internationally and nationally and
cash management and check clearing and those kinds of things where we
could have permissible on the ground facilities elsewhere. We eventually
put an office in Chicago somewhere along the way. Anyway, this was our
growth. We knew that, we thought that somewhere along the way we'd have
a chance to do what we did is to go into other states, but we needed to
be good at what we were already doing to be ready for that. Our
competition, we really didn't, North Carolina, one thing that Wachovia
can take credit for is really spawning statewide banking in North
Carolina. We had no restrictions since the Civil War. Communities wanted
you to come and open a bank. There was no real restriction. The state
was still so poor after the Depression and even after World War Two that
you had no trouble being kept out anywhere. We really, I think inspired
what was then North Carolina National Bank in 1970, in 1960, which was a
merger of American Commercial Bank in Charlotte and Security Bank in
Greensboro with an office in Raleigh. We were something of an
inspiration behind First Union, which was a major Asheville bank, and
Charlotte bank that got together and began to have some competition. We
have had the experience of statewide banking now for almost a hundred
years, ninety-eight, ninety-nine and others for only forty years. Size
has never been our goal.
Before I ask you about that acquisition, obviously it didn't present too profound a challenge to the bank's health, but sketch a little more of the detail of that '80, '82 crisis and how you rode that roller coaster crisis and watched your competitors ride that roller coaster there for a few years.
I guess there was still, banks still had bandages on their fingers from
having gotten burned in the mid-seventies. So the southern banks
probably did not suffer as much out of the '82 problem as the banks did
in some other parts of the country. Although they still got, the ones
that had not fully recovered got beaten back down a little bit. The
things that we did in the '80, '82 experience saying what should we do
to try to deal with the situations that face us. We recognize with rates
going up so high that people didn't want to make a mortgage at fifteen
percent with the expectation that's what they were going to be paying
forever. So that's when we introduced variable rate mortgages, variable
rate home mortgages. Set the payment so that there would be something
less than a fifteen percent rate assumed for the, that they
Were you the first bank that brought that to the market place?
We were, I can't say that we were the pioneer but we were right there with—
The first tier.
We were the first tier of people who did it in volume. A lot of banks were had problems technologically doing it. We offered a variable rate credit card, which today we still have that is a cheaper one. When the rates came down, we were prime plus. When the prime was way up there, it was a pretty high rate, but it came down. Our dealing with the perils of interest sensitivity in a rapidly rising and falling rate environments I think is something that we were particularly good at. A person named Jack Runnion who was our Executive Vice President and funds management officer at the time was a great source of strength and creativity in that period. We would, our failing to get in trouble as some other banks enabled us to have the flexibility to do some things that other banks couldn't do at that time. When other banks said, 'We can't do car loans anymore, automobile loans', we went out and sort of captured the market for automobile dealers, financing their papers and things like that. It was those kinds of thing, those are short-lived advantages. When rates come back down, they're 'We want your business back.' We'll undercut Wachovia's rates and terms. That's the way the business is.
Tell me the measure you took looking towards the acquisition in '85, the measure you took of the Regional Compact in '84, the Southeast Regional Compact and how actively you seemed to think that would change your landscape.
Well we were active in pursuing that. We were active in pursuing that in
our legislature and other legislatures. Our putting a check clearing
facility in Atlanta some years before we were able to go there with a
full service bank was an anticipation that that would be a good idea,
and that we could build some business, in anticipation of that whether
it would be a smaller bank. We didn't know if we would be able to buy a
larger bank or a total bank or open a new bank or what. The opportunity
to marry up with First Atlanta came along in 1985. I think I was in, I
had gone to an international monetary conference in Hong Kong and had
gone to Japan after that to call on customers. I had arrived back here
on Sunday. On Monday morning I was in the office, half asleep from being
in the Far East for ten days on a twelve hour
Tell me about what you thought that merger would do for the bank and how well the integration process unfolded.
Well, we felt it, we would acquire the business of that bank and the state of Georgia. They had some national business that overlapped with ours. They had some similar things that we had. They probably had more things farther south, Florida, Alabama than we did. We thought the synergies—they had been strong in some areas like credit card that we had not been as strong in, as aggressive in. They had taken a bath back in the '70s in credit card. What they had at that time was a good book of credit card business. We had gone more slowly and grown ours more gradually with a higher quality screen. Plus getting into Atlanta, Atlanta is about equal to the combination of Research Triangle, Piedmont Triad, and Charlotte-Mecklenburg MSAs of North Carolina, all in one area. We thought it also, that technologically we needed a larger base of business over which to spread the increasingly high cost of technology. You develop a system one time and you can use it over more customers. We also saw this as the first step in what we hoped would be our ability to cover the Southeast, major states in the Southeast, particularly the ones adjacent to us like Georgia and South Carolina, Virginia. To spread out doing the Southeast to what we had done in North Carolina since 1902.
Any particular surprises in the integration, things that caught you off guard or that required some extra measure of new thinking?
Well, I don't think it was surprises. The time it takes to have a cultural consolidation or transition. It's one thing to get up in front of a group of people and say, ' Now here's the way we're going to do business.' And list them off, and they said they understand it that they're going to follow it. But first of all they don't really understand it all the way we understand it. Secondly the degree of enthusiasm for following is not always there, so it takes longer. It costs more money to integrate systems than the estimates usually are at the outset. It's just that it takes a while. They had not, in Georgia, they had only had statewide banking for a short while, and they're banks out in Savannah and Dalton and wherever were not nearly as integrated as we were in North Carolina where we'd been one bank forever. So those are differences. But it was a good lesson in doing major mergers, which we've done since then and made sense and no regrets.
How was your, what was your thinking around the time of '86 when McColl does the big First Republic Texas deal, and both First Union and NationsBank are starting to move pretty aggressively to really start buying banks.
I think that was '88.
Oh excuse me.
I think First Republic bellied up in '88, I think. After the stock
market crash. I remember being in Texas in '87.
Tell me a little bit about, it would be interesting to have your sense of how you in your CEOs desk over the years have had to watch the whole technology issue unfold and make probably at times some really important and in cost terms consequential choices about technology systems you're going to employ.
The big, the first big dilemma I think on that was back when we
developed our retail accounts information systems, RAIS they call it. To
say, here you're going to spend all this money and all you're going to
get out of it is just a little more knowledge about your customers.
You're not sure where the revenue is coming from to pay that back or pay
for it. Then the automated teller machine is not long after that,
automated banking machines. Some of our competitors were in the market
place very early on with a thing you'd put a card into and it would pop
out twenty-five dollars, and it was not on line, and it was not really
much more than getting a Coke type machine service. We were a little
late and our surveys told us that people wanted more than that. You
weren't going to get much advantage other than short-term PR advantage
in having those kinds of machines. So we took the time to work with the
manufacturer and develop a machine that was a much more comprehensive
banking machine. So when we came to market a couple of years later, we
really had something that made sense for us and the customer. We were
displacing cost. We were adding value other than a twenty-five-dollar
pop on a quick card. Those kinds of decisions, you want to be on the
leading edge but not the bleeding edge when the technology is [unclear]
Reflections on the big '91 South Carolina National merger.
Well, after, that was a big merger, and it was important merger, but it was sort of boring. After the First Atlanta, all we learned from First Atlanta, it went very smoothly, no real problems. It just sort of fell into the routine things then. But it was important to fill that gap between Georgia and North Carolina. It's gone very well over the years. We bought a good bank and haven't messed it up.
Let me turn to a short list here of questions that really turn to a broader context sort of take you outside. Well, one I'll open with a banking question specifically, and we'll certainly touch on banking along the way. But these also sort of range out more generally across the economic history of the region and the nation in the last several decades. First, this question you've probably heard a hundred times, but I'd be interested again to hear what you have to say. Why has North Carolina ended up such a key part of the banking landscape, nationally and internationally?
I think very simply that we, first of all that, we had the opportunity to go statewide early on and have done that. We developed a number of statewide banks that have made each other very competitive. I mean you couldn't get away with anything in North Carolina for very long. And because we had statewide banking, I think the economy of North Carolina has been more dispersed and spread out because. In Georgia for example, if you went to Georgia, if you were an out of state company moving to Georgia, you probably were in touch with First Atlanta or Trust Company or C&S. If you went there, they were probably going to encourage you to go somewhere around metro Atlanta. I think the fact that, if you look at Richmond, you have a similar situation. Atlanta and other cities across the country that tended to build up around where the money was. Because the money was spread out across North Carolina, I think our growth was more diverse. Also, it probably had something to do with the political power being more dispersed. There's not a, you really have three states here, the agricultural East, the industrial Piedmont, the mountainous West and in some respects politically. Neither one of those really has ever probably gotten the upper hand; the farmers probably dominated more some time in the past. It was sort of a pattern of the Governor rotated from East to Piedmont and West. So I think the banking laws had a lot to do with this; our diverse geography had something to do with it. It certainly gave North Carolina banks an advantage when the starting gun on interstate banking came about. We'd been doing this, and it was not different for us to manage banks from here to Atlanta than it was from here to Asheville, which is about the same difference as to Atlanta.
By and large your assessment of the state's role in enabling this record of tremendous economic growth of all sorts, assessments that this state has worked very favorably on behalf of business.
Yeah. Yeah I think the fact that political power has been dispersed. Like I said, it really hasn't been a dominant group. It has made it cleaner. We haven't had big scandals in modern times of political corruption and that sort of thing that has made politicians I think more responsive to all the people. I don't think business has ever gotten a big break in North Carolina nor has it gotten ignored. It's sort of a good balance I think. We tend to be a higher tax state in some respects. We've got lower real estate taxes and higher income and sales taxes. We spend a lot of money on education. We probably spend a disproportionate amount of money on higher education than on K to twelve education. That'll show up in the numbers. The one thing that we still need to do better on is that K through twelve education, which is a problem all across the south. We maybe, we've made progress, but we've still got to make more progress.
I'd be interested to draw you out a little bit more on that issue. But let me first ask, any of the state, the State Secretaries of Commerce who stand out in your mind as being particularly aggressive or particularly in successful in selling North Carolina as a place for businesses to open up?
I think the Governor's probably stand out more on that than the Secretaries of Commerce. You're talking about North Carolina Secretary of Commerce?
I am.
Certainly Lauch Faircloth under Jim Hunt did a fine job. If I could remember the others, I could probably say they did too. I think Dave Phillips during his more recent administration under Governor Hunt did a fine job. But the Governor tends to be I think the leader of delegations going across the country and the world selling North Carolina. Jim Hunt certainly stands out as having worked very hard at that in his first eight years as Governor and certainly continues to in his second eight years. But Jim Martin, the Republican Governor for eight years was a tiger on that too. The art and the effort really hadn't gotten as fully developed back in the Scott, Moore and Sanford administrations. I think they tended to be a little more internal than they have since being aggressive outwardly.
Reflect if you would on the measure outsiders, those could be folks not
too far across the state's borders or folks as far as Tokyo and Hong
Kong, have taken of North Carolina across this span of
I've never gotten an impression anywhere, I really didn't start traveling outside the state representing Wachovia that much until the early '70s or outside the country. But I've never been anywhere that there wasn't a pretty good impression of North Carolina and Wachovia. Wachovia was, we go to Japan; we go to Europe. You're from Wachovia. 'Oh what a wonderful bank. Oh that wonderful state.' Companies that have, mostly the companies that I would call on would be ones that have plants or some facilities here—
They were familiar.
Overseas. I think they all give it good reports and good marks.
Oh sure. You mentioned the issue of the relative spending, the state's priorities on Higher Ed and K through twelve. I'm wondering just generally if you would contribute your reflections on the issue of the state's fiscal priorities of that sort, how happy you are with the state's tax policies as they have unfolded in the last couple of decades and on the spending side as well.
Well, my comment on spending more on higher education doesn't say we
should spend less there. But it's a, our present resources there
probably is a higher percent spent there than other states would spend
on higher education. That probably relates to the fact that we have a
sixteen campus university system that really includes some institutions
that probably stretch a little bit to call them a university and that,
are not in the same league as UNC-CH and NC State and so forth. The
politics of that consolidation have cost the state some money that
probably could have been spent on K through twelve education. I think we
collect about all the taxes we ought to try to collect. I wouldn't say
that we necessarily ought to try to cut them either. The needs are there
and the budget is tight, and we need to continue to spend to have equal
and quality education for everybody. I firmly believe that the way to
solve most of society's remaining problems is if everyone gets a good
education from Kindergarten up through whatever higher level they
deserve to or need to go in a professional training and some of that
would divert off into other fields after, during high school or after
high school rather than necessarily a liberal arts education. Then I
think we'd make a lot of progress on the race problems. If you dig into
the race issue, its economic
Right. Right. Let me ask you for a few further thoughts on the whole race question. I guess during your tenure as CEO here, you would've witnessed not the very beginnings but a substantial portion of the integration of African-Americans, women into the Wachovia workforce and watched it happen in the workforce more generally in North Carolina. Can you talk about sort of managing that process, observing that process, key things that stand out in your mind about that whole part of our history?
Well, by the time I went into senior management in 1970, it was sort of
an accepted fact that we did not discriminate based on race, sex, blah,
blah, blah, blah, blah. Some added, additional, some things have been
added since then. But yes it was something. By the time certainly in my
divisional area and later on in the whole company, that I worked very
personally, very hard at to the point of actually doing a good bit of
interviewing of people coming in because in those days you still had to
not only do some selling inside, you had to do some selling of the
people to come in. Do you really mean what you say? And if they heard
the head of the, Executive Vice President say it or the Chief Executive
Officer, they maybe took it a little bit more seriously than some
recruiter. So I think, trying to make sure we got good people that we
got the best people. It's something I worked very hard on, and we had
goals on. We made progress on and the difficulty always was keeping. If
you hired somebody and they turned out to be very good, it was also
recognized by outsiders too and keeping them became a problem as much as
hiring, getting them in the first place. About all the good minorities
and women who had gone to seek other fortunes over the years. We have a
good retention rate; don't get me wrong. This is not unusual. We have
more in the upper reaches now. We have two [unclear]
Reflecting back, was it a process that presented any undue hurdles or complications, fairly smooth pattern of integration across those years.
Well, we had a class action suit in 1974—
I wasn't aware of that.
After considerable frustration with our attorneys that were talking to
other class action attorney that happened to be Julius Chambers,
prominent civil rights attorney. I finally got in my car one day without
the knowledge of our attorneys and went down to see Julius and said,
'Julius, look who has
How about, you mentioned that a generation ago, twenty or thirty years ago, you had folks down working in the front lines in the company, any company here or elsewhere. There's a mindset that prevailed at the time among some small number of folks that could cause these kinds of problems. Today and not just Wachovia, generally, do you think that that's much less significant of an issue? Does it prevail still as a problem in a significant way? Has the corporate and business mindset really fundamentally changed?
Well I'm five years out of the trenches so to speak having really retired from management at the end of '93. I think it's a less significant problem. To say there aren't some of those problems there would be not true, I think, because there are still people with attitudinal failings that built up over years, just plain carelessness sometimes with some of the kinds of remarks that you hear people make. They aren't really racist, but they say stupid things and some of those do stupid things. I think the trend line is good.
Here's a question that might, I don't know if I put this quite right in
the notes I sent to you before hand. I'm very interested in how a person
who's leading a major business enterprise like Wachovia over the years,
where you get your source. What you draw upon as sources of information
and perspective to help you both, obviously the particular information
you need about the bank mostly will come from
Well, I think that changes as you go up the ladder. In my own
metamorphosis in that regard as I said earlier, accounting and finance,
things you learn in business school are important early on. When you get
to be Chief Executive Officer, philosophy and political science and
psychologically, the liberal arts education becomes a lot more
important. Where you get that information, professional part of banking
I guess became sort of second nature, almost secondary as Chief
Executive Officer. You still had to understand what was happening to the
business. You didn't worry as much about the transactional, operational
part as you did the strategic issues. The strategic issues then begin to
border on these humanities courses and disciplines, liberal arts
courses, history obviously is one of those. I always read. I read
several newspapers a day. Always the New York Times, the Wall Street
Journal, and some local papers and Atlanta when we got to Atlanta, so
you knew what was happening, what was being said by people, editorials
and whatever. But to read all kinds of things that you get your hands
on. One of the more interesting books I've read in recent years, really
since I've retired, was a book about the Renaissance about
how—it's called The Worldly Goods by Lisa Jardin who talks
about some of the economic aspects of the Renaissance. Amazing
similarities to and some of the, you can look at a period like that and
maybe you see where things go in the [unclear]
How much has a identifiably regional character persisted in today's economy? Is there still a southernness to Wachovia, a southerness to the business in North Carolina in the region? Is that coming less relevant, still quite relevant?
I think there's still a southernness, whatever that means. I've married a young lady that grew up on Long Island who I met at Chapel Hill. We argue periodically about what that means. She has different view sometimes than I do. When something bad happens, 'Agh, that's the damned southerners.' I talk about the damned Yankees too. But no. I think there's a, I'd like to say a gentility, a niceness, something friendlier that would characterize the southern term still. But what was more southern is less southern as witness the Research Triangle. Cary probably has a minority of southerners living in it now.
I suppose that's true.
A city that's built over the last twenty years by Research Triangle people moving in from somewhere else. So I think the blending, there's strength in the blending too. I think we have a stronger family by having a northerner and southerner as mother and father. I think there are aspects of that that have a durability and have value long run. There are aspects of it that are parochial and probably can be dispensed with, some of the traditional things. So hopefully we'll keep the best and get rid of the worst.