The New York Times terms it "odd." Other accounts deem it "unusual." The Volkoh Conspiracy blog wonders if Atlas is, in fact, shrugging. However, the announcement that BB&T, the nation's ninth largest bank holding company, will not participate in private economic development projects that involve eminent domain action should not shock. The decision is consistent with the corporation's values, harnesses widespread public unease with the Kelo eminent domain ruling, and is another manifestation of symbol-laden stakeholder capitalism.
The reporting and commentary on the bank's policy has been so confused that the Atlas Shrugged quip actually tells us more than it appears. Far from being a cheap PR stunt for the bank, the new policy is a continuation of the application of its Randian corporate ethics. Bank Chairman John Allison IV has spoken at Objectivist gatherings and the bank has in recent years doled out millions of dollars in support for academic programs on the moral foundations of capitalism at colleges and universities across the Southeast.
One of the more recent gifts came in August when the BB&T Charitable Foundation gave $1 million to the Belk College of Business at UNC Charlotte. The Charlotte Business Journal reported that the donation sprang from talks between Allison and Claude Lilly, dean of the school.
"During a dinner meeting last year, our conversation turned from ethics and leadership to metaphysics, objectivism and Ayn Rand," Lilly told the paper. "John and I discovered that we share an interest in how business schools discuss capitalism in their courses, as well as the importance of teaching ethics and values in business."
So all the values talk is no sudden thing. The motive-questioning does not end there, however. It has been repeatedly noted that such projects are not a large part of the bank's business. And the implication has been made that as the bank is headquartered in a state, North Carolina, that bans Kelo-type seizures, BB&T has little to lose by taking this stance. Not so fast.
True, North Carolina, like many states, does not have any explicit state-wide permission for localities to take private property and route it to another private entity. But neither is there a prohibition. Pre-Kelo that did not matter much. There was only one instance in the state of private property being taken for another private use: FedEx got some land for a cargo terminal at the Greensboro airport. But post-Kelo the door is wide open to more of these land grabs. In fact, the state's Urban Renewal law permits takings of property that may, in the future, become blighted. If that does not sound like an invitation to mischief, you are just not paying attention to modern American governance.
Furthermore, the state has just joined the craze for tax increment financing, an economic development tool the state constitution explicitly banned before North Carolina voters approved it in November 2004. Localities cannot wait to start using this mechanism. Pair tax increment financing with eminent domain power, and government planners have the power to erase all the perceived sins of market-driven development.
As detailed by Daniel McGraw in the January issue of Reason, tax increment financing, or TIF, is the crystal meth on crack of local government re-development tools. TIFs allow developers and government officials to work together to "earmark" projected tax revenue increases from a new project to help fund that same project. The funding can either pay for government bonds floated on the new development or directly subsidize that development. But in either case, both developers and government win. Politicians get a shiny, new, multi-million project to take credit for with little upfront cost and developers get below-market financing and other subsidies. Everyone wins except the general public. The average tax-paying schmo has to pay for general government services for the free-riding new development.
This gets us back to the other misunderstood thing about BB&T's decision. It is clearly saying to customers—and would-be customers—that the bank stands with them on re-development issues, not with the developers and government officials. As a result, the bank can be thought of as practicing its own version of stakeholder capitalism that broadens the corporate governance imperative beyond what is best for shareholders. Whole Foods contracts for wind-generated electricity for its stores to align itself with the greenie ethos of it customers. Similarly, BB&T avoids big, government-forced development projects that often roll over the bank's small business-based clientele. Decent enough policies which may, in fact, actually differentiate these companies enough in the marketplace to have a positive impact on the corporate bottom-line. That certainly seems to be the effect with Whole Foods. It is too soon to tell with BB&T.
Of course, there will not be any differentiation should other banks follow BB&T's lead. There is no reason why they could not. If credit card companies can refuse to do business with Internet tobacco-outlets, banks can skirt controversial development projects involving government condemnations and seizures of land for private development. Yet two of BB&T's bigger North Carolina-based rivals, indeed two the biggest banks in the U.S., Wachovia and Bank of America, have already declined to follow BB&T's lead.
In a more sensible world, that decision would be the odd and unusual one.