Nationalization of banking came at the expense of local communities

There is a section in Death and Life of Great American Cities, where Jane Jacobs describes driving on a US route across the Northeast coast, going through town after town in decline.  

She describes being shocked at seeing a successful community.  Later she learned that it still had a remaining community-based bank committed to making business and building loans, whereas the other neighborhoods she passed through had been redlined--areas determined to be less viable, and therefore too risky to lend money to.

I remember the period of bank consolidation in Detroit.  National Bank of Detroit (NBD) merged with Bank of Chicago, later to be gobbled up by what is now JPMorganChase.  Comerica is the merger of a bunch of Detroit banks, the company moved its headquarters to Texas although it still has interests in Detroit, naming rights for the baseball stadium, Comerica Bank.

Many cities went through a similar process, to the point where most city center regional banks have been acquired by JPMorgan Chase, Bank of America, or Wells Fargo, although there are still some large center city banks here and there.

And studies generally show that as corporations consolidate and leave former headquarters cities, their financial and philanthropic commitment declines 

-- "The geography of giving: The effect of corporate headquarters on local charities," Journal of Public Economics (2010)

It's not clear these days how well local banks function compared to what Jane Jacobs described.  Banks have community reinvestment requirements, but I don't think the reporting is very good.  In fact I think that branches should have to publish infographics each year, detailing their local operations.

This isn't the best example of an infographic, but the best I could find.  I picture one say showing 5 and 10 mile radii from where the branch is located, with information about residential mortgages made, business loans made, and personal loans made.  With demographics breaking down loans by income, race, etc.  I suspect most of the deposits are used out of the area.  Source: BECU.

Philadelphia Inquirer business columnist Joseph DiStefano has a piece, "How Philly lost its big banks, and a little survivor that’s grown in the vacuum," about two books about the history of Philadelphia's banks, most of which have met similar fates to those of Detroit, St. Louis, Chicago, etc.  From the article:

Philly’s big banks lived for generations. That includes Girard and Fidelity, Provident and PSFS, and especially the grandest and toughest, PNB and First Pennsylvania, whose combination as CoreStates was designed to keep Philadelphia in business as the nation’s oldest financial center.

These big banks funded factories, transport, and trade, taught school kids to save, guarded fortunes, decided who in the divided city got to buy property and who had to rent, intervened in public crises, and hired armies of workers, many of them low-paid women with little power but vast responsibilities.

These banks all vanished in the merger mania of the 1980s and 1990s, amid mass layoffs that emptied Center City office towers. The biggest bank still based in the metro area is now Delaware’s WSFS, which bought its way into the vacuum left by the passing of the big lenders after enduring its own near-death experiences.

As it happens, Charles Coltman III, the No. 2 executive at CoreStates when it vanished in a $20 billion 1997 merger, and Marvin “Skip” Schoenhals, the man who saved WSFS from a near-shutdown, then a threatened takeover, have now published memoirs giving their insider accounts of the news events of more than a quarter century ago. What can we learn?

... a tough but supple credit culture that he argues has been stripped, leaving promising businesses without hope of healthy funding, by rigid regulators captive to the Wall Street mega-banks.

 ... Beyond the scope of the book is the larger question of why Philadelphia bankers, so strong for so long, lost public influence, their sense of personal responsibility, and the moral will to excel, leaving a hole in the city’s leadership.

... Schoenhals’ book, cowritten with Brittany Kriegstein, is, like Coltman’s, part life story. It goes on to recount the rescue takeover of the badly over-extended former Wilmington Savings Fund Society by canny investors who put the well-connected, straight-arrow manager in charge. And it shows how he avoided their plan to resell the bank for a fast profit, won time to rebuild the staff and its credit culture, and boost its stock to stay independent.. 

Then again, one of the criticisms of too locally focused banks, especially those cozy with developers, is that the bank's loan portfolio can be especially risky, if economic conditions change. That's driven many banks to failure.  From the article:

While WSFS recovered as Philly’s banks vanished in the ‘90s, there’s a more recent moral lesson, in WSFS’s eclipse of Delaware’s once-dominant Wilmington Trust Co. At a reception in Wilmington on Dec. 12, Schoenhals recalled how he had limited developer loans to just over 10% of his bank’s portfolio on the eve of the Great Recession — vs. Wilmington Trust’s 40%, enough to sink that bigger company when land values fell. But that story isn’t in this book; he plans a sequel.