Why do so many banks have offices in Wilmington? - Technical.ly Delaware

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Nov. 18, 2016 12:21 pm

Why do so many banks have offices in Wilmington?

It's a tale of government and corporate intrigue, led by — who else? — a duPont in the late 1970s.
A look down Wilmington’s 11th Street.

A look down Wilmington's 11th Street.

(Wilmington via Shutterstock)

Among the many quirky features of Delaware, perhaps its financial sector footprint is among the loudest.

The state’s reputation for attracting business incorporation is not so far behind but perhaps better told. Though there’s a clear relationship between the strength of Delaware corporate law to both business incorporation and tiny Wilmington’s outsized banking skyline, the story of the latter goes further.

Talk to anyone in Delaware’s business community today about the beginnings of Wilmington’s banking sector and they’ll point to this moment: an audacious economic development strategy by legendary former governor (and aborted 1988 U.S. presidential candidate) Pierre “Pete” S. duPont IV.

It is quite perfect that duPont — the namesake of the company that built the state’s business community — helped usher in that next generation of corporate Delaware.

In the wilds of 20th-century economic development, duPont was the triumphant big-game hunter just about everyone else wanted to emulate. But in this forest, the big game — the banks — were negotiating with hunters to get the sweetest deal.

We’ll return to those negotiations in a moment, but here’s how the story played out in the public eye. With legislative support in the late 1970s, duPont passed a pair of income tax reductions and a bold constitutional amendment limiting government spending. Then, in February 1981, he signed the Financial Center Development Act, legislation that dropped restrictions on interest rates and gave tax breaks and other accommodations to the burgeoning credit card sector. It’s that bill which is now credited with supporting ballooning credit card debt, and those are the roots of why most of the national banking companies with offices in Wilmington have their credit card divisions here, rather than, say, the investment banking that still is densely packed in Manhattan. National bank CEOs are still very much leading from New York.

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Behind the scenes, the story of how that landmark 1981 deal got done is one of what feels like high-stakes economic development.

It happened largely at the direction of those very big New York banks, which were looking for greener pastures by playing various jobs-hungry mid-Atlantic states against each other, as places like New York, Pennsylvania and Delaware struggled with post-industrialization. Lawyers from Chase Manhattan and J.P. Morgan, those iconic banks that merged in 2000 to form the giant that now operates its suburban Delaware Technology Center, literally wrote the legislation, as the New York Times reported at the time. The Delaware deal was brokered in the wake of a similar tryst between South Dakota and Citibank, which still headquarters its credit card division in that far-flung state — though, yes, in 2012 opened a Wilmington outpost. The companies wanted looser regulation on the then-already-expanding credit card sector and duPont was open to just that.

Within months of the legislative change, boosters say nearly a dozen banks and thousands of jobs had moved or were moving to Delaware. 

The legacy remains a generation later, with the large presence of JPMorgan Chase (both its Chase credit card offices downtown and its global tech footprint at that suburban tech center), Barclaycard, M&T, WSFS and others looming over the state’s jobs mix. Even through job cuts and consolidation, the banking sector remains: witness Bank of America establishing itself by merging with homegrown MBNA or Capital One joining the local mix with its $9 billion acquisition of ING Direct in 2011.

No doubt the banks pay a big tax bill. But why hasn’t it resulted in a more dynamic Wilmington?

The ever-discussed topic at just about any local networking affair among the civic minded is how to better engage those corporate banking employees known for being insular commuters. Neither the credit card offices nor Delaware’s business incorporation boon are credited much for downtown dynamism. For example, the one million companies incorporated in Delaware only translate to some 50,000 jobs, fewer than one in five of which are held by Wilmington city residents, as reported by Next City in 2014.

That’s where recruiting at local tech events could play a role. Think of this month’s {OpenBracket coding competition, Technical.ly’s tech jobs fair NET/WORK and an increasing number of meetups that are creating bonds between corporate dev teams and local tech scene-makers. Those could be a chance for the credit card companies to grow relationships within the tech community. You might think Pierre duPont’s son Ben duPont, who is active in the Delaware tech community, sees that as a natural progression. There were innovative corporate nominations for this year’s Delaware Innovation Awards, for example.

But if tech is meant to follow the financial sector that followed the chemicals powerhouses that so comprise and define Delaware’s economic mix, there will need to be far more interplay between them all.

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