Plan to buy MBNA may deliver a big blow to tiny Delaware

July 06, 2005|By Jay Hancock

CLOSE YOUR EYES, gulp it down and grimace, Delaware. It's a bitter brew.

Delawareans are trying to see the bright side of Bank of America's plan to buy MBNA, the Wilmington-based credit-card colossus, for $35 billion.

True, MBNA will shrink, Delawareans tell themselves. But the state still has DuPont, a nascent biotech industry and the country's top business-courts mill. Corporate mergers happen every day. Things will eventually be OK for Delaware. Won't they?

Yes, but "eventually" can be a long time.

MBNA, which started life as a Maryland corporation and bugged out of the state in the 1980s after the General Assembly refused to deregulate interest rates, employs 10,700 of its 28,000 workers within Delaware.

MBNA accounts for a fourth of all of Delaware's financial-sector jobs. It's the No. 1 private employer in the state. More Delawareans work for MBNA than for the federal government. Take away MBNA at a stroke and all of Delaware's job growth for the past year disappears.

And these aren't just any jobs. These are highly paid headquarters jobs, many of them, for a Fortune 200 corporation with $61 billion in assets.

Three factors have accounted for the extraordinary blessings MBNA has bestowed on Delaware, and those same factors will make MBNA's shrinkage especially painful.

First, Delaware is a tiny state, making dependence on any large employer risky. Second, MBNA grew surprisingly quickly into one of the world's most powerful and wealthy companies, accounting for a large portion of Delaware's growth the past two decades.

Third, it has spun off economic benefits even beyond its bigness. The company was built and led for years by Charlie Cawley, who liked to spend big and had a civic heart. Together, these caused MBNA to loom over its jurisdiction, spread millions across Delaware, lead annual charity lists and almost single-handedly revive downtown Wilmington.

Bank of America boss Kenneth Lewis says he'll make the merger work by cutting 6,000 jobs from the combined operation. But as usual in a corporate combo, everybody's being coy about how much pain the acquiree's hometown will experience.

The Associated Press reported that Delaware officials "greeted" news of the impending dismemberment "with cautious optimism."

"We do not expect to see large numbers of reductions in Delaware," Gov. Ruth Ann Minner told the AP.

"I have no reason to believe that Wilmington will bear any extraordinary burden from the overall projected job losses announced today," echoed Wilmington Mayor James Baker to the wires.

Where do they think the 6,000 job cuts are going to come from? Bank of America's call centers in India? Its Charlotte, N.C., headquarters?

And corporate mergers have taught us that 6,000 jobs is just the beginning. The 6,000-job downsizing target is only for the next two years. Expect continued shrinking bank-wide and in Delaware, especially if the economy hits the rocks.

MBNA's 1,100 jobs in Baltimore's Hunt Valley suburb, which owe their presence to Cawley, are certainly also at risk. But better to have 1,000 MBNA jobs in your back yard than 10,000. That's the first time you could ever say that.

In recent decades, Baltimore has never been as dependent on a single corporate employer as Wilmington is on MBNA. Baltimore insurer USF&G had 2,500 employees when it was bought by St. Paul a few years ago. Baltimore investment bank Alex. Brown had 2,700 before it combined with Bankers Trust.

Even Maryland National Bank had fewer than 8,000 workers when it was bought by what is now Bank of America in the 1990s.

Speaking of which, landing on his feet again in this deal is Frank Bramble, former chief executive of Maryland National parent MNC Financial. After helping sell Maryland National to Bank of America, he became chairman of Baltimore's Allfirst Financial and then a vice chairman at MBNA as Allfirst was absorbed by M&T Bank Corp. in the wake of a big currency-trading scandal.

With the new merger, he'll join the Bank of America board. Bramble not only survived a potentially fatal helicopter crash with other MBNA executives recently but has negotiated merger hazards as well as any top banking executive in the country. Delaware and Wilmington will not be so fortunate.

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