As a finance professor at our state university, Rutgers, I receive calls from a number of daily newspapers whenever something of interest takes place in the banking world.
I guess the reporters call me because I have tenure and thus I am not afraid to say what is on my mind. Many better observers of the scene are either bankers themselves or others who depend on the industry for their livelihood and thus have to be more circumspect in their comments.
I welcome these calls for two reasons. First, they give me a chance to reciprocate for all the help I have received from others through the years as a professor and as a reporter, editorial writer, and columnist.
Second, they let me know what is going on in the minds of the people reporting to the public on the banking industry. Some of their questions are unique and reflect a different set of beliefs and fears than I have developed.
So it was no surprise when I received five or six calls from reporters after First Union Corp. announced its plan to purchase of New Jersey's largest bank, First Fidelity Bancorp., in the biggest bank acquisition to date.
What were some of the questions on the reporters' minds?
*Will the merger harm New Jersey's bank customers?
*Will it help the state's customers?
*What does it mean for community banks? Will they all be swallowed up?
*What will the acquisition of First Fidelity do to the state's image as a financial center?
*What will the merger mean for the charities and nonprofit organizations that rely on bank contributions and have found First Fidelity to be a generous neighbor through the years?
*Finally, why have there been so few hostile takeovers in banking?
Answering the first three questions was easy. I have always held that the public is helped rather than hurt by any bank consolidation. If the new larger bank provides more services or cheaper or better services, it will aid the public. But if it offers poorer banking, the public will leave in droves for other banks - largely community organizations.
A chief executive officer of a midsize bank in New Jersey has already told me of First Fidelity customers making tentative calls about switching accounts, just in case they become unhappy.
It is, of course, up to First Union to keep customers from being unhappy, or else it will give up much of the market share and profit potential it paid good money for.
So we are likely to see the North Carolina superregional bring new capital market instruments and state-of-the-art electronic banking techniques to First Fidelity's territory. And also it should work its hardest to keep quick turnarounds on loan requests and familiar faces in branches, while at the same time not raising loan minimums or service charges to the point where First Fidelity customers become disaffected.
Bankers have the momentum in terms of keeping accounts, because switching deposits and especially loans is a nuisance for the customer. But there is a limit to the tolerance.
As for the issue of the state's image as a financial center, I don't think this is significant. First, I don't think New Jersey, or most states other than New York, have an image to be lost. And to bank customers, it is how they are treated one on one, not a national or world image, that determines where they bank.
Charitable contributions is a tougher issue because there is no denying the old rule "charity begins at home."
It is hard to see how New Jersey's banks would have been the spearhead for New Jersey's new performing arts center, science center, and aquarium, among other projects, without chief executive officers and boards of local residents who saw the value of the projects to both the state and the banks that serve the state. This is a hurdle that any acquirer will have to clear if it wants the good will that banks have developed while locally owned.
And finally, as for hostile takeovers, I reply to reporters that they just don't make sense unless a bank is badly neglecting its shareholders. For a bank's greatest asset is its employees, officers, and board. And if they turn against an acquirer, the buyer has bought a shell of buildings and equipment rather than a live, vibrant bank.
These, then, were the reporters' worries as my state's largest bank was acquired.
Happily, their questioning showed no anti-bank feeling or fear of "Big Brother" taking over the financial environment.
But their queries and concerns did point up to me the areas that banks like First Union will have to work on if they want to make the most of the well-oiled banking machines, like First Fidelity, that they have paid up to acquire.
Mr. Nadler is a contributing editor of the American Banker and professor of finance at Rutgers University Graduate School of Management.