This weekend we saw two interesting items in the Advocate. First was an appeal for public support of print media by the editors, taken out as a full-page ad in the paper’s print version. That was followed up by a business story, the significance of which the editors either did not grasp, or for their own reasons they chose to take the ironic approach that they did.
The following will address the substantial significance of the issues, but as to the Advocate I have always found it amazing that a newspaper that is so liberal in reporting and editorial content would expect to be successful as a business in a state whose citizens are strongly conservative. How would anyone think that people would buy something that they just do not agree with. If I were publisher, my editorial content would be much more conservative in tone with a balance of liberal content. But that is not the direction they have chosen and apparently their subscribers agree with me – at least, what subscribers they have left.
To the important issues missed by the Advocate’s piece on the merger of IberiaBank Corp with First Horizon National Corp of Memphis. The Advocate chose to write extensively on the bonuses paid to management resulting from the merger. Such reporting appeals to liberal readers whose inclination is to paint successful businesspeople as greedy and therefore immoral, but it misses the significance of the event. Perhaps what is so ironic is how liberal media trashes success but never addresses the more common business failures or the underlying reasons for them.
First a bit of history. New Orleans through most of its saga had always been an important financial hub, at sometimes the most important financial center of the South. This meant that Louisiana was blessed with the headquarters of substantial banking houses, bringing with them jobs and prosperity for their employees and the businesses that depended on them for capital resources. That all started to unwind starting in the late 1960’s.
Several events took place in the later part of the 20th century. First New Orleans lost most of its international commerce to Miami, New York, and other places. That took away manufacturing, distribution, and white-collar jobs. Next, starting in 1979 or so the major energy companies consolidated to Houston and Dallas and took all the professional and support businesses upon which they depend. Finally, New Orleans lost volumes of commercial businesses to pro-growth southern cities, cities such as Atlanta and Nashville, that continue to boom during the late 20th and early 21st centuries.
With the out migration of the New Orleans economic base, the major banks recognized that their future lay in merger, sale, or failure. No economy, no banks. So, by the early 21st century New Orleans had lost all its major banking institutions. It was no longer a go to city for banking or other financial services.
About a decade ago Iberia Bank of Lafayette recognized the banking vacuum in the New Orleans economy and aggressively built up its efforts here. Sadly, it now appears that they too have recognized that their future lies in other markets, and like all the other banks they will leave us as only a hint of what they expected their presence to be here.
After the Iberia merger New Orleans will once again have no headquarters of major banks in residence. True we have several smaller regional banks, but they too have expanded out of state in the quest for more profitable cities in which to do business. The history of our economic slide is far more significant than any other story that the Advocate could delve into.
The other element of the events missed by the Advocate was why we are no longer a financial hub and why Iberia chose to put itself up for sale. To put it simply we let it happen. When international trade started to relocate, we did nothing about it. When the energy sector decamped, we just ignored it and failed to seek replacement business sectors. Our usual response to economic stress has always been that we react as if business must come here because it always did. No, our recent past proves that it does not, and we are poorer for it.
There is one overriding principle of business be it big or small. Management’s duty is to make profits for the shareholders, the owners, and to keep as much as they can. That is it and Iberia’s management reacted to that principle when they realized that New Orleans and Louisiana did not offer them the opportunity to enhance the value of their business.
So now New Orleans has no headquarters of major banks. The obvious loss is of good jobs and of support businesses. Not so obvious, when a Louisiana businessperson needs capital, he/she will now be at the mercy of policies dictated in Jackson, Dallas, or New York. Louisiana businesspeople have lost the most important element of banking, they have lost their relationships with major banks whose staff lives and works here.
Imagine this scenario, a businessperson wants to locate to a good economy. Does anyone think that a banker in Dallas will have a good feeling about New Orleans or the prospects of a business here? Of course not, the banker will always have a pro-Dallas bias and will not encourage that business to locate in Louisiana.
The end of New Orleans as the major focal point of finance is a direct outcome of the state’s and the City’s weakness as viable economic centers. With the decline of New Orleans as a strong economic center the banks have responded in the only way they could, they have merged or sold to other banks that have in turn moved their headquarters to other areas that are strong economic centers.
The significance of the Iberia merger story is our economic history and the economic reasons for that history. It has everything to do with Louisiana’s policies and the people that we elect to implement those policies. Reporting on what a businessperson makes as somehow suspect because of a successful deal is not unexpected from a liberal media outlet, but doing so while ignoring the significance of the deal, as the Advocate does, is a terrible dis-service to readers.
And the market is responding accordingly.