Rhode Island’s economic planners once believed that banking would be a big part of the state’s economic future. After all, it had nurtured home grown banks like Fleet and then Citizens that based their operations here and then expanded out of state to become regional players. Banks had lots of employees and built signature buildings in Providence to house their headquarters. Banks were solid, stable and great corporate citizens. But the economic promise in banking was short-lived, overtaken by relentless mergers from even bigger banks in a big fish-small fish feeding frenzy that started in the late 1980s and continued through the 1990s.
Witness the evolution of the Industrial National Bank, cousin to Hospital Trust Bank and Old Stone Bank as the state’s major banking institutions. Industrial National Bank occupied the city’s tallest building – the 1927 art deco Industrial Trust Tower - for decades and had branches all over the Ocean State. It became InBank for a time and then, under Terrance Murray, morphed into Fleet Bank. Fleet built 111 Westminster next to the Industrial Trust Tower building – the so-called “Superman Building.”
But then Fleet merged with Bank of Boston and Murray moved his office to Beantown, promising that the now bigger Fleet would remain committed to Providence. In the end, however, Fleet was ultimately acquired by megabank Bank of America, which had started out in San Francisco. Last year Bank of America announced that it would vacate the space it leased in the Industrial Trust Tower building, effectively ending the relationship with Providence. Come April the building will go dark.
Then there is the case of Citizens Bank. Citizens grew rapidly under CEOs Lawrence Fish and George Graboys during the same period and the bank built an impressive building at the bottom of Steeple Street below College Hill. Citizens acquired smaller banks and became a regional bank with branches stretching from Rhode Island out to Ohio and down through Pennsylvania. The bank became a big regional player and then became a brand of the even higher flying Royal Bank of Scotland (RBS). Today, RBS is mostly owned by the British government after it had to step in and rescue it during the financial crisis. RBS reported losses of $9 billion last year, and just a few days ago it announced that it will start selling off shares of Citizens to raise much needed cash. Like Fleet, Citizens will probably be bought up in the end by some financial entity and served up again, probably under another name. Like Industrial National-Fleet Bank, we will most likely have to say goodbye to Citizens.
With Citizens on the chopping block, Rhode Island will lose more jobs and the banks’ downtown buildings will have little or no association with their former owners, much like the 1828 gold-domed Old Stone Bank building on South Main Street, which is now owned by RISD. As community benefactors, the successive loss of these institutions has been a significant setback for social service agencies and arts organizations, which have greatly benefited from their contributions and support.
Much of the turnover and turmoil in banking has stemmed directly from the foolhardy permission, granted by the federal government during the Clinton administration in 1999, with the repeal of the Glass-Steagall Act of 1933, to allow traditional banks to engage in a wide range of financial services, including credit default swaps and other highly speculative behavior that banks previously couldn’t engage in with your money. Turning bankers into risk taking investors, we now know, was not a good idea.
Today Rhode Island looks not to banks and financial services as a growing job producing segment of its economy but instead to healthcare and related research in partnership with our universities. The recently opened I-195 land will be mostly occupied by new buildings dedicated to medical research and education, which will be a much better bet on the future than the now faded promise of banking.