Regional bank to refuse loans in eminent domain projects
CHARLOTTE, N.C. -- Regional bank BB and T Corp., one of the nation's largest financial institutions, will make no loans to developers who plan to build commercial projects on land taken from private citizens by the government through the power of eminent domain, the company said Wednesday.
"The idea that a citizen's property can be taken by the government solely for private use is extremely misguided, in fact it's just plain wrong," John Allison, the bank's chairman and chief executive, said in a statement.
In an interview, BB and T chief credit officer Ken Chalk said the bank expects to lose only a tiny amount of business, but believes it was obligated to take a stance on the issue.
"It's not even a fraction of a percent," he said. "The dollar amount is insignificant."
But he added: "We do business with a large number of consumers and small businesses in our footprint. We are hearing from clients that this is an important philosophical issue."
Chalk said he knows of no other large U.S. bank with a similar policy.
BB and T, which is headquartered in Winston-Salem, ranks among the nation's top 10 banks by assets.
In June, a divided Supreme Court ruled that cities may raze people's homes to make way for shopping malls or other private development. The 5-4 decision gave local governments the power to seize private property in the name of increased tax revenue.
The ruling upheld a decision by the City of New London, Conn., to seize seven property owners' land so developers could build a hotel and high-end condominiums to keep pharmaceutical giant Pfizer expanding in the state.
Scott Bullock, a senior attorney with the Arlington, Va.-based Institute of Justice, who represented homeowners in the New London case, applauded the bank's decision.
"Eminent domain abuse is wrong and unconstitutional," Bullock said in a statement. "BB and T has stepped up and recognized its corporate responsibility to not be a part of this shameful abuse of individual rights."
The policy also will protect the assets of banks such as BB and T by not tying up their money in projects that may draw political opposition, said Columbia University law professor Thomas Merrill, a specialist on eminent domain.
Merrill added that he did not believe there were many cases similar to the one that developed in New London.
"No one knows how many of these projects are out there because the data is flimsy," he said. "But my hunch, from what data we do have, is that the number is relatively small and concentrated in large congested cities like New York, Boston or Baltimore."
In its statement, BB and T said 38 states have recently passed or are considering laws to ban the use of eminent domain for private development. Similar legislation is pending before the U.S. Congress.
"While we're certainly optimistic about the pending legislation, this is something we could not wait any longer to address," Chalk said in a statement. "We're a company where our values dictate our decision-making and operating standards. From that standpoint, this was a straightforward decision; it's simply the right thing to do."
BB and T, with $109 billion in assets, operates more than 1,400 branches in 11 states and Washington, D.C.