PhillyTablet Inquirer Daily News
Mobile
Home Delivery
philly.com
email
font size
options
 
Monday, August 22, 2011

Dorrance's last decision doomed Philly as a bank center

G. Morris Dorrance lived a long and useful life, and deserved the attention he has received, including a front-page Inquirer obituary, since his death Aug. 11 at age 88.

But it's a mixed legacy. As the paper noted, Dorrance was the nephew of Campbell's Soup's founder, a leading backer of Fox Chase Cancer Center and other good causes, and, especially, the founding boss of CoreStates Financial Corp., the biggest and last of the Philadelphia banks, combining Philadelphia National and First Pennsylvania into one big company designed to dominate mid-Atlantic finance and ensure Philadelphia remained a center of banking decisions and thousands of headquarters jobs and regional and charitable leadership as banks across the US consolidated.

But Dorrance's legacy also includes the loss of that bank, due, as much as anything, to his surprising decision to bypass a generation of canny and brainy lenders and investors, some with fancy degrees and blue-chip client rosters, some with deep foreign-banking and military leadership experience, to name outsider Terrence Larsen, a 40-year-old economist, as Dorrance's successor in 1988.

Larsen was a dedicated golfer, and a rare hand at growing peppers for the Philadelphia Flower Show, and an afficionado of Hawaii's beaches. But he lacked the skills or will  to defy short-term Wall Street criticism in pursuit of a long-term strategy, and to retain, not just the many bright people who left on his watch, but also CoreStates' designated merger partners, notably Maryland National Corp., which owned what became the biggest credit card and home loan businesses in the nation.

Larsen did a great job selling CoreStates, at the top of the market, in 1997, for a record six times book value, to First Union (later Wachovia) Corp., which never recovered from the deal (it's now part of Wells Fargo & Co.) "We got one hell of a price," as he told me after it was all over.

But in that deal Philadelphia lost its banking sector, more than 10,000 jobs, and its old status as a headquarters city where businesspeople made big decisions that mattered here. It's now a branch town, with a downtown workforce that hasn't grown since CoreStates went away, and office valuations to match.

How did Larsen repay his mentor? I was told Dorrance learned his bank was sold, not from Larsen, but from his barber. At the time, Dorrance declined to comment, or to second-guess his successor. Maybe he agreed that taking the money and running was the right thing to do. (Larsen got $50 million to sell, plus royal benefits for life. That in itself wasn't unusual; Corbin McNeill, who sold what used to be Philadelphia Electric a few years later, retired to his ranch in the Rockies with $86 million in stock and payments; David LeVan was awarded $22 million in severance for selling Conrail. Think about that when you sputter over Philly schools chief Arlene Ackerman taking not quite $1 million to go away.) 

But I'd like to think Dorrance hoped for more for the community he loved. PNC Bank has thrived in Pittsburgh, by absorbing other banks, some of them deeply troubled, in Philadelphia and Washington, Baltimore and Cleveland. PNC is what CoreStates should have been: one of the nation's largest banks, solvent in crisis, profitable in almost all seasons, and a major hometown employer and patron of good causes. PNC is even building a 40-story skyscraper headquarters in Pittsburgh as Philadelphia suffers a commercial construction freeze (except hospitals). That should have been us.
Posted by Joseph N. DiStefano @ 2:09 PM  Permalink | 9 comments
Comments   
  • 0 like this / 0 don't   •   Posted 3:10 PM, 08/22/2011
    Maybe Philadelphia's government should be less hostile to business, and the city can attract corporate headquarters to relocate here.

    Naah, who am I kidding? City government is too busy protecting their political machine and their individual fiefdoms.
    — Mr. Smith
  • 0 like this / 0 don't   •   Posted 3:40 PM, 08/22/2011
    Great piece Joe D. Well done!
    — vc bear
  • 0 like this / 0 don't   •   Posted 4:20 PM, 08/22/2011
    Well written and insightful. (and I usually disagree with Joe D). Corestates departure was the final nail in philly as a financial services center. look at boston, as well as pittsburgh. They have nice new sky scrapers, and we keep fighting to keep the logo's of failed banks (PSFS,PNB) on our sky line . They never kept the promise to build out in community. And none of execs based here from Wachovia, were players.
    — stevejones
  • 0 like this / 0 don't   •   Posted 5:29 PM, 08/22/2011
    Well written. Unfortunately, I know some even in the local business community who think Philly doesn't need big hometown corporates in Center City filling those offices and funding all the social service and arts causes around town. They are happy to see the downtown become home to million dollar condos instead and point to all the liveliness around Center City has green signal for more of the same. They don't realize that Philadelphia is working itself out to be a bedroom community for suburbs and perhaps even NYC in the future thanks to HSR.
    — phillyaggie
  • 0 like this / 0 don't   •   Posted 8:08 PM, 08/22/2011
    I met the bloated Mr. Terry Larson once. Was not impressed.I'd have given him 2 a side for whatevwer he wanted to bet so long as he had to walk the course.
    — Wilhelm Von Humboldt
  • 0 like this / 0 don't   •   Posted 11:13 PM, 08/22/2011
    I am a banker and totally agree with you specifically but also generally.

    I have felt for many years that the Phila. banking leadership was contented and interested in keeping their life simple and controlled and that is why all of the larger banks were acquired. Give the late Hal Pote credit--he sold Fidelity to First Fidelity but retained the CEO title. Unfortunately the NY centric, politically crafty management of First Fidelity out maneuvered him politically and got rid of him and Bernie Morgan. The long time CEO of Continental and his successor both spent long weekends (Thurs. PM to Monday AM) in Florida during the winter. How could they feel vested in the Phila. business community when they were sleeping four out of seven winter nights a week in Florida?

    The surviving banks are in second tier cities (population-wise) like Pittsburgh (PNC), Buffalo (M&T and First Niagara) and until two years ago, Charlotte. I give those leaders credit.

    Losing those headquarters was critical--headquarters spending for services is heavily, but not totally, locally beneficial to those cities. Executive civic involvement means good charitable giving and deeper involvement by other managers and employees.

    Good article.
    — jfmcg2
  • 0 like this / 0 don't   •   Posted 6:37 AM, 08/23/2011
    PNC is a great institution. I agree, good piece.
    — Jeffritoe
  • 0 like this / 0 don't   •   Posted 10:27 AM, 08/23/2011
    Seriously, Joe, a really great and informative piece. Far too good to be classified as a blog entry. I had no inkling of Philadelphia's heyday as a banking center. Those jobs would be mightly helpful today.
    — tomfox
  • 0 like this / 0 don't   •   Posted 8:10 AM, 08/24/2011
    These great banks also had great buildings on South Broad Street: PNB, Girard (now a hotel), Fidelity, Western Savings. And there was PSFS (now a hotel too). Is Beneficial the only local bank left? Same building as always but not a real landmark like those on Broad Street. I guess they make great restaurants and Rite Aids too, like Del Frisco's, the Provident building at 17th and Chestnut (Rite Aid and condos)and even Union Trust, when the City's financial center was further east on Chestnut Street, before they built City Hall and shifted everything to Broad and Market Streets. Good subject for a book, Joe, or maybe a longer article.

    — sloweddie


9 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
Advertise Here