PhillyDeals: Sale of Wilmington Trust the latest upheaval in 'Corporate State'

Delaware's political unrest, which brought reporters flocking to Wilmington for the Election Day test between angry Republican conservatives and frantic allies of President Obama, follows job-destroying business upheavals that have unwound the tight social and economic consensus in what consumer activist Ralph Nader used to call the "Company  State."

The latest came Monday, the eve of Election Day, with the deep-discount sale of Delaware's dominant bank, money-losing Wilmington Trust Corp., to investor Warren Buffett's M&T Corp., at its lowest share price in 25 years - lower, if you count inflation.

In a 1971 book, Nader described Delaware as a place where the public deferred to business paternalism - giving the locally dominated DuPont Co., its founding family, its allied banks (especially Wilmington Trust) and foundations-friendly courts, favored tax treatment and other advantages - in exchange for the comforting sense that big business would take care of the basics, like keeping people working.

Since Nader wrote, DuPont Co. (and the du Pont family) influence has receded. For a time, the corporate model seemed to gain strength, as Wilmington traded on its business-friendly laws and politicians to draw diverse new financial and legal business, boxy new offices, and a tasty menu of big-city restaurants and shows.

Contemporary industrial cities like Camden and Chester collapsed as their factories shut. But until recently, Wilmington-area industrial plants survived waves of U.S. corporate cost-cutting. Delaware governors routinely visited corporate bosses in New York and Detroit, cited the state's business-friendly statutes and attitudes, gave concessions, and won reprieves.

Not anymore. In the last three years, General Motors, Chrysler and Valero have closed their sprawling plants in surrounding New Castle County, idling thousands.

The giant credit-card banks that took up slack from DuPont's retreat were sold to outsiders; Bank of America, in particular, has cut more than 3,000 former MBNA Corp. card jobs since overpaying for the Wilmington-based loan giant in 2007.

M&T says Wilmington Trust, after losing money for six straight quarters, still has a billion dollars in bad loans on its books, piled up under the 17-year rule of chief executive Ted T. Cecala, a former accountant who abruptly departed last spring as losses mounted.

The details are complex and painful, but Wilmington Trust's disease looks simple in its outline: Cecala's agreeable business lenders made too many construction loans to developers, especially along the Delaware Shore. Property and loan values collapsed in the economic slump.

That's a problem, not just for the bank's shareholders, but for other Delaware business borrowers, which relied heavily on Wilmington Trust. Their main capital faucet slowed as the bank was forced to tighten credit.

The sale will almost certainly mean more corporate jobs lost, this time at Wilmington Trust headquarters, which occupies two towers - one beige, one gray - near Wilmington's downtown Rodney Square. The bank employs 2,700, mostly in Delaware.

It is "sad to lose an institution that we have known and trusted for over a century in the City of Wilmington," Mayor James Baker said. Baker plans to meet with M&T officials and remind them that the city and state do a lot of business with Wilmington Trust, in hopes of cushioning the blow. Gov. Jack Markell says he's been appealing to M&T, too.

It's not all bad. The banks - M&T already has a presence in Delaware - don't much overlap, which will limit branch closings. (M&T runs a call center in Millsboro, way downstate.) Veteran loan officers have told me M&T's culture encourages business lenders to be aggressive in finding good customers.

So maybe M&T will help get the local economy going again by lending more than Wilmington Trust could lately, even if it does lay off the bank's bosses and staff.

But M&T chief executive Robert Wilmers is 75, and M&T has been named in merger talks with bigger banks. There could be another deal in the works before voters and workers can bank on what to expect next from Wilmington Trust, the state's dominant financial institution.