BB&T; Corp., the second-biggest bank in the Washington area, said yesterday that it will not lend money to developers who plan to build commercial projects on land taken from private citizens through the power of eminent domain.
“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,” said John Allison, the bank’s chairman and chief executive officer.
BB&T; Chief Credit Officer Ken Chalk said the North Carolina bank expects to lose only a tiny amount of business, but thinks it is obligated to take a stand 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.”
Mr. Chalk said he knows of no other large U.S. bank with a similar policy.
If other banks were to follow suit, it likely would stop developers from asking cities to obtain property through eminent domain, said Scott Bullock, a lawyer with the Institute of Justice in Arlington, a nonprofit group that advocates for property rights through legal action.
“This tells cities and developers that they need to choose other methods for development projects,” Mr. Bullock said. “There are ample methods that do not involve taking property against [residents’] will. They should be pursued and can be fully funded by banks and other financial institutions.”
Washington has obtained property through eminent domain at the Skyland Shopping Center in Southeast, which is being redeveloped by the National Capital Revitalization Corp. A spokeswoman for the development group said yesterday that BB&T; is not involved in that project.
The city also has used eminent domain to gain control of 14 acres at the site of a proposed baseball stadium for the Washington Nationals in Southeast. The stadium project is unlikely to be affected by BB&T;’s decision, since it is being financed through public money and an agreement with Deutsche Bank. Moreover, the stadium will be owned by the city rather than by a private entity.
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 from expanding there.
Mr. Bullock, who represented homeowners in the New London case, called eminent domain unconstitutional.
“Hopefully, many others will follow suit and recognize that this is not the way business should be done in America,” he said.
The policy also will protect the assets of banks such as BB&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.
Mr. Merrill said he did not think there were many cases similar to the one that developed in New London.