The year 1981 marked a significant turn in Delaware’s financial landscape with the passage of the Financial Center Development Act (FCDA). This legislation, championed by Governor Pierre du Pont, aimed to decontrol credit terms and invite out-of-state banks to set up shop in Delaware. With the ink hardly dry on the FCDA, Chase Manhattan and Morgan Guaranty Trust Co., two of the nation’s banking behemoths, pledged to open subsidiaries in Wilmington, igniting a spark that would soon fan into a financial flame.

Financial Center Development Act

With the FCDA, Delaware joined South Dakota in an exclusive club of states rolling out the red carpet for out-of-state banks. This move was not without its detractors. Consumer groups, spearheaded by the Consumer Federation of America and supported by the Washington-based Study for the Center of Responsive Law, raised the alarm over the elimination of interest rate ceilings, and new charges on credit transactions. “The bill may be good for Delaware in attracting more business,” fumed James Boyle from the Federation, “but you are acting to supersede the laws of many other states.” Despite these concerns, the wheels of financial change were already in motion.

As the 1980s rolled on, the promise of a well-positioned banking sector began to manifest. The state by 1991 had become home to thirty-one credit-card and wholesale banks. The employment ripple was substantial, with 13,000 direct jobs and an additional 7,000 related jobs created. The state’s coffers too felt the impact, with bank franchise taxes skyrocketing to $70 million from a meager $2 million a decade earlier. The FCDA flung the doors wide open for credit-card issuers, and the state further greased the wheels with the passage of the Consumer Credit Bank Act in 1983, which catered to smaller regional banks.

The economic dividends were palpable. A study by University of Delaware economists pinpointed a 15 percent annual surge in the state’s economic growth rate through the first quarter of 1989, primarily attributed to these financial deregulations. Nina Keesling from the Delaware Development Office highlighted the importance of staying on the cutting edge in the face of stiff competition from other states.

Fast forward to the turn of the millennium, Delaware’s financial sector had metamorphosed into an indispensable pillar of the state’s economy. The industry, now swelled to include more than three dozen banks, was the largest employer in the state, offering nearly 34,000 jobs. “To see what it has grown into today is just unbelievable,” expressed David Bakerian from the Delaware Bankers Association, encapsulating the awe surrounding Delaware’s banking ascension.

The financial sector’s trajectory wasn’t always upward. A series of mergers in 1998 saw a shrinkage in the ranks of Delaware banks, yet the industry’s dominance held firm, contributing to 13.5 percent of the state’s economy. The fiscal year 1999 alone saw the banks paying more than $259 million in bank franchise taxes, solidifying their position as a financial linchpin in the state’s economy.

FCDA Legacy

The legacy of FCDA echoed through its first two decades, with Delaware becoming a hub for credit-card issuers. The legislation had far-reaching effects, impacting the banking sectors beyond state borders. Robert Glen, Delaware state bank commissioner, lauded the significant contributions of the industry in terms of employment and bank franchise tax revenue.

The 20th century’s close saw Delaware further solidifying its position on the American financial map with the addition of Citigroup’s Citibank and other financial institutions. The state’s favorable trust laws also began drawing in limited-purpose trust companies and major insurers, expanding Delaware’s financial portfolio.

Delaware’s financial journey from 1981 to 2000 illustrates the impact of strategic legislative initiatives coupled with a conducive business environment. The banking sector’s ascent propelled the state to reshape its own economic destiny. Two of the nation’s largest and most aggressive card marketers were based in Wilmington: First USA Bank, a unit of Chicago-based Bank One Corp., and MBNA Corp., the nation’s third-largest card issuer. Eight of the nation’s top 10 credit-card issuers were based in or had large operations in Delaware, and more than 60 percent of the world’s credit cards came out of Delaware. Over the years since, Delaware has remained a significant player in the credit card industry, continuing to host a substantial portion of the U.S. credit card market.