Delaware, home of MBNA, can count its good fortune


MBNA CORP. is a lode of Delaware jobs, the No. 2 private employer in that state, a vital force in the fastest-growing economy in the Northeast.

It is the second biggest issuer of Visa and MasterCard credit cards in the world, behind Citicorp. Its Delaware offices hand out fortnightly paychecks to 8,600 workers. Its profits have doubled in five years; its stock quadrupled.

MBNA is growing so fast that last week it was paying college graduates $100 each merely to attend a job fair in the hope that they might apply.

This year MBNA surpassed Baltimore's Alex. Brown Inc. as the top contributor to the Alexis de Tocqueville Society, the United Way club for people who donate at least $10,000 apiece to the charity clearinghouse.

Alex. Brown, a perennial and deep United Way well, boosted its de Tocqueville membership from 49 to 56 this year, a spokeswoman said. But MBNA overachieved more, drafting an amazing 78 de Tocqueville givers, setting a club record and delivering a big chunk of pledges for United Way of Delaware.

If MBNA were in Maryland, it would generate perhaps $50 million in corporate and personal state income tax revenues, not to mention sales taxes, vendor contracts, home projects and United Way de Tocqueville members.

Wait, MBNA was in Maryland. The "M" stands for Maryland. Its original name was Maryland Bank N.A.

What's it doing in Delaware?

Few in this state remember. But the answer provides a marquee exhibit for Marylanders -- and there are more of them now -- who worry about the state's "business climate." And it demonstrates that regulatory action can sound loud economic echoes long after the current political or business cycle is over.

It was 1981. Inflation was raging, and Maryland National Corp. wanted, as all lenders want when the value of money starts falling more rapidly, to raise interest rates. But there was a problem with its credit-card portfolio. Maryland law limited interest rates to 18 percent on the first $700 of a customer's loan balance and 12 percent beyond that.

Eighteen percent is what credit-card lenders charge in the 1990s, when inflation is almost dead. In 1981, they wanted at least the option of bumping rates beyond 18 percent.

That was the year, don't forget, when the prime rate -- charged to banks' very best customers -- hit 20 percent.

But Maryland's General Assembly, concerned about consumers and peeved at the whiff of blackmail in Maryland National's threats to remove to Delaware, did not budge.

The bank did. It up and moved its credit-card wing to Newark, Del., where the rate caps were more liberal and where Gov. Pete DuPont was unfurling the welcome mat for financial companies everywhere.

At the time, it seemed a trifling loss. Maryland National's credit-card subsidiary initially employed only 150 full-time and 50 part-time workers.

But Charles Cawley, then the unit's chief and now MBNA's president, had another opinion. In a conversation 15 years ago with his friend Francis X. Kelly, then a Maryland senator, he said: "You are serving with some of the dumbest people I have ever known."

At least that's the way Kelly remembered it last week.

Kelly himself isn't that harsh on his former legislative colleagues. Maryland was very pro-consumer at the time. Nobody could foresee how credit cards would blast off, how quickly banking business would break out of state boundaries and how Maryland's remaining bank employment base would be hammered in the 1990s.

"Credit cards weren't that big, and some people felt that high interest rates should be capped," he said. "For a legislator, it was not popular to vote for the banks."

But financial history suggests another verdict. Consumers went on a plastic binge that hasn't stopped. They now owe almost half a billion dollars in Visa and MasterCard debt, five times the amount of 1981. The growing MBNA was eventually spun off into a separate company by Maryland National.

And United Way of Delaware will soon distribute about $1 million that it otherwise would not have had.

Pete DuPont came to Maryland this month to speak to the annual Republican state legislators' dinner. During the speech, he bragged about Delaware's healthily growing economy and its thriving financial industry. He may not have mentioned MBNA, Kelly said, but "clearly that's who he was referring to."

Pub Date: 12/23/96

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