A retrospective on the Texas Bankers Association since 1885

Texas banks are thriving and helping the communities they serve prosper. We enjoy a strong and diversified economy.”

April of 2023 marks a milestone for the Texas banking industry. The new nine story TBA building — across the street from the Governor’s Mansion and overlooking the State Capitol — will be a visible symbol of the historical and long-term strength of the banks in Texas. Texas Gov. Greg Abbott was present at the grand opening. Governor and banker, Dolph Briscoe, dedicated the prior TBA building in 1977.

When bankers gathered in 1885 in Lampasas Springs, arriving by horseback, carriage and train, it was an optimistic time in Texas. The post-Reconstruction economy was booming, railroads spanned the far reaches of West Texas and the Panhandle and immigrants were coming in from all over the country. Even so, the TBA founders could not have imagined that they were creating the oldest and largest state banking trade association in the country with over $1.09 trillion in assets and fueling a 21st century economy that is the ninth largest in the world.

TBA was founded with the goal of changing Texas law to allow for the chartering of state banks. National banks were created in the National Bank Act in 1863, which also established the national currency, the greenback. It wasn’t until 1905 that the Texas Constitution was amended to permit state charters. The reason why it took so long for there to be state banks goes all the way back to the Republic of Texas.

Sam Houston was the hero in the improbable victory over Mexican General Santa Anna in the Battle of San Jacinto in April of 1836. Houston was elected President of the Republic of Texas later that year. He had come to Texas after a political life in Tennessee. Houston rose to prominence when General Andrew Jackson commended his valor in the War of 1812. Jackson became a protector and father figure to Houston, helping him gain political offices in Tennessee. When Jackson became the 7th U.S. President he campaigned against and allowed the charter to expire of the Second Bank of the United States. The opposition to government sponsored banks goes back to Thomas Jefferson’s battles with Alexander Hamilton. Jefferson wanted an idyllic republic of 100-acre farms, but Hamilton wanted a strong central government with a central bank and mercantilist policies. Although Hamilton died young in a duel with Aaron Burr, we live in a Hamiltonian Republic.

When Sam Houston became President and subsequently governor of Texas his views against government-sponsored banks were Jacksonian. The Constitution of the Republic in 1836, the state constitution in 1845 and the constitution of 1876 all prohibited state banking. The 20 years it took from 1885 to 1905 may seem like a long time but the Republic’s constitutional protection of homesteads from second liens lasted 157 years.

Texas banks continued to be chartered and prosper in the early years of the twentieth century. Most banks survived the Depression and adapted to the imposition of federal deposit insurance in 1933. Prior to FDIC insurance, healthy banks often held the equivalent of 20-30% of what we now call Tier1 capital.

Things were going well for the state economy and Texas banks until the late 1980s. A drop in energy prices, falling real estate values and the 1986 tax bill combined to cause the failure of over 500 banks from 1988 through 1992. The high-water mark for the number of Texas charters was 1,927 in 1988. Until 2009, the biggest bank failure in the country was First Republic Bank. Washington Mutual became the biggest bank failure in 2009. The recent failure of Silicon Valley Bank now holds the number two spot. There are now over 390 Texas-based banks. They are among the strongest in the country.

Texas banks are thriving and helping the communities they serve prosper. We enjoy a strong and diversified economy. The major threat to the viability of Texas banks now comes from Washington D.C.. The struggle will continue as long as the elected class continues to use federal law and thousands of pages of regulations to accomplish goals, inconsistent with safety and soundness, such as environmental policy and credit allocation.