News Releases

January 25, 2006

BB&T announces eminent domain policy

WINSTON-SALEM, N.C. –

BB&T Corporation today said it will not lend to commercial developers that plan to build condominiums, shopping malls and other private projects on land taken from private citizens by government entities using eminent domain.

The commercial lending policy change comes in the wake of Kelo v. City of New London, a controversial Supreme Court decision in June that said governments can seize personal property to make room for private development projects.

The court’s ruling cleared the way for an expansion of eminent domain authority historically used primarily for utilities, rights of way and other public facilities.

“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 BB&T Chairman and Chief Executive Officer John Allison.

“One of the most basic rights of every citizen is to keep what they own. As an institution dedicated to helping our clients achieve economic success and financial security, we won’t help any entity or company that would undermine that mission and threaten the hard-earned American dream of property ownership.”

The high court, in a 5-4 ruling, held that 15 homes in a waterfront neighborhood in New London, Conn., could be acquired by the city, turned over to private developers and ultimately replaced by a luxury hotel, upscale condos and office buildings. The city justified the project as a way to generate tax revenue and jobs.

Critics charged that by letting local governments decide what constitutes a “public purpose,” the court abdicated its duty to protect citizens from unconstitutional seizures of their property under the Fifth Amendment.

In a stinging dissent by Justice Sandra Day O’Connor, she wrote that, since the decision, “the specter of condemnation hangs over all property. Nothing is to prevent the state from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.”

But that may change. Thirty-eight states have recently passed or are considering laws that would ban the use of eminent domain for private development. A similar bill that would apply a federal ban has passed the House, and President Bush has voiced his support for such reform.

The bipartisan Private Property Rights Protection Act would revoke for two fiscal years all federal economic development financing – a significantly large amount of money for most localities and states – from local governments that condemn privately owned houses and other non-blighted property so that they can transfer it to private developers.

“While we’re certainly optimistic about the pending legislation, this is something we could not wait any longer to address,” said BB&T Chief Credit Officer Ken Chalk. “We’re a company where our values dictate our decision-making and operating standards. From that standpoint, this was a straightforward decision; it’s simply the right thing to do.”