Breaking the banks.

• Position: Charlotte - Interview

Charlotte rose to prominence as the nation's second-largest financial center, thanks largely to state laws that favored intrastate branching and fostered greater competition than in other states, well-timed changes in national laws and an intense rivalry between two banks that pushed them to one-up each other often. One of those banks, Wachovia Corp., nearly failed in late 2008 before being bought by San Francisco-based Wells Fargo & Co. Analysts often trace Wachovia's downfall to its $24 billion purchase in 2006 of Oakland, Calif.-based Golden West Financial Corp. Bank of America survived the financial crisis but changed CEOs at the start of 2010 under pressure from federal regulators. Rick Rothacker, a reporter with The Charlotte Observer, examines those events in his new book, Banktown: The Rise and Struggles of Charlotte's Big Banks, published by John F. Blair, Publisher.

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What was the most surprising thing you found?

Just how precarious a position Wachovia was in and how close it came to failing. Its leaders initially thought Wells Fargo was going to buy it, but Wells Fargo pulled out, and some of the executives weren't sure what was going to happen, whether they might fail. They thought Wells Fargo was totally out of the picture, and they knew that Citigroup wanted to break up the company. And [Federal Deposit Insurance Corp. Chairman] Sheila Bair at one point contemplated failing the bank.

Why didn't she?

She got a lot of pushback from the other regulators. They had already seen how bad it was when Lehman Brothers failed and what that did to the financial system. Washington Mutual's failure helped unsettle markets even further. Basically, the other regulators were saying Wachovia is much bigger than Washington Mutual, it's much more interconnected than Washington Mutual was, and that would be too much of a blow to the financial system.

Why did Wachovia go through with the Golden West deal?

One, its CEO at the time, Ken Thompson, is a pretty optimistic guy. The company had become an expert at doing mergers, so I think they were confident they could do it well. They weren't just buying it because it was a mortgage company. It had a large presence on the West Coast. There are only so many banks that can give you a big presence, and Golden West was one of the last ones out there. Also, Golden West sold Wachovia on the idea that they knew how to do option adjustable-rate mortgages the right...