Bank of America

The Bank of America was founded in 1904 as the Bank of Italy. Its credo was radical at the time: to serve "the little fellows." From its humble beginnings in a former tavern, the Bank of America grew to become a force that revolutionized U.S. banking. With deregulation, however, its traditional emphasis on the general consumer created problems for the bank. Amadeo Peter Giannini, founder of today's BankAmerica, became one of the most important figures in 20th-century American banking. Giannini, an Italian immigrant, was seven when his father died. By age 21, he had earned half ownership of his stepfather's produce business. He married into a wealthy family, and profits from the produce business, combined with shrewd real estate investments in San Francisco, enabled him to retire at age 31. His retirement was brief. When his father-in-law died, he left a sizable estate, including a directorship of a small San Francisco savings bank. When Giannini failed to convince the board of this bank that the poor but hardworking people who had recently come to the West Coast were good loan risks, he resigned his position and set out to start his own bank--a bank for "people who had never used one." The year, 1904, was an inauspicious one; an up-and-down economy and the financial irresponsibility of many banks during this period gave banking such a bad name that the government was eventually prompted to create the Federal Reserve system, in 1917. But Giannini's bank was atypical. His policy of lending money to the average citizen was unheard of in the early 1900s, when most banks lent only on a wholesale basis to commercial clients or wealthy individuals. Giannini raised capital for his new bank, called the Bank of Italy, by selling 3,000 shares of stock, mostly to small investors, none of whom were allowed to own more than 100 shares. Although Giannini never held a dominant share of stock, the extreme loyalty of these and subsequent stockholders allowed him to rule the bank as though it were closely held. His innovative policies made the Bank of Italy and its successor, the Bank of America, the most controversial bank in the United States. The nation watched with wary eyes as he created a system of branch banking that made the Bank of America the world's largest bank in a mere 41 years. During the famous San Francisco earthquake of 1906 Giannini rescued $80,000 in cash before the bank building burned by hiding it in a wagon full of oranges and bringing it to his house for safekeeping. With this money he reopened his bank days before any other bank and began making loans from a plank-and-barrel counter on the waterfront, urging demoralized San Franciscans to rebuild an even better city. Giannini's original vision led naturally to branch banking. Expense made it difficult for small depositors to travel long distances to a bank, so Giannini decided his bank would go to them, with numerous well-placed branches. Accordingly, the Bank of Italy bought its first branch, a struggling San Jose bank, in 1909. Giannini made up the rules as he went; he was not a banker, and his was the first attempt ever at branch banking. Going his own way included loudly denouncing the "big interests," and he repeatedly offended influential members of the financial community, including local bankers, major Californian bankers, and many state and federal regulators, who were already uncertain about how to handle an entirely new kind of banking. Some did support Giannini's vision though, including William Williams, an early California superintendent of banks, and the Crocker National Bank, which lent money to a subsidiary of the Bank of Italy expressly for acquiring branch banks. With California conquered, Giannini turned to the national scene. He believed that a few large regional and national banks would come to dominate American banking by using branches, and he intended to blaze the trail. He already owned New York's Bowery and East River National Bank (as