A.P. Giannini must be turning over in his grave

The recently disclosed, indulgent manipulations of top management at Bank of America and its partner Merrill Lynch are all in vivid contrast to the ethics and good sense of the bank’s founder, Amadeo Pietro (A.P.) Giannini. Once the nation’s largest bank, it was created and grew from humble beginnings in San Francisco, and its history was intertwined with the story of California for most of the 20th century.
Born in 1870 in San Jose of immigrant parents, Giannini started work as a teenager in the wholesale produce business, where he dealt with small farmers. When he was elected to fill his late father-in-law’s seat on the board of a savings and loan in 1901, he soon became an advocate of shifting its emphasis to the small depositor and borrower, but his older colleagues were not convinced. So in 1904 at age 34, Giannini recruited five partners to found the Bank of Italy in a San Francisco storefront. He was able to put into practice his emphasis on small deposits and loans to working class people to complete a home purchase and to small businesses requiring funds to stock their shelves. The Bank of Italy loaned to farmers, orchardists and vineyard owners, all borrowers considered too risky by the commercial banks. Over the years the bank’s lending practices proved a major stimulus to the state’s agriculture.
The Bank of Italy got a dramatic boost on April 18, 1906, when San Francisco was shaken to its roots by a major earthquake followed by a devastating fire that started south of Market Street and spread northward during the day. As the conflagration swept toward the financial district, Giannini closed the doors of the bank at noon and filled a horse-drawn produce cart with all of the bank’s money, both paper and gold, covered it with a load of oranges and blithely trundled south and west of the fire to his home in San Mateo County. Thus, in a few days, with the cash reserves of other banks buried under a pile of rubble, the Bank of Italy became the source of immediate funds in an almost money-free city.
Giannini set up business near the waterfront on a plank supported by a couple of barrels, and made loans with little documentation since he knew all his customers, and even took in deposits from people looking for a safe place for their cash. When San Franciscans began to rebuild and repair, the Bank of Italy was a source of construction loans.
A year later, anticipating the panic of 1907, Giannini increased his gold reserves and stacked gold coins and bars at each teller’s cage, giving depositors faith in the bank’s healthy solvency. He studied the Canadian branch banking system, and when the California legislature authorized branch banking, Giannini was prepared. On Columbus Day, 1909, the Bank of Italy acquired a branch in San Jose. Within a decade it operated 24 branches statewide, especially in agricultural communities like Fresno and Madera, and north of San Francisco Bay. In all branches the bank emphasized services to middle-class customers, offered monthly home loans at lower rates, encouraged even the smallest accounts, funded planting, and employed local management of each branch.
In 1930 the Bank of Italy acquired a smaller Los Angeles chain of local banks named Bank of America, so the combined company was named Bank of America, National Trust and Savings Association.
When the Great Depression crippled the nation, Giannini spoke on the radio about the power of investment to stimulate the economy, declaring, “Dollars at work create credit, and credit creates business and business creates jobs.” He urged that “idle money” be invested in homes and schools. As a matter of policy, Bank of America offered to purchase every California school bond issue as both a social need and a job stimulus.
Giannini was almost alone among bankers in support of Franklin D. Roosevelt and the New Deal. When repeal of Prohibition put wineries back in business, his bank was prepared to finance their recovery. Incidentally, one of his friends was Sonoma’s Samuele Sebastiani.
But Giannini’s most significant contribution to the North Bay Area was the funding of the Golden Gate Bridge construction when, after 14 years of struggle – engineering, political and financial – in the fall of 1932, the Bridge Board had no working capital and could not find a buyer for its bonds. In desperation, the bridge’s chief engineer, Joseph Strauss, and several board members (including some from Sonoma County) explained the situation to Giannini. At the conclusion of their presentation, Giannini said, “We’ll take the bonds. We need the bridge.” Besides buying the first two issues, the bank also advanced $200,000 cash.
In contrast to those at Merrill Lynch, the recently acquired subsidiary of Bank of America, who so casually misspent investors’ and federal bailout funds, Giannini was always aware both of his social responsibilities and of the value of the dollar. When a young consulting engineer named Raymond T. Hill was designing an air conditioning system for the bank’s new headquarters, Giannini said he wanted to meet him. After asking Hill questions about the functions of the planned installation, he inquired about family and children. Then he presented a gift box of candy for the Hill children. “The retail price is [so much] for each box, but we get it for the wholesale price of [so much],” confided Giannini. My father loved to tell the story of how one of the country’s richest men paid that kind of attention to detail.
By the time of his death in 1948, Giannini’s skill, attention to business and philosophy had paid off both in creating the nation’s largest bank and in establishing his reputation for integrity.