A.P. Giannini was one of the greatest bankers in history, a superb business leader whose name today is largely unknown. With bankers being in ill repute since the crisis of 2008–09—the latest black eye, of course, comes from Wells Fargo—it is perhaps salutary and indeed inspiring to look at a banker who did so many things right. Born in northern California in 1870, this son of Italian immigrants (at age 7, he witnessed his father’s murder over a money dispute) went into the produce business as a broker and was so successful that he retired at 31. Soon after, Giannini took a seat on the board of a local bank and couldn’t understand why it—and every other bank—refused to serve the rapidly growing population of immigrants. Banking services, he was repeatedly told, were for only the well-to-do. He left the bank and started his own, the Bank of Italy, which years later morphed into the Bank of America. Giannini made it the largest bank in the U.S. His life offers many lessons for would-be entrepreneurs. • Giannini broke all the rules. His bank stayed open long hours to accommodate shift workers. As well as English, tellers spoke their customers’ immigrant languages. They instructed customers in the ways of banking, from filling out deposit slips to managing checking accounts. Loans were made for as little as $25—ridiculously small levels in the eyes of traditional bankers—with low interest rates that were light-years away from those of the loan sharks immigrants had to go to before. Defaults were few. Having spent much of his early life on San Francisco’s wharves, Giannini had learned how to size men up. He advertised, something banks never did. He and his colleagues knocked on countless doors to get depositors.
Giannini also opened new branches relentlessly and bought up smaller banks. He pioneered the bank holding company and expanded into other states. (Decades later Washington forced Bofa to spin off its non-california banks and its insurance operations.)
It was not only in serving immigrants and pioneering consumer finance (new and used cars, mortgages and home appliances) that Giannini did the unconventional. He applied the same approach to whole industries, such as financing the new film industry sprouting up in Hollywood (including Columbia and MGM studios) and California’s wineries.
In 1937, when Walt Disney was on the brink of financial ruin because of vast overruns in producing what was regarded as a piece of madness, the feature-length cartoon Snow White and the Seven Dwarfs, Giannini made a big, lifesaving loan, against the advice of all his colleagues.
In 1932 in the pit of the Great Depression, when the bank was under severe financial pressure, Giannini had the bank buy all of the bonds that enabled the construction of the Golden Gate Bridge.
Giannini financed William Hewlett and David Packard when their company was still housed in a garage.
After WWII Giannini had Bofa aggressively lend to war-torn Europe and Japan. He financed the rebuilding of Fiat’s ruined factories, for instance. • Crisis management. In 1906 San Francisco was hit with an earthquake and subsequent fires that left the city in smoldering ruins. After the quake but before the fires swept the city, Giannini got a wagon, loaded it with the bank’s cash and gold, covered the load with produce and drove it out of the city. He realized that the coming fires would melt the bank vaults, trapping the money therein. As the fires abated, Giannini returned to the city, threw a plank across two barrels, put the money on his makeshift table and sent out the word that any merchant who wanted a loan to begin reconstruction could come by and get it immediately.
It’s no surprise that Giannini aroused intense competitive jealousies. When Franklin Roosevelt shut down all the banks in 1933—the famous Bank Holiday—to determine which banks were sound and would be allowed to reopen and which would be permanently closed, the traditional banks lobbied the Treasury Department to close down Bofa. Giannini had to use every political chit he had and all his powers of persuasion to save his bank. By conventional measures many of his loans were troubled, but Giannini believed he knew the ultimate soundness of his borrowers better than any Washington bureaucrat. • Character. Giannini inspired intense trust because he clearly was a man with a good mission, capably serving ignored customers. • Wealth isn’t an end in itself. Giannini died in 1949 with a lower net real worth than when he sold his produce business nearly a half-century before. He believed “no man actually owns a fortune; it owns him.” He constantly gave money away to fund scholarships and medical research. He never paid himself more than $50,000 a year, very good money in his time but a pittance by today’s big-company CEO standards. During the Depression he took no salary.
Sadly, the banking industry is so regulated now that anyone with Giannini’s extraordinary entrepreneurial talents would probably become frustrated to the point of leaving.