A Quarantine from Reality: Italian Goes to America, Son Opens a Bank, Helps Rebuild a Community, a City, a State, and a Country

Amadeo Pietro Giannini

It seems that what's dictating the human agenda right now is fear. Each day we get our rationing of countswho lived, who died, who told a story. Right out of Hamilton, the show. The avalanche of articles and news alerts seem to indicate that anything goes.

In a business setting, which is what I'm used to, when a new situation like the one we're facing creates a change, the first line of defense from letting it overtake you is what you say to others and your internal conversation.

Because those words are birthing the emotional wake you'll need to live with as you try to wade through the crisis. Nobody knows how things will be as time passes. A sure bet is that they won't be the same as they are today.

So I thought of taking a quarantine from reality. Come with me down history lane.

Italian goes to America, son opens a bank

I came across this story thanks to an exchange on LinkedIn with an expert in behavioral finance from Rome in response to an article someone shared. In fact, he pointed out that the author had mentioned Amedeo Peter Giannini in closing and with little detail.

It turns out that Giannini, born in an Jose, California, to Italian immigrant parents (his father was from a town near Genoa, at the time still part of the Kingdom of Sardinia), is the inventor of the modern bank and the concept of banking marketing.

Giannini's father bought a farm with his gold rush proceeds and settled to grow fruits and vegetables for sale. He was fatally shot by an employee after a pay dispute, leaving a widow with two children and one on the way. After his mother remarried, Giannini called it quit with school, thinking he could do better in business.

He worked as a produce broker, commission merchant and produce dealer for farms in the Santa Clara Valley, was successful and married well the daughter of a North Beach real estate magnate.

Retired at 31, he administered his father-in-law's estate. When he became a director of the Columbus Savings & Loan, a business in which his father-in-law had invested, he saw an opportunity to service the increasing immigrant population that were without a bank.

But there was no persuading the other directors, so he quit and started his own bank. He invested everything he had, including his wife's assets in the risky business. The bank guaranteed honest and lower exchange rates than the others to immigrants who sent money home and granted credits for small amounts to those who had little or no guarantees.

That is he set out to do what all the others don't do because “a banker worthy of the name it was his theory must not deny anyone credit, provided that he is honest.” Giannini founded the Bank of Italy on October 17, 1904.

The institution for “the little fellow” was in an old saloon in North Beach, the Italian quarter in San Francisco. He went street by street, house by house, to present the services offered by the bank. They say he looked at how many calluses the person who was asking for a loan had on his hands to decide whether to grant it or not.

He opted for popular shareholding, he had dealers, farmers and artisans subscribe to shares and decided to finance the builders who guaranteed good prices to those who wanted to buy a house. Deposits on the first day were $8,780. Within a year, they soared above $700,000 ($13.5 million in 2002 dollars).

When the 1906 San Francisco earthquake and fires leveled much of the city, Giannini set up a temporary bank, collecting deposits, making loans, and proclaiming that San Francisco would rise from the ashes. He was fast.

They say Giannini took gold and money out of the half-destroyed office of his credit institution hidden in fruit carts similar to those he used to sell vegetables with his parents as a boy. Other stories talk about him hiding the money under rubbish in a trash truck, then later giving employment to the driver's son as a thank you for saving his bacon.

However he moved the money, he used it in the days immediately following the earthquake to travel around the city and lend to those who lost everything. In return, he asked only for a signature and the commitment to return the sum as soon as possible.

While the other banks were struggling to get back on their feet, the confidence of the Californians in the Bank of Italy increased and with it the deposits. In 1912 they already amounted to 11 million dollars. The reconstruction of the city attracted large sums of money, which passed through the bank's coffers.

Amadeo Peter Giannini became the symbol of the desire to rebuild the destroyed city. In 1909, right after legislation made branch banking possible, he opened the first branch of the bank in San Josè, the city where he was born. The Bank of America and Italy were created from a branch of the institution in 1919. In 1934 there were already 423 branches. The bank continued to be profitable.

In 1928 Giannini gave up his share of dividends, equal to over 1.5 million dollars. “A man who wishes to own more than 500 thousand dollars,” he used to say,  “should run to the psychiatrist.”

He was a banker, but also a patron. Giannini was once again able to see far into the future when he started offering loans at low interest rates to the nascent film industry. Fascinated by the educational potential of the new art, he wanted the Bank of Italy to sponsor Charlie Chaplin's The Kid in 1920.

A few years later it was the turn of Walt Disney's Snow White and It Happened one Night by Frank Capra, a director with whom the Italian-American banker made friends. They say Giannini inspired Capra for It's a Wonderful Life. In all, between 1936 and 1952, Giannini's bank financed over 500 films, for an amount of over half a billion dollars.

There's much more history in his story.

He bought bonds that helped finance the Golden Gate Bridge during the Great Depression in 1932. Designed by Joseph Strass, the long San Francisco bridge was a great work nobody wanted to finance. Giannini did, at zero interest rate, because he was convinced that the connection infrastructure would help restart the city's economy.

Meanwhile, nationalized in 1927, three years year later the Bank of Italy changed its name to Bank of America National Trust and Saving Association and survived the difficult years of that crisis unscathed.

When Giannini went to add the numbers, he realized that the loans he had granted without guarantee over the years had been repaid over 90 percent. The bank of emigrants had given confidence to the poorest, did not lose capital, produced profits and contributed to the development of California. He won his bet: The Bank of Italy had become one of the largest credit institutions in America.

Giannini's bank also faced the years during World War II without too many problems, financing the American war industry. Italy, however, had remained in his heart. After the end of the conflict, the bank advanced the funds necessary for the management of aid for the reconstruction of the Marshall Plan in Italy at zero interest. He also financed many Italian companies directly, including Fiat.

An elderly Giannini resigned from the presidency of his credit institution in 1945. His desk drawers were open that day. “I have nothing to hide,” he said. “And neither does the bank.”

Creating lasting impact

Amadeo Peter Giannini died in 1949 leaving a substantial legacy: A banking giant, two foundations that still bear his name dedicated to medical research and the development of the rural economy and a limited personal wealth, less than $500,000.

The “banker of the Italians” had remained faithful to the theory elaborated before founding his bank: I don't want to get too rich, because no rich man possesses wealth, but is possessed by it. A lesson he must have learned as a child when he saw his father die in a fight following a discussion over a one dollar debt.#

I'm just tickled that an obscure reference in a short article could provide such a wonderful trip down history lane. “You've got to lend money to the people who don't have it, at zero interest,”# was the reference. History worth remembering.

[Credit for much of the story goes to Silvia de Bernardin, journalist]