Today, Bank of America is one of the largest banks in the US (and the world for that matter!) Yet few actually know the story of Amadeo Giannini, the man who helped found it and turn it into the giant it is today!
At the time, banks really only dealt with wealthy customers, often turning away poorer customers, or those with poor credit history, as they weren’t as profitable as their wealthier counterparts and were thus “not worth their time”.
But Giannini didn’t do this, he opened up his bank to middle and lower class customers and practically invented the modern-day banking system…
Early Life
To tell the story of Amadeo Giannini, we must first take a look at his father: Luigi.
Born in 1848 in the comune of Favale di Malvero, near Genoa, Liguria in present-day Italy (then in the Kingdom of Sardinia) Luigi heard about the gold rush then happening in California and moved there with the hopes of striking it rich.
Unlike many of his fellow prospectors, Luigi Giannini was actually semi-successful and eventually returned to Italy in 1969 to marry Virginia Demartini. Not long after the marriage, the couple returned to California to start a new life for the both of them.
Arriving in California, Virginia found out she was pregnant and later gave birth to a son on May 6 1870 in San Jose, California. The couple named their son Amadeo Pietro Giannini, later known as Amadeo Peter Giannini or simply A. P. Giannini.
With less and less gold being found with each passing day, Luigi Giannini chose to quit gold prospecting and become a farmer. Using the money he had, Luigi purchased a 40-acre farm in the Alviso area of San Jose in 1872.
Growing fruit and vegetables and selling them via a farm store, the Gianninis were quite prosperous and the store grew to have a few employees by 1876. Yet a pay dispute between Luigi and one of his employees ended badly, with the employee fatally shooting his boss.
This left Virginia, a mother of three with a fourth on the way, to run the farm and store on her own. In line with the customs of the time, Virginia remarried, marrying Lorenzo Scatena in 1880, who took control of the farm and founded L. Scatena & Co.
Only six when his father was killed, and ten when his mother remarried, Amadeo had a strong bond with his stepfather, who treated him as his own and financially supported him whilst he attended prestigious schools.
Although he was one of only a handful of children his age to receive a formal education, Amadeo dropped out of school at the age of 15 to help his stepfather and later learned the ins-and-outs of the produce industry.
Marriage
Eventually, Amadeo went out on his own and started his own company – a Santa Clara Valley-based produce broker and dealer that connected local farms with stores in need of fresh produce to sell, which he charged a commission for.
Proving successful, Amadeo was introduced into leading members of San Francisco society, including politicians and businessmen and their families.
On one occasion, he met Clorinda Agnes Cuneo, the daughter of Italian American San Francisco real estate mogul Giuseppe “Joseph” Cuneo and the couple started dating (then known as courting).
In 1892, at the tender age of 22, Amadeo Giannini married Clorinda and the couple settled in the city of San Mateo, roughly halfway between San Jose (where Amadeo’s family were) and San Francisco (where Clorinda’s family were).
Continuing to grow his business, Amadeo and Clorinda started their own family, beginning with their eldest Amadeo Peter Giannini (Jr.) who was born in 1893.
By 1900, Amadeo’s produce brokerage and dealer business was one of the largest and most profitable in California. Yet money seemed to bore Amadeo, who later sold it in 1901 to a group of his employees and retired, hoping to be more involved in his children’s lives.
Amadeo invested the proceeds of the sale wisely and lived off the interest, and even held a stake in his father-in-law’s company. After the death of his father-in-law, Amadeo took his place on the board of directors of Columbus Savings & Loan.
And here is where his future banking career really started.
You see, at the time, banks really stored the money of the wealthiest 1% of society. Everyone else, was forced to keep their money under the mattress. But it wasn’t because banks couldn’t deal with them, it’s that they wouldn’t.
Seeing this, as well as the constant influx of poor Italian immigrants, Amadeo tried to convince the bank’s management that it should offer accounts to these immigrants, but the management wholly refused.
Bank of Italy
After three years of trying to convince them otherwise, Amadeo quit the board in frustration and vowed to start his own bank. Staying true to his promise, Amadeo founded the Bank of Italy on October 17 1904 with its first branch in San Francisco.
Founded with the aim of becoming the bank of “the little fellow” the bank’s first branch was in a converted saloon in a part of town where immigrants often lived, rather than in the business quarter of the main city like other banks were.
Offering longer opening hours to accommodate the blue collar working day, the Bank of Italy attracted the poor, yet hardworking immigrants other banks refused to serve (because they weren’t “rich” enough).
Immigrants like his mother, who came to the US with nothing in search of a better life.
And although his rival banks mocked him for a “flawed” business plan, within its first day of operations, the Bank of Italy had taken $8,780 in deposits – a feat that often took other banks months to accomplish.
Expanding solely through word of mouth, the Bank of Italy had a total of $700,000 ($21.7 million adjusted for inflation) in deposits by the end of its first year – a number that rivalled many of its more traditional rivals.
Beyond just allowing poor immigrants to open accounts, Giannini encouraged them to borrow money from him. He even allowed women to open bank accounts without permission from their fathers/husbands – a ludicrous idea for the time.
But he didn’t do this because he wanted poor, and often uneducated, immigrants to borrow huge sums of money from him that they couldn’t afford: he did this to help them.
As bizarre as it may seem, Amadeo loaned money out at a lower interest rate than other banks would – even though his was the only bank willing to extend them credit, and could’ve easily gotten away with hiking interest rates.
Not surprisingly, the Bank of Italy gained almost a cult-like following among San Francisco’s immigrant communities and became the go-to bank for new immigrants to deposit their money with.
1906 San Francisco Earthquake
In 1906, a devastating earthquake leveled much of San Francisco, with fires destroying much of what left.
Though all areas of the city were hit badly, the business quarter (where Amadeo’s competitors were located) was hit particularly bad. It wasn’t the earthquake that caused the most problems – it was the fire.
You see, the fires superheated the bank vaults in the quarter. And whilst the bank vaults didn’t melt (as you’d have thought) they were so hot that if you opened them before they cooled down, the sudden influx of cold air would destroy the vaults’ contents.
Not to mention the fire destroying all the bank’s records, making it almost impossible to determine who had what amount in the banks at the time.
Alone, these factors would’ve crippled the San Franciscan banking sector, but together left most of San Francisco’s banks unable to accept new deposits, withdraw existing deposits or loan out more money.
Yet Bank of Italy was lucky. The area it was in, was one of the least affected areas and Giannini was able to get all the bank’s records and the contents of its vault out of San Francisco and to his house in San Mateo.
Wanting to travel incognito to avoid being robbed, Amadeo Giannini was aided by a local garbage man, who allowed Giannini to use his wagon to transport himself, the records and the money out of the city.
Hidden below literal garbage was all the money of San Francisco’s immigrant community.
And so it was, that whilst his competitors were waiting for their vaults to cool down, Amadeo Giannini was sat in front of a makeshift desk made from a plank of wood and two barrels, accepting new deposits and withdrawals as though nothing was wrong.
He was also loaning out money to anyone who was looking to rebuild, doing so on little more than a handshake.
Though his competitors publicly decried that he was mad and that he’d never be able to rebuild San Francisco or be repaid, Giannini later recounted how every single dollar he loaned out was repaid… with interest.
Branch Banking
Using this money, Amadeo Giannini pioneered another mainstay of today’s banking industry: branch banking.
Knowing that Bank of Italy could replicate what it had done in San Francisco in other Californian cities, and that his banking license allowed him to operate anywhere within the state, Giannini opened his first branch outside of San Francisco.
Opened in his home town of San Jose in 1909, it too became quite popular with the local immigrant community and proved that his business model did actually work. With this knowledge in hand, Bank of Italy soon went on a mass expansion.
Establishing branches in dozens of major Californian cities, Bank of Italy was quickly becoming one of California’s largest banks.
Yet establishing a new branch, training employees and actually getting people to deposit their cash with him was a time-intensive endeavor.
Wanting to speed things up, Amadeo Giannini (through the Bank of Italy) began systematically acquiring existing banks in cities it wanted to expand to, acquiring not only their location, but their client list and reputation too.
By the early 1920’s, Bank of Italy had hundreds of locations throughout the state and was the bank of choice for a large portion of California’s 4.27 million people.
Bank of America
Financier
The head of one of the largest banks in the United States, and mostly uninterested in obtaining wealth, Giannini instead chose to use his money to do at least a little good.
Loaning his bank’s money out to companies in California, Amadeo Giannini had one condition: Expand California.
When California’s burgeoning wineries needed startup capital, Giannini was the one who loaned them the money. When Walt Disney needed money to produce Snow White in 1937, it was Giannini once again who loaned him the funds.
Yet his involvement with Hollywood didn’t stop there. He continued to finance other films into the late 1930’s and early 1940’s, most notably Gone with the Wind, starring Vivian Leigh and Olivia de Havilland.
And not even something like the Great Depression slowed him down.
In 1933, when McClintic-Marshall Construction Co. was desperately looking for finance to construct the Golden Gate Bridge, it was Amadeo who bought $27 million ($430 million adjusted for inflation) worth of bonds to finance it.
Not because it was a good business deal, but because it would help boost the local economy.
Likewise, during WWII, Giannini loaned vast sums of money to industrialist Henry J. Kaiser, which allowed him to expand production of his Liberty ships as well as the Hughes H-4 Hercules flying boat cargo aircraft (which Kaiser and fellow industrialist Howard Hughes co-designed).
With his company now self-sufficient, Giannini chose to tour Italy at the end of WWII, visiting Genoa (where his parents were from) and touring the bombed-out wreckages of what were once Fiat factories.
Believing it was his duty to help them, Amadeo organized loans to Fiat, which would help them rebuild their bombed-out factories, predating the Marshall Plan (which did the same thing, but was bankrolled by the US government) by almost two years.
Years later, when Bill Hewlett and David Packard needed finance to expand their company – Hewlett Packard – Giannini was the one who gave them the necessary capital. Inadvertently, this also helped create today’s Silicon Valley.
Transamerica Corporation
Death
Legacy
How do I Replicate What Amadeo Giannini Did?
Reading about the truly amazing life of Amadeo Giannini, you’re probably wondering how you could replicate what he did to similarly become the founder of one of the largest banks in the world.
And here’s where I’ve got to be honest: you can’t.
Though the largest banks, such as Bank of America, have billions of dollars in deposits, their business model is somewhat outdated to say the least.
The rise of the internet has also seen the rise of internet banks – which don’t have traditional branches but are becoming more and more popular with each passing month.
Aside from that, establishing a traditional branch-based bank like Amadeo Giannini’s Bank of Italy is more expensive than you’d probably realize.
As such, it’s probably not a very good business model to join a dying industry – especially given that traditional branch-based banks like Bank of America are closing branches down at a rate never seen before to focus on their internet banking.
Yet there are only a few online banks challenging the traditional ones, so assuming that you can target an untapped niche (just as Giannini did with immigrants), you could quite easily build a rather large internet bank.
Sadly, starting any bank, regardless of whether it’s a traditional or internet-based one, isn’t cheap. So having a solid business plan, and knowing a few key investors willing to invest in your project would be essential to even getting your idea off the ground.
What Can we Learn From Amadeo Giannini?
Though he passed away the better part of 70 years ago, the life of Amadeo Giannini can teach you a lot, both about starting/running your own business and life in general.
Never Let Someone Tell You “No”
It’s interesting to think: Had the board of Columbus Savings & Loan not dismissed his idea about allowing poorer customers to open accounts with them time and time again, and actually implemented it, we probably wouldn’t know Amadeo Giannini’s name.
Repeatedly scoffing at the idea, often belittling families not too dissimilar to the one he grew up, angered Giannini.
Angered at the way they were treating perfectly good potential customers (and mildly insulting him in the process), Amadeo chose to do something about it by starting his own bank.
And as we all know, it was this bank – the Bank of Italy – that soon became one of the largest banking institutions in the world (albeit under a different name).
But this isn’t even something unique to Amadeo Giannini. Of the many entrepreneurs we’ve covered on our Surprising Wealth Stories segment, almost half of them started their own business because someone spited them.
This drove them like it did Giannini, and ultimately allowed them to create a company that reshaped an industry, just like Amadeo did with the Bank of Italy, and its successor, Bank of America.
Money is Useless
Today, bankers get a bad reputation. They’re useless, they’re rude, and worst of all, they’re greedy. It seems like every year bankers are taking home more and more at the expense of their customers as a whole.
Yet Amadeo Giannini and his Bank of America were not like that. Yes, they certainly made money, but it was not the be-all and end-all as it is perceived to be for bankers today.
For Amadeo, he paid himself just enough to live the he was accustomed to, and nothing more, making sure that the extra money he would’ve paid himself went to his employees, so they too could live a better life.
He also made sure that the people who borrowed from him paid less in interest than other banks charged, meaning that those who borrowed from him had more disposable income, which they often kept in their account with him.
Give Back
Naturally, this strategy quickly made Bank of America one of the largest banks in the country in terms of both the number of customers and the total number of deposits.
As the owner of the bank, Giannini’s net worth should’ve been in the billions in today’s money.
Yet Giannini never forgot his roots and every time his net worth surpassed his imaginary boundary, he’d give most of it away and start again.
When his wealth surpassed another of his imaginary boundaries, he’d donate it to a charity or organization whose main aim is to help the poor and start from scratch once again.
This continued his entire life, and was the reason why his estate was only worth $500,000 at the time of his death in 1949, or roughly $5.75 million adjusted for inflation. It’s also what inspired Bank of America to fund various charitable organizations since the 1950’s.
Become an Icon
Before Amadeo Giannini, banks almost never opened accounts to poor people – the very people who needed their services the most. And even when they did, the banks often placed tight restrictions on what the poor customers could do.
If they ever borrowed money, the lending rates were tantamount to extortion!
So when the son of Italian immigrants came along and said “I’ll let you open an account with me, I won’t place restrictions on your account and I won’t extort you,” many in San Francisco saw him as a godsend.
When these people opened accounts with him and realized he actually kept his word (unlike other banks at the time), Amadeo gained a sort of mythical status with the people of San Francisco.
But whilst it was most prevalent in San Francisco, it wasn’t limited to just that city.
As BoA added new branches in new cities, the poorest in those cities came to view Bank of America as a shining light surrounded by darkness, and Amadeo Giannini by extension.
Has the story of Amadeo Giannini inspired you? Tell me in the comments!
