Today I found out about the real life “George Bailey” (It’s a Wonderful Life), who founded the Bank of Italy which became Bank of America.

The man was A.P. Giannini who was said to be who Capra modeled the character of George Bailey as well as the bank president in Capra’s 1932 movie, American Madness, after.  At the age of 14, Giannini left school and began working with his step father, Lorenzo Scatena, in the produce industry as a produce broker.  By the time he was 31, he was able to sell much of his interest in this company to his employees and had planned to retire.  However, one year later, he was asked to join the Columbus Savings & Loan Society, which was a small bank in North Beach, California.

Once he joined up, he found that almost nobody at the Savings & Loan, nor other banks, were willing to give loans to anyone but the rich or those owning businesses.  At first, Giannini attempted to convince the other directors at the Savings & Loan to start lending to working class citizens, to give them home and auto loans, among other things.  He felt that working class citizens, though lacking in assets to guarantee the loan against, were generally honest and would pay back their loans when they could.  Further, by loaning them money, it would allow working class citizens to better themselves in ways they would not have been able to do without the money lent to them, such as being able to buy a home or to start a new business.  He was never able to convince the other directors to begin lending to the working class.

Not to be dissuaded, he then set out to start his own bank.  With $150,000 raised from various friends and family, Giannini founded the Bank of Italy in 1904, which would be a bank specializing in loaning money to the common man.  The first Bank of Italy branch was in a converted saloon across the street from the Savings & Loan he had formerly been a member of.  The assistant teller at the Bank of Italy was the former bartender of that very saloon.

He then went about educating the working class on what a bank does and how one could help them.  He then made a practice of not offering loans based on how much money or equity a person had, but based primarily on how he judged their character.  Within a year, Bank of Italy had over $700,000 in deposits from these working class individuals, which is somewhere around $15-$20 million today. By the middle of the 1920s, it had become the third largest bank in the United States.

Two years after the Bank of Italy was founded, the great San Francisco earthquake of 1906 occurred, which was a 7.7-8.25 earthquake that resulted in 80% of the city being destroyed, over 3,000 deaths, and around 200,000-300,000 of the city’s 410,000 population left homeless, because of the earthquake and subsequent fires.

The Bank of Italy managed to be the only bank able to open back up directly after the earthquake, despite the fact that the bank building itself was unusable.  Directly after the earthquake happened in the very early hours of the morning, Giannini went and sifted through the rubble of his building and gathered $2 million into a garbage man’s wagon, owned by Giobatta Cepollina whose son would go on to work for Bank of America because of a promise made by Giannini to Cepollina in exchange for use of his wagon.  (Cepollina’s son was able to retire from Bank of American at 41.)

After gathering the money, Giannini then took it outside of town, covered in garbage to protect it.

Next, he headed out to the docks and setup a temporary bank with two barrels and a piece of wood as his desk.  He then began taking deposits and giving loans to help not only businesses, but also the working class, so that they’d have the money they needed to rebuild their homes and their lives.  At that time, none of the other banks had re-opened and most did not do so for several weeks, so few who kept their money in banks had access to it and many others had lost everything in fires.  Giannini also immediately sent two ships to Washington and Oregon to acquire large amounts of lumber to try to work around the inevitable materials shortage that he foresaw.  That lumber comprised most of the lumber available in the early stages of rebuilding San Francisco.

Because so many had lost everything, including identification papers, Giannini gave these people loans based on nothing but a signature and a handshake.  He supposedly never tired of mentioning to other bank big-wigs that wouldn’t loan to the common man that every single loan he made that way to so many working class individuals was ultimately repaid in full.

During his time with Bank of Italy and eventually Bank of America, as it became, he instituted a variety of practices that are standard among nearly all banks today.  He also was a key figure in making California what it is today, including: being an integral part of the California wine industry getting started; providing numerous loans to various entities in Hollywood in its early days, by starting the motion-picture loan division, which provided loans to many budding Hollywood groups and individuals including funding Walt Disney’s Snow White, when it had gone $2 million over budget; and funded the United Artists, which was founded by Charlie Chaplin, Douglas Fairbanks, and D.W. Griffith.

He also loaned money to the founders of HP, William Hewlett and David Packard, to start their business.  More significantly, he had his bank purchase the necessary bonds to fund the construction of the Golden Gate Bridge. And, of course, the aforementioned integral role in financing much of the rebuilding of San Francisco directly after the earthquake of 1906, among other things.

By 1930, Giannini had retired once again and this time moved to Europe.  However, his successor began running the bank like traditional banks of the day, only lending to the wealthy and businesses and the like.  Because of this, Giannini came back to the United States and rallied various employees and depositors to him, with them buying shares in the bank until they owned the controlling interest.  He eventually accumulated enough shares owned by working class citizens, who backed him, to allow him to regain control of the bank, at which point, he returned it to its former ways of lending to the “little man”.  He did not retire again.

Much like the fictitious George Bailey, Giannini kept little for himself through all this.  Despite that fact that the bank he started was worth billions at the time of his death, Giannini’s entire estate was valued at only $500,000 when he died at the age of 79 in 1949.  He avoided acquiring great wealth as he felt it would cause him to lose touch with the working class.  For much of his career, he refused pay for his work and when the board attempted to give him $1.5 million as a bonus one year, he gave it all away to the University of California stating “Money itch is a bad thing.  I never had that trouble.”

If you liked this article and the Bonus Facts below, you might also enjoy:

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• The Origin of the Stock Terms “Bull” and “Bear”
• Why There is Braille on Drive-Thru ATMs
• The First Stock Market Crash: The South Sea Company
• The Fascinating Origin of “It’s a Wonderful Life”

Bonus Facts:

• Giannini’s biological father is said to have died in a fight over a single dollar when Giannini was just seven years old.
• Snow White was the first full-length animated movie made in the United States.
• Giannini is said to have wanted to create a nation-wide bank so that it would not be as vulnerable to a specific area’s problems, something that banks of the day struggled with.  With a nation-wide bank, the bank would be able to lend money to those trouble areas, when they had problems, and the people who had their money in the bank wouldn’t have to worry about losing their money or losing access to it if their local community had a major catastrophe.   This served him well during the Great Depression as his bank was one of the few able to continue lending, particularly to the working class, during that time.  Giannini never saw his dream of a full nation-wide bank happen, mostly due to certain laws preventing such a thing at the time, but his bank did eventually become the first bank to accomplish this when Bank of America merged with NationsBank.
• One of the reasons so few of the other banks re-opened directly after the earthquake of 1906 was that their vaults had been in fires which heated them to the point that if they were opened, all the money inside would burst into flames.  The vaults themselves were fire proof, so it was simply a matter of waiting a sufficient amount of time to insure the insides cooled enough that the money would be fine when the vaults were opened.
• After the earthquake, it was reported that only 375 people had died as a result of the quake and the destruction was largely downplayed by the media, due to the government feeling that if the true numbers and level of destruction was reported, the city might struggle to re-build, with most of its citizens moving away.  This actually happened to a certain extent, with many in San Francisco moving to Los Angeles.  This resulted in the end of San Francisco as the dominant city in California.
• The 1906 San Francisco earthquake also devastated neighboring towns and in Monterey County resulted in the Salinas River’s mouth diverting 6 miles south of its previous location in Monterey Bay.
• As many as two years after the earthquake, many of the make shift camps created by the now homeless in San Francisco were still in operation.
• Interestingly, many of the fires after the earthquake were started by firefighters and citizens on purpose.  The firefighters were attempting to use dynamite to demolish buildings to create firebreaks, but were untrained to do so and generally just started more fires as a result of their efforts.  It’s estimated that these fires resulted in about 50% of the fire damage to the city.  Further, most insurance policies at the time did not cover earthquake damage, but did cover fire damage, so many citizens saw to it that their homes damaged by the earthquake burned down.
• Bank of America was also the first bank to offer a widely accepted credit card, the “BankAmericard”, which later was re-branded “VISA”.
• In order to cater to the working class, who typically worked very long hours, Giannini’s banks stayed open until around 10pm every night.  At the time, banks traditionally closed around 3pm.
• As of 2010, Bank of America was the second largest non-oil company in the United States, with Wal-Mart being number 1 in that bracket.
• In that year, 2010, Bank of America was forced to pay $137.7 million after they were accused by the federal government of defrauding schools, hospitals, and various state and local government organizations by illegal investment practices.  Presumably, Giannini is rolling in his grave right about now.