The People’s Banker

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Many distinguished economists of the mid-twentieth century predicted an American economy that would be dominated by a relative handful of giant companies, soon nicknamed on Wall Street the Nifty Fifty. And certainly the waves of mergers in the last generation have concentrated economic power in fewer and fewer corporate hands, right?

Well, no, actually, they have not. In 1967 the top two hundred nonfinancial companies held 41 percent of the country’s business assets. By 1988 they held only 32 percent, and that number has continued to drop in the last decade.

The reason, of course, is that the economy has grown even faster than its largest companies have merged. And new companies, which tend to grow fastest of all, have been appearing like mushrooms after a rain. In 1967, after all, neither Intel nor Microsoft even existed, and now both are being sued by the federal government as monopolies.

An exception to this has been the banking industry. The number of American banks reached its peak in 1921, when we had no fewer than 31,076 of them. A little more than a decade later, after the Armageddon of the Great Depression, a mere 14,771 still operated. By 1996, although banking assets had soared to $4.6 trillion, there were only 9,528.

That, to be sure, still gives the United States more banks than the rest of the world combined. But that is an artifact not of economics but of history and of the deep fear of banks held by Thomas Jefferson and his political heirs. Banks were from the country’s earliest days greatly restricted by state regulations in their ability to grow and merge. Many states limited branch banking, and some forbade it altogether.

Slowly, under the pressure of sheer economic necessity, these restrictions have been easing. Recently even giant banks have been allowed to merge, and this year has seen this trend accelerate even more. Most notable has been the merger of Nationsbank, based in Charlotte, North Carolina, and Bank-America, formerly the Bank of America, based in San Francisco, to form what is, at least for the moment, the largest American banking corporation.

The Bank of America has an only-inAmerica history. American bankers traditionally have had Waspy names like Peabody, Morgan, and Stillman. But the Bank of America was founded by a man named Giannini.

Amadeo Peter Giannini was born in San Jose in 1870. His father, Luigi, had come to California from Italy and bought a forty-acre truck farm, only to be murdered by one of his workers in a dispute over two dollars in wages.

Giannini’s mother married Lorenzo Scatena, a self-employed teamster. Scatena proved to have no talents as a farmer, and his wife suggested he try his hand at being a commission clerk, working for a wholesale firm.

This turned out to be a very good idea, for Scatena had the gifts that make a good broker, an unerring sense of how the market is moving and an ability to make quick decisions. He was soon earning $250 a month, a comfortable middle-class income at that time, and when he went into business for himself, he made a profit of $1,500 by the end of his first month.

After completing eighth grade and five months at Heald’s Business College, A. P. Giannini decided to leave school and go to work for his stepfather. “The old waterfront commission business was a pretty stiff school for men,” he remembered long afterward. “I used to study them down there and I suppose I picked up the knack of sizing up men.”

It quickly turned out that he, too, had what it took to make a great broker. In the summer of 1887, when he was only seventeen, Giannini, sure that there would be a shortage of pears that autumn, persuaded his stepfather to trust him on a buying trip to the Sacramento Valley, where he promptly bought up all the pears he could get his hands on for future delivery. It was a huge gamble, but he was right; the firm cleared a profit of fifty thousand dollars on pears alone that year.

Not surprisingly, Giannini was soon in charge of all buying trips to the Sacramento Valley. He quickly demonstrated that other requirement for economic success, the capacity for hard work. “I used to take a loaf of bread and a big Italian cheese along with me for my lunch and supper,” he said. “I never aimed to arrive at a place when they were having meals. It would have meant a serious loss of time.”

Giannini soon proved himself indispensable. His stepfather gave him a one-third interest in the business in 1889 and two years later raised it to one-half. In 1892 Giannini married Clorinda Cuneo, the daughter of an Italian immigrant who had made a fortune in real estate. At the turn of the century, Giannini had income from investments of about $250 a month, plus his half-interest in his stepfather’s firm. That, Giannini decided, was enough. “I don’t want to be rich,” he said. “No man actually owns a fortune; it owns him.” He sold his interest in the family firm to a group of employees for a hundred thousand dollars and, at the ripe old age of thirty-one, retired.