The Real Life George Bailey
The Real Life “George Bailey” Who Founded Bank of Italy, which Would Become Bank of
America The man was A.P. Giannini who was said to
be who Frank 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.
Also, because working class individuals typically worked very long hours, Giannini’s bank
stayed open until around 10pm every night.
At the time, banks traditionally closed around 3pm.
Most importantly, he also 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.
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 well established businesses.
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.”
Bonus Facts: • 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 dominate city in California.
• 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.
• In 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.