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Bank of Italy Head Is Subject of Absorbing Story In Recent Literary Digest
Executives of the Eagle Rock branch of the Bank of Italy were particularly pleased and interested in a story appearing in the October 15th issue of the Literary Digest, reviewing the unusual career and thrilling experience of Amatleo P. Giannini, founder of that mammoth institution. The article entitled, Great Banker and His Fiery Baptism," follows: flames were nearing the baby bank of San Francisco, so called because it was less than two years old on that fateful morning of April i8, 1906, when the business district of the Pacific coast metropolis was being ravaged by the fire that followed the historic earthquake of that year. Every other bank building had been overwhelmed, and its treasure made inaccessible, at that time of the stricken city's direst need. As writer in The Bank'er's Magazine puts it, that had been of real or material value suddenly became shapeless mass of twisted, burning rubbish.' And now the 'baby Bank of 'up against it.' The flames were within block of it, and racing madly from building to building. Such was the situation at noon when the founder of the bank, Amadeo P. "after walking for miles through the maze of desolation," reached the spot where his ambition and untiring energy had borne fruit in the shape of thriving young bank -prized guerdon of the son of an Isalian immigrant, whose youth had been spent in the fierce competition of the Business along the docks, where boats come in before dawn, "laden with fresh foodstuffs from the Sacramento Valley." We are now quoting from an earlier article in The American Magazine, which opens with the statement that "one afternoon in the middle of 1920, New York financial paper announced that, for the first half of the year, the increase in deposits of certain bank in California had outstript those of every other bank in the United States. New pride themselves on being in the financial hub of the their amazement. Many of them never had heard of the Bank of Italy, the Pacific coast institution which had hung up the record. Had some #new Lochinvar come out of the West to challenge the financial honors of the East? Was this Bank of Italy foreign institution? What power was behind it? What was the secret of its growth? Answers to these questions, constituting "one of the most amazing romances of finance in the history of this country," are given by number of writers, including Preston S. Kecker, who tells us in Commerce and Finance that the Bank of Italy was "almost literally born in the throes of the great San Francisco earthquake of litle more than two decades ago. Returning to that exciting adventure in banking, we quote an article by B. C. Forbes in Forbes Magazine:
His fledgling institution, please remember, was then only year and half old. How could it best serve the stricken inhabitants? That was the question given first and dominant consideration by Giannini. One thus graphically and accurately described how Giannini faced the emergency caused institution to rise Phoenix-like, from the ruins stronger and more popular than before:
"Hastily commandeering two horse-drawn rigs from his old commission house, he loaded one of them with money and securities. In the other he had the forethought to place supply of all the blank forms and stationery to resume business with delay. "Where could he take his valuable cargo? Oakland was across the bay, with jagged wall of reach the flames between; to stronghold of the Presidio it would be necessary to travel many miles through district where pandemonium reigned. He decided proceed down the peninsula to "Seven Oaks," his San Mateo home and there bury the treasure. So the caravan set out, accompanied by two soldiers and several trusted employees. next day, while the ruins of his bank were still smoldering Giannini addressed circular ter all his depositors, telling to of their them that good part immediately available money was in cash. In addition, he offered to lend money to all those who wished to rebuild structures wiped out by the fire. Despite the confusion most of those letters reached the whom they were intended. Hundreds of people took advantage of his loan offer, with the result that the North Beach section around Telegraph Italian the first area to spring up from its own ashes. "By setting up desk on the docks while the firse was still burning, and putting clerk there to take deposits from the commission men, Giannini was the first banker in the city to re-establish his business. In the midst of the chaos following the conflagration, he hung out the "Bank of Italy" sign on the home of his brother in Van Ness avenue (a street which the fire and shock had spared intact), and opened "calamity-day book." Record show that of all the fire victims to whom Giannini lent money, not one failed to repay the full amount loaned."
Banking calls for foresight, for business prescience, for ability to analyze economic trends. Giannini demonstrated convincingly that he possessed these qualities months before the fatal 1907 panic broke loose. Returning from trip to New York and other Eastern centers, he informed his associates that he was convinced serious financial trouble was brewing. And he issued orders that the bank husband its stock of gold. It quietpaid out paper currency and stored large and still larger supplies of the yellow metal, until the vaults of his own bank were filled to overflowing, and space was obtained in the vaults of another bank. the Pacific coast: When he arranged retire from active business life. He had earned and saved modest competency, and he pictured for himself quiet life. His share of the firm he turned over to his associates on easy terms, allowing them to pay him out of the profits as they accumulated. So young man. however, did not long remain lazy retirement. One or two real estate opportunities arose which were such sure that he of them. One profitable deal led to another. Almost unconsciously he was finding easier to become busy than to retire.
He accepted an invitation to become director. Little did he dream that this apparently significant incident was to lead the making of epochal banking history in this country. On acquiring insight into how things were being run, he brought forward what he regarded as an important and necessary recommendation. The powers dominating the institution refused to act. Giannini tried to convert them to the need of adopting his suggestion. They turned him down pointblank.
"Then I'll start bank of my own and run it according to the principles you refuse to adopt," was the ultimatum he fired them. Forthwith he proceeded to fulfil his vow.
And Mr. Krecker tells us in his Commerce and Finance story that the Bank of Italy, founded by this son of fruit peddler, has become "the largest bank in the country outside of Greater New York, with more branches than any other American bank"; also that "in capital assets it has only one superior, the great Natoinal City Bank," Under the title, writes:
One of the very first State banks to take advantage of the passage of the McFadden Banking Act, authorizing admission into the national banking system of State banks operating branches, was the Bank of Italy located in San Fran cisco. Immediately upon enhetment of the new law that bank applied for and received national charter.
Behind the Bank of Italy is the Bancitaly Corporation with even larger capital assets and far-flung ramifications.
When the panie engulfed the country, banks everywhere found themselves obliged to limit or stop entirely gold payments and ,in mainy instances, certificates were resorted to. The Bank of Italy, however, stood up strong as rock, meeting with shining gold every demand made by its customers. The Bank of Italy's action quickly became the talk of the city, and such troop of new depositors were attracted that their deposits, often in gold, enabled Giannini to let the bank where he had stored his overflow use it its own purposes. Similarly, when the World War came along, the Bank of Italy was so strongly fortified that it not only was able to subscribe for large sums of Liberty Bonds-it carries about $50,000,000 Liberty Bonds as its first line of reserve -but it never had to send dollarss worth of its paper to the Federal Reserve bank to be rediscounted.
Since "nothing succeeds like surecess," it is perhaps not astonishing that other banks in California and elsewhere have been energetically and rapidly acquiring branches. Meanwhile, Giannini was extending his banking operations in other directions. The suuccess of his operations in California inspired the Italian Chamber of Commerce in New invite and urge him in 1911 to establish bank there. At first he refused, because he still had much creative work to do at home; but in 1918 he consented to go if the members would raise $1,500,000 in stock from not fewer than 1,000 stockholders. This sum and more was readily subscribed by over 1,000 individuals The East River National bank was acquired, Dr. A. H. Giannini (A. P.'s brother) was induced to move from California to New York to take the presidency, and this institution has grown from resources of three and half million dollars time of purchase to over $20,000,000. we are told, A. Giannin has declared, am not millionaire, and have no hope or expectation of being Something of his temperament may gathered from this early episode, after he had placed his commission business at the head of its line
The combined capital resources of those two institutions and controlled banks are approximaetly $230,000,000. That huge aggregation of banking capital, virtually under one management, makes these affiliated institutions the most powerful private banking system in the world. None even of the "Big Five" banks of England can show any such tremen dous capital assets. This great concentration of banking power, with its widespread ramifications, has been subjected to bitter attack and criticism. It has been termed by some "money dragon." Others have spoken of the system as an "octopus" whose tentacles grip the Federal Reserve banking system and threaten to destroy it. Are such characterizations justified? What exactly is the Bank of Italy group? What are the aims of those who founded it? Seeking an answer to these questions which are agitating the banking community to perhaps a greater extent than is generally known, obtained an interview with Dr. A. H. Giannini, who has charge of the New York business of the Bank of Italy group as President of the Bowery East River National bank.
Dr. Giannini is a doctor of medicine. He gave up practice, however, to join in his brother's great banking enterprises. "Tell me how you happened to create the Bancitaly Corporation," asked, "Was not one big bank enough "Formation of the Bancitaly Corporation (he pronounced the word "Bancitaly" with soft "e") "was not our idea. It was suggested to us by Italians here New York. Before we organized our banking corporation here, there was no chartered bank of an Italian character in New York. The only Italian bankers were private bankers. They had come in along with Italian immigrants years before and served the Italians who flocked to this country and were glad to do business with bankers who spoke their own language. The second generation of Italians, however, preferred do their banking business in more modern way. They had heard of our success in San Francisco with the Bank of Italy. They invited us to come East and con- duct bank here. We replied that if they would form banking company we would come East and run the bank for them. They formed the Bancitaly Corporation, and started it in business in 1919. "Does your family control these banking institutions ed.
"No," repiied Dr. Giannini, "nor do we want to control them. We are running these banks for the benefit of the stockholders. We are in position where the shareholders could throw us out if we did not conduct their business properly. That is the way it should be and the way want to Another feature of unique which differentrates it from any other large bank the writer has ever heard the creation of system whereby employees can become participants in the profits. Reading on: When the plan was announced, in 1924, the president, P. Gia nini, said that the ultimate purpose was to enable employees to own the bank. At the same time he declared himself in favor of rotation in office, including that of president, and resigned from the presidency, as he said, "to give the younger fellows chance." He became and still is chairman of the banks' board. The Bancitaly Corporation undoubtedly owns larger amount of diversified bank stocks than any other institution in the world. It is said that there is not an important bank in the United States which it does at least one share. Its interests extends across the northern border into Canada, where it has holdings in the largest banking institutions of that great Dominion including the powerful Bank of Montreal, Bank of Canada, and others. Now follow the Baneitaly across the sea, and there you will find another vast web of financial terest stretching from England all over the Continent of Europe. The famous Bank of England on the Bancitaly Corporation's list. That corporation also owns shares in the Bank of Scotland and the Bank of Ireland. The Giannini banks have been attacked from two angles, first the branch banking feature, and, second, the bank-stock investment policy, In both instances, the underlying thought that they tend to create banking monopoly. The Bank of Italy for years was denounced by the foes of branch banking because of the creation of great chain of branch banks California. As is well known, strong opposition to branch banking exists in this country. Happily, the issue has been at least by the passage of Banking Act. Under it we never will have any great expension of branch banks except in cities where they are needed. The banking laws of the country do not prevent common ownership of bank tho restrictions are placed on interlocking directorates. Does that fact constitute menace to our banking system? That is very doubtful. put the question of accumulation of bank stocks as a possible road to banking monopoly to Dr. Giannini. He smiled incredulously. thought is too absurd to give serious consideration," he answered. "Think for moment what vast aggregation of capital would be required to obtain stock control of any dangerously large number of banks. Why, capital investment of our Bancitaly Corporation is mere tiny drop in the bucket of banking share capital outstanding. Consider, for stance, the market value of bank stocks of the large institutions. Then, too, consider how very difficult it would be to acquire sufficient stock in the good banks to be able to control them. "Everything we do is open and
