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Lesson #4: Don’t Let Anyone Keep Your Ambitions in Check
Article Overview: When Giannini first came onto the scene, the banking world was a very different one to that which exists today. Most banks were single, stand-alone entities, and had limited capital, which meant that they could only lend out the amount of money they had in reserves. Giannini helped to change all of that by building a large branch network in California, and with a dream of going national, but none of it happened without a fight.
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Lesson #4: Don’t Let Anyone Keep Your Ambitions in Check
When Giannini first came onto the scene, the banking world was a very different one to that which exists today. Most banks were single, stand-alone entities, and had limited capital, which meant that they could only lend out the amount of money they had in reserves. Giannini helped to change all of that by building a large branch network in California, and with a dream of going national, but none of it happened without a fight.
Today, Giannini is considered to be the father of nationwide banking. It is almost unfathomable to think of any of today’s major banks as operating in one city, and one city alone. But, that was indeed how it worked in Giannini’s time. He had a vision of a bank doing business in all parts of the country, which would make the system strong enough to handle regional crises. He wasn’t able to see that vision become a reality during his own lifetime, but Giannini was able to make significant inroads with state-wide banking, and set the stage for what was to come.
It was during the Panic of 1907 that Giannini first realized the need for large, nation-wide banks. He had been one of the few bankers who had retained enough gold and currency to meet depositor’s needs, and it served as his wake up call. He then began to understand that it was only big banks, with significant assets, which would be able to protect themselves and their customers in the face of a future panic.
With that lesson learned, Giannini headed to Canada, where banks had already begun to establish effective branch systems. He wanted to learn from their experience. Upon returning home, Giannini quietly began making moves to expand his bank into other western states, as well as into the insurance industry. However, Giannini’s competitors were not happy with his progress. They argued that branching out in such a way would actually hurt customers. Many of his opponents even took to giving him nicknames such as “Sicilian fruit merchant” to undermine his banking credibility. Despite their best efforts, Giannini’s competitors watched as the Bank of America slowly became one of the largest banks in existence. Racial slurs had done nothing to stop the determined Giannini. In fact, only federal legislation was able to deter his ambitions – for awhile.
In the early 1930s, Giannini prepared himself to fight one of the biggest battles of his life. A Federal Act had been passed prohibiting banks from operating in more than one state. As a response, Giannini created the holding company TransAmerica Corp. in order to facilitate his nationwide expansion and to help combat these growing legal challenges in doing so. In 1956, just a few years after Giannini’s death, the California State legislature passed the Bank Holding Company Act, which proposed even further limits to bank branches. TransAmerica had to divest itself of all its banking activities, which were diverted into FirstAmerica Corp., while TransAmerica was left with its life insurance operations.
It might not have been until the 1980s when federal banking legislation was amended to allow the Bank of America to revive Giannini’s dream of expanding its activities nationwide, but Giannini was the one who put the wheels in motion to make it happen. The Bank of America became the first bank in the U.S. to have branches coast to coast, in a model that is applied today throughout the international banking system.
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Article Tags: ambitions, amount of money, assets, banks, currency, depositors, doing business, entities, giannini, gold, inroads, insurance, insurance industry, lifetime, nicknames, opponents, panic of 1907, regional crises, returning home, western states
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