It’s like something out of It’s a Wonderful Life. A small bank provides a place for small depositors and borrowers to do business in a city dominated by big banks that serve only the wealthy. Then, after an earthquake and a fire destroy a quarter of the city, the small bank immediately rises from the ashes to provide its customers loans to rebuild and a place to safely deposit their money while the big banks close their doors for six months.
But unlike the popular movie, this story is true. In 1901, Amadeo P. Giannini had retired at the age of 31 after selling his share of a produce business for $100,000 ($2.7 million in 2014 dollars). He came out of retirement three years later to establish the Bank of Italy as “the little people’s bank,” eighteen months before the April 18, 1906 earthquake.
To his surprise on the morning of the earthquake, his employees had removed the bank’s $80,000 dollars in gold and silver from the Crocker National Bank vaults, and were ready to operate business. By early afternoon, he realized he had to remove the bank’s assets out of the city. He and an employee acquired two wagons to haul the bank’s fixtures and, more importantly, the money.
They hid the bags of money under crates of oranges. They traveled only four miles, during daylight, to the home of Giannini’s brother. After nightfall, they resumed the journey to Giannini’s home in San Mateo, fourteen miles south of San Francisco, where they hid the money in the ash pit of the living room fireplace.
As important as it was to get the bank’s assets out of the city, it is what Giannini did the next two days that set his bank apart from the big banks. He encouraged his customers to borrow money to rebuild and to deposit their money in his bank, where it would be safer than in the refugee camps that sprang up to house San Francisco’s homeless 225,000 citizens. He set up the bank’s “main branch” at his brother’s house and a second branch on the waterfront once the fires were contained. While the big bankers wrung their hands, Giannini put his bank to work, affording average San Franciscans the means to begin rebuilding the city.
Giannini made loans based on his knowledge of the borrowers’ character, not their credit reports. Years later, after he expanded and merged his way to build the Bank of America, he said every one of those 1906 loans had been repaid. The early version of the “Bailey Savings and Loan,” i.e., the Bank of Italy, did not remain small for long. At his death in 1949, the Bank of America was the largest bank in the United States.