Last Updated on September 16, 2022
The history of the Bank of America can be traced back to a man named Amadeo Peter Giannini, also known as A.P. Giannini. His ambition was to create a bank that could serve as a national bank. However, Giannini’s policies eventually led to a depression. As a result, his bank’s policies pushed the United States towards the Great Depression.
Giannini wanted a nation-wide bank
In the 1920s, Giannini founded Bancitaly Corp., a launching pad for statewide expansion. By 1928, he had expanded to the Transamerica Corp., which had wide interests in financial services, including several overseas banks. In 1928, Giannini purchased Bank of America, a competitor of Bancitaly. He retired in 1930 and moved to Europe, but later returned to take control of the company again. In 1932, he won a proxy fight and returned to reclaim his former position.
Giannini’s vision of a nation-wide bank was tempered by several factors. California regulators sought to keep his operation limited to a geographic region, spurred on by rival bankers. While state-chartered banks were not prohibited from branching, they were much less regulated than their national counterparts. Moreover, local monopolist bankers cultivated the idea that branching was an egregious way to drain money from rural areas and finance growth in cities.
When the 1906 San Francisco earthquake hit, A.P. Giannini’s innovative approach to lending money was unprecedented in history. He broke ranks with fellow bankers, who wanted to close local banks and sort out the damage. Instead, Giannini’s innovative approach allowed a small business to set up shop in the rubble, where other banks were shuttered. His hands-on approach to lending helped the city recover, and his efforts were ultimately a catalyst for redevelopment.
McLin’s expertise was in deal-making
McLin’s background includes a background in merger and acquisitions. He was an executive at a number of financial institutions, including Goldman Sachs, Citigroup, and JP Morgan Chase, and he also served as the chairman of STM Holdings LLC. Before becoming chairman, McLin was President and Chief Executive Officer of America First Financial Corporation, parent company of EurekaBank, and an executive with Bank Of America. He has served on the Board of Directors of Charles Schwab Bank since 2004. He brings a wealth of experience in leadership and knowledge of the financial services industry through his role as chairman of STM Holdings LLC.
In 1984, McLin expanded Bank Of America’s reach outside California by acquiring the Seafirst Corporation, a failing oil company. The deal made Bank of America the first US bank to operate coast-to-coast. But in 1998, the Seafirst subsidiary failed, owing to a high level of bad loans and other issues. During this period, the Bank of America name was applied to the entire company.
As the bank’s wealth increased, McLin began to organically expand its reach. In addition to New York, Boston, Indianapolis, and San Francisco, the bank has opened branches in several cities in addition to its headquarters in New York. Its rivals include Chase Bank and Wells Fargo, and the largest non-Big Four competitor is U.S. Bancorp.
Giannini’s policies led to depression
Giannini inherited a thriving bank from his father, but he changed it into something completely different. The bank grew from a small Italian business to a giant, with more than 500 branches and $6 billion in deposits. After Giannini died, the bank continued to grow. The company grew so large that it has become one of the biggest “supermarkets” of services.
During the Great Depression, the Federal Reserve Board took over monetary control of the economy, which was previously controlled by the banks. Giannini’s branch banking and compensatory spending policies did not have this problem. They became so big that they ended up causing the Depression. Even the Federal Reserve Board was not immune from this problem, and eventually enacted laws to limit bank size.
The bank began expanding its operations to the west and south. The bank expanded from a single teller office in North Beach to 500 branch offices and over $6 billion in assets. The bank’s policies, however, caused depression. Giannini’s policies encouraged large businesses to expand their services, and he banned advertising in order to attract more customers. As a result, the bank’s profits fell by nearly half.
In 1906, Giannini’s bank was the last bank to open. Giannini and his partners made a difference by opening it in the middle of the night to accommodate shift workers and borrowers. The bank’s tellers spoke immigrant languages and instructed customers about banking. The bank issued loans of up to $25 at very low interest, which was better than going to a loan shark. Giannini’s bank also advertised more than other banks, and knocked on doors to collect deposits.
McColl’s expertise was in deal-making
When he founded Bank Of America, McColl had already built a storied career as a dealmaker. His record included more than a hundred mergers and acquisitions. Known as a tough competitor, McColl talked tough about launching missiles at his competitors. He did not intend to merge banks, but rather buy them. He had a transition team that travelled the country year-round, and his associates were rewarded with crystal hand grenades he threw from a training bunker at Quantico, Va.
The bank’s acquisition of NationsBank was a sign of this expertise, but McColl took on more than he could handle with this deal. The company plans to cut $2 billion in costs after the deal with Bank of America. This is in stark contrast to his own record of cost cutting after acquiring large corporations. Those costs are now largely in the form of dividends, and McColl may have pushed them out of the company.
The merger made BankAmerica a giant in the U.S. and abroad. The combined entity had nearly $50 billion in assets and offices in 22 states, and McColl was expected to retire as CEO in 1998. He also was eager to build a global financial center. While McColl’s expertise was in deal-making, he also had experience with integrating acquisitions made before the merger.
McColl’s policies led to recession
The Great Recession in 2008 has drained resources from Bank of America, but McColl had made the bank profitable by investing billions in neighborhoods. While many of his policies failed to help the country recover from the crash, he is still lauded for his charitable work. He is known for donating millions to Habitat for Humanity, a nonprofit organization that emphasizes sweat equity and careful vetting of prospective homeowners.
The Bank of America Corporation is a large financial institution with a network of branches across the U.S., serving 30 million households in the U.S. and other customers worldwide. In 1997, McColl was appointed chairman and CEO, and Coulter resigned as president in 1998. According to McColl, running NationsBank is like driving a race car at 100 mph and changing tyres without braking. McColl’s successor, Frank Gentry, became executive vice-president of the Charlotte, North Carolina-based bank.
As the troubles with C&S/Sovran increased, McColl’s confidence grew. After C&S/Sovran’s board split in two, McColl decided to pursue the merger with Brown. When it came to the merger, McColl’s confidence soared. He even renewed merger efforts with Brown, a former NCNB board member. This time, however, the problems were bigger.
McColl’s policies led to demise
Hugh McColl, the serial bank acquirer and chairman of Bank Of America, is set to leave the company. He has been a key figure in the recent history of the financial industry. As the head of one of the world’s largest banks, McColl helped trigger the wave of bank consolidation that is still far from over. Despite his efforts, the number of banks in America has shrunk from over 14,000 to under 8,500. But despite the massive changes in the industry, McColl has been a major player in the story, which is now a sad and twisted tale.
While some say McColl’s policies led to the demise of Bank Of America, others have pointed to his personal failings as a key factor. One bank that had tried the same strategy as Bank Of America, First Union, was an early example of this. And Fast Eddie Crutchfield, McColl’s longtime rival, retired early last year. But the demise of Bank Of America is an indictment of the’modern’ American branch banking industry.
While some credit Sandy Weill as the architect of the merger, others credit McColl with handing over the reins to Kenneth Lewis. Lewis continued to build the company with the acquisitions of Merrill Lynch and Fleet Financial. But McColl has since set up a private consulting firm to share his deal-making skills. His firm, McColl Partners, specializes in middle-market companies and advises various industries. It has also been responsible for advising Fifth Third Bancorp and others in the financial sector.
About The Author
Alison Sowle is the typical tv guru. With a social media evangelist background, she knows how to get her message out there. However, she's also an introvert at heart and loves nothing more than writing for hours on end. She's a passionate creator who takes great joy in learning about new cultures - especially when it comes to beer!