Tros Tyriusque mihi nullo discrimine agetur NORTH AMERICAN REVIEW JULY, 1928 GIANNINI AND BANCITALY I TWENTY-FOUR years ago a small unnoticed bank in the Italian quarter of old San Francisco opened its doors for business. Today it has grown into a prodigious institution stretching from coast to coast, from the Mexican border almost to the Canadian border, and with the largest aggregation of banking capital the world has ever seen. That the Bank of Italy has been able to accomplish this spectacular expansion with the name that it has chosen, in a country that exalts one hundred per cent. Americanism, is all the more remarkable. Although the great bulk of its customers are made up of the general American public, the Bank of Italy, with its head office in San Francisco and nearly three hundred branches, is controlled to a considerable extent by a group of Italians, American born for the most part and thoroughly loyal to this country. Nearly half the directors of the bank have foreign names. The bank is nevertheless a genuine American institution and democratic in its make-up. The Bank of Italy itself is only a part of the story. Associated with it are the Bancitaly Corporation, the National Bancitaly Company, and several other members of the "Italy" family. The pivot around which the group of institutions swings is the Copyright, 1928, by North American Review Corporation. All rights reserved. VOL. CCXXVI.-NO. 845 person of Mr. A. P. Giannini, the founder and moving spirit of the organization. The Bancitaly Corporation, a holding company, or more specifically an investment trust, was organized originally by Mr. Giannini in 1918. Its sole business is to own securities, and included among its securities are stocks of numerous other banks, so that the Bank of Italy, or the Giannini system, includes within its scope many banks in addition to those nearly three hundred branches which carry the name of Bank of Italy. Inasmuch as the Bank of Italy is itself prohibited by law from owning stock in other banks, the Bancitaly Corporation, by purchasing a controlling interest in these other banks, provides a convenient means for expansion anywhere in the country. It is through the Bancitaly Corporation that Mr. Giannini has now appeared in New York at No. 44 Wall Street. At this location he has taken over one of Wall Street's oldest and most respected institutions, the Bank of America, which has been in business for one hundred and sixteen years. It would be a mistake to regard the Bancitaly Corporation merely as a convenient arrangement for acquiring control of other banks for the Bank of Italy. Bancitaly, one of the pioneer investment trusts in the United States, has become one of the financial giants of the country. It has stock outstanding which is worth, according to current market prices, over one billion dollars. The growth of Bancitaly has, in fact, been even more rapid and spectacular than that of the Bank of Italy. Bancitaly, it should be remembered, has no official connection with the Bank of Italy. The relationship is that of ownership, to a considerable extent, by the same individuals. The story of the Bank of Italy and its affiliated institutions is to a large extent the story of Mr. A. P. Giannini. An aggressive exponent of branch banking, he has set the pace for the other banks. In fact, he has gone much faster than most of the other banks cared to follow. Shattering precedents and traditional banking practices, his extremely aggressive methods have been criticized by his opponents as improper, unbecoming the banking profession, and beneath the dignity of a respected financial institution. Competitive methods practised in the industrial world he has applied to the banking profession, with the result that banking in California has become as keenly competitive as any business in the country. Among Mr. Giannini's innovations, for example, is that of bank advertising. Formerly it was regarded as improper and cheapening for a financial institution to go before the public and tell of its merits, to tell the public why it should deal with this particular bank instead of with the bank around the corner. Banks were supposedly conferring a great favor on the public by being in existence, and therefore should not press themselves forward like a brand of soap or a variety of chewing gum. Advertising was vulgar. Nevertheless every banker, while he did not want to seem to be doing so, was quietly desirous of pressing his institution forward just as far as possible. Mr. Giannini did not care about convention, and early in the history of the Bank of Italy deliberately set about advertising it. Advertising had proved profitable in other lines of business, so why not in banking? With the precedent once set, other banks have been forced to follow, whether they liked it or not, so that at the present time bank advertising has become respectable. Bank advertising in its early stages had to be disguised and not appear on its face to be advertising. Thus a street map would carry a note to the effect that it was given by the courtesy of the City National Bank, or perhaps a newspaper would carry a modest announcement of the name of the officers of the bank together with a brief statement of the capital and resources. In the present development of bank advertising, electric signs and window displays are brought into use; but there are limits and we have not as yet reached the point where red balloons, illuminated airplanes and playing search lights are appropriate. Mr. Giannini did not stop with advertising, but broke again with banking tradition in soliciting new business, and in actively selling stock in his bank to the public. He went almost literally from door to door soliciting new accounts and making friends for his institution. At the present time most other banks have New Business Departments, Commercial Development Departments or whatever they may variously be called. A stock ownership plan for employees has been inaugurated by Mr. Giannini, whereby forty per cent. of the net profits of the bank, after dividends, go to the employees for the purchase of stock. At present about two and a half per cent. of the stock is owned by employees, exclusive of officers. Mr. Giannini, as might be assumed, has made many enemies who censure him most severely and in the harshest of terms. "Unethical," "not a man of his word," "a political manipulator," are some of the expressions used to describe him. It is charged that several of the high State officials in California are under his influence. At the same time, he has a plentiful supply of the stanchest of friends, and in addition a large popular following who regard him as a sort of financial wizard, an honest Ponzi, and withal a generous philanthropist, as witness his recent gift of $1,500,000 to the University of California. He holds the imagination of thousands of people almost as under a magic spell, people who believe that whatever he touches will turn into money. This belief, as a matter of fact, has been supported to a large extent by past experience. On the other hand it might be added that the rapid expansion of Mr. Giannini's interests is regarded in many quarters with genuine uneasiness. Fear is expressed that the base is not adequate to support the superstructure. Several of the leading and conservative bankers in the country (whose names obviously can not be mentioned) shake their heads and wonder what will be the outcome. It is feared that if Bancitaly, for example, should suddenly show signs of weakness, the result might shake the Pacific Coast and in fact the whole country. II As to Mr. Giannini himself, he was born in San José, California, fifty-eight years ago, of Italian parents who were not wealthy. His father died before he was six, so that he was raised by a stepfather, who later became a prosperous produce merchant in San Francisco. Mr. Giannini had little schooling, leaving the grammar grades before he was fifteen, and then spending three months in a business school. After this preparation he went into business with his stepfather along the San Francisco docks. It |