Archive | May, 2013

Sixth Avenue & 42nd Street (Part Two)

26 May

So I’m trying to determine when it is exactly that Bank of America became the type of institution that one can really hate, you know?  But damn, it’s hard to pin point this kind of thing!  I mean, they started off so nice and everything, what with lending money to poor Italian immigrants and all.  Hell, their name was even Bank of Italy back then.  When did they go wrong?

Bank of Italy’s founder Amadeo Giannini pursued a strategy of opening bank branches throughout California, starting in 1909, and so the bank was already pretty damn big (maybe the biggest in the state) by the time it merged with Bank of America, Los Angeles in 1928.  Bank of America, Los Angeles was the creation of Orra E. Monnette who, despite the name, seems to not have been Italian (he was born to Methodist parents in Ohio – you ever met an Italian Methodist?).  Monnette was a lawyer, moving to California to practice law, though he really hit the big time when his father struck a gold vein in the Mohawk Mine of Tonopah, Nevada.  The huge proceeds from the gold mine allowed Monnette to buy stock in various local L.A. banks, eventually gaining him a controlling interest in one bank, which he merged with another bank, before buying another bank, which he merged with some of those other banks.  (That’s how these things work I guess; like Hunter S. Thompson said, “Once you get locked into a serious drug collection, the tendency is to push it as far as you can.”)  In 1923 Monnette changed the bank name to Bank of America, Los Angeles.

After the 1928 merger with his Bank of Italy Amadeo Giannini decided to keep the name Bank of America (only losing the “Los Angeles” part), perhaps in tribute to his ambition to create one of the largest banks in the country; not sure if he still cared about the poor Italian immigrants at this point, though to be fair, he was interested in bringing financial services to the masses (as opposed to just the plutocrats).  It was along those lines that Giannini acquired Occidential Life Insurance Company, and its $25 million in assets, in 1930, through his holding company Transamerica Corporation.  Bank of America and Transamerica were united until the 1950s – after Giannini’s death – when they were forced into separating by regulators under the Clayton Anti-Trust Act.  In addition The Bank Holding Company Act of 1956 put the kibosh on Bank of America’s interstate activity (it had expanded its branches throughout the west) and so BoA (or maybe Transamerica, it’s a little confusing) had to divest itself of all its non-California branches (all under the Republican Eisenhower I might add).  Those operation were spun off as Firstamerica Corporation which eventually became First Interstate Bancorp – the 8th largest banking operation in the country until it was bought by Wells Fargo in 1996.  Wells Fargo is the 4th largest bank in the nation by the way.  You follow all of this?  We’re getting close into the territory of why Bank of America is so terrible. 

In 1958, maybe looking for a new leg up after losing all that interstate activity, Bank of America launched its BankAmericard credit card program with an unsolicited mailing of 60,000 credit cards; not an application mind you – these dudes just mailed out 60,000 unsolicited credit cards.  There were some ups and downs I guess but in the end it worked out well cause that BankAmericard was the direct descendent of Visa.  So yeah, Bank of America created the Visa credit card, pre-dating MasterCard by about 8 years.  Actually MasterCard was created by a bunch of California banks to rival BankAmericard’s success.  You see how all these mega-corporations are connected?  I mean we’ve already touched upon Occidential Life Insurance, Transamerica, First Interstate Bancorp, Wells Fargo, and Visa, and we aren’t even done yet.

Because there’s definitely more.  I guess we’ve got to jump to the 1980s (of course! the beginning of the conservative dream that we’re still suffering the hangover from) to find Bank of America’ next interstate move.  Following deregulation they were able to acquire Seafirst Bank (of Seattle).  Seafirst was a bank holding company formed in 1929 from the merger of Seattle’s three largest banks – changing its name a number of times through the years.  Bank of America was able to acquire Seafirst when they became insolvent following the collapse of Penn Square Bank in 1982.  I’m guessing the Penn Square Bank collapse must have been a big deal in its day.  Penn Square Bank was a small commercial bank from Oklahoma City, located in the Penn Square Mall, that made its name making high-risk loans to the energy industry during the Texas and Oklahoma oil boom of the late 70s and early 80s.  The rapid growth in the value of its assets probably convinced other banks to get in on the game through loan participation (chipping in together to make a large loan under the lead of Penn Square Bank) – so when Penn Square collapsed they took some people down with them, like Seafirst Bank and including Continental Illinois National Bank and Trust Company, the largest bank failure (at the time) in US history.  Federal regulators looking at Penn Square after its failure cited 451 possible criminal violations.  Oh and by the way when Continental Illinois National Bank and Trust Company went bankrupt it was considered “too big to fail” – the first time the term was used in popular lingo.  The Federal government bailed them out and they eventually reemerged as Continental Bank.  Bank of America bought them in 1994.

So wow, let’s stop there for now because my head hurts and it’s basically taken me two months just to get this far.  And we’re still only early in the 80s.  More deregulation ahead I’m sure!  More “too big to fail” and definitely more possible criminal violations.  Let’s see what else we find.