Finance

Amadeo Peter Giannini: The World's Bigger Banker (Part 1 of 2)

This is the first part of the story of Amadeo Peter Giannini, an Italian emigrant who arrived in America still in his mother?s womb. Amadeo was born in 1870 in San Jos? California, and starting without anything, in just 40 years he was able to create the world?s biggest bank. In 1902 Giannini was already the director of a San Francisco bank , where a lot of the Italian emigrants went to send their savings to their homeland. Giannini regretted that the Italians had to pay 8/10% tax for the transfer and they had to accept unruly exchange rates. For two years he struggled to change the bank?s policies, which only paid attention to the well-off clients. When he realized that there was nothing to do, in 1904 he decided to open a new bank that he called Bank of Italy. Sending money from his bank cost only 2% and the exchange was fair. It may seem incredible, that this modest bank, which was seated in a saloon in North Beach, a poor part of San Francisco where the Italian community lived, became the biggest bank in the world. The most surprising thing is not what he did, but how he did it! All his life he operated totally out of the logical way of making profits with the ambition of helping the people that were the most in need.

His life demonstrates that that even if you don?t place money as the highest value, it?s possible to make considerable profits and make money for yourself and others. But let?s with all great stories, let?s start from the beginning.

Amadeo Peter Giannini?s parents were two emigrants. Just like many others who left their birthplace searching for a better life: Favale di Malgaro, which was a hamlet in the inland of Ligure where his grandparents and also his great grandparents were born. A small village with two thousand citizens, surrounded by the mountains that is found just behind Rapallo, in the Fontanabuona valley where only a few more than 500 people live today, but over the last century more then three thousand of Favale?s citizens went to America, and most went to California. Giannini?s house was modest and isolated and built on a hill made of stone and clay, with just one big room that was above a barn and a stable.

Right after they got married, A.P. Giannini?s parents, Luigi who was 29 years old and Virginia Demartini who was fourteen, decided to go to America with the idea of making fortune and to escape from the misery ? that could even be considered dignifying? where the mountainous people lived. When they arrived in California ? with the railway trans continental railway that was just inaugurated, they decided to venture North and they stopped in San Jos?, a small city between Los Angeles and San Francisco where, they hoped to buy a piece of land with money that they collected from relatives before leaving Italy. But the information that they had on the price of the land was not up to date and they realised that they wouldn?t have been able to buy a piece of land big enough for them to survive. They rented a house with a few rooms and they transformed it in a type of guest house. After six months of working very hard the guest house became an Inn with twenty rooms. And that was where on May 6th, 1870 the most important banker in the world, Amadeo Peter Giannini was born.

The hordes of emigrants from all over the world, arrived in California attracted after the discovery of gold, helped Giannini Inn to prosper and after a few years it became a Hotel. For Luigi Giannini, the hotel proved to be a small goldmine which he sold after a few years. And with the money he made from it he bought a piece of land with 40 acres halfway between San Francisco and the bay. A perfect choice, since later it became an area of considerable value. But before he could enjoy the benefits of his choice, six years after he bought it, Luigi Giannini was killed by an employee; in an argument over a ?one dollar? debt. A crying Amadeo saw the scene first hand and was the one who came to save his dying father.

From that moment Amadeo realized that money could poison you, or even worse, could kill you. Virginia became a widow when she was only 22 years old. She left behind three children, the oldest being Amadeo, who was seven years old at the time. Virginia was a beautiful woman, and above all there where not so many women left in California, so she had the possibility to choose a new husband from many suitors and she chose well.

She married Lorenzo Scatena who was twenty-six years old at the time, who?s only asset was a pair of horses and a carriage that he used to transport produce to the docks on the San Francisco bay. He actually was quite clever, a characteristic that developed with his loving spouse?s help.

Scatena was completely in love with Virginia, and as someone who really knew how show affection, also loved her three children. He particularly was fond of the oldest one, Amadeo, who even while studying, helped his stepfather not to tend the fields, but also to manage the produce business. After a few years Lorenzo Scatena who took his wife?s suggestion from his wife that the produce business was more profitable than farming and so they moved to San Francisco in 1882, where ships arrived every day to stock up on fresh fruits and vegetables. Luigi bought his produce directly from the farmers in the California valleys, brought them to the shore and then sold them directly to the ships, who were just berthing their ships. Scatena became in a very short time a very successful produce distributor. The farmers appreciated Scatena for his politeness and at the dock his was known as a real gentleman.

After going to school in San Jose until the age of 12, he continued to study in San Francisco, where he took a five month economics course. But while studying he had already started to take part in his father?s business. He read a lot, but above all he went around to get all the information about new techniques in agriculture. A lot of the emigrants were farmers from all different countries and Amadeo asked for explanations innovative methods being used all over the world. He then suggested to the farmers what they should grow and he gave them strategies to increase production. Above all he suggested early harvesting, when the first fruits were still fresh and tender. They weighed less , but they were worth much more. They not only were focusing on the quality of the product, but they emerged as having the best prices. In addition, he convinced his father to make loans to farmers who wanted to buy new equipment, or who were going through rough periods, and that way he was able to create a loyal clientele.

Scatena was very proud of his son, not only for his hard work but also for his moral integrity that he had taught and that Amadeo had adopted as his own. And in no time he became the most important person in the company, and in eventually Scatenas alter ego. Nobody cured the public relations like he did. To increase Lorenzo Scatena & Company?s business he wrote lots of handwritten letters every day, to all the potential clients and suppliers. Writing all those letters he didn?t promise anything he couldn?t maintain. And if the didn?t answer his letter, , he dressed up elegantly, he went to see them, and concluded his business in person.

On the piers at the port being a convincing person wasn?t enough and Amadeo ? at the age of 15 was already 6 feet tall and weighted 180 pounds ? was able to make his point even by taking part in brawls.

The company was doing so well that Scatena, made him a partner in the company to award him, first with a 30% share and then increased it to 50%.

By the age of 20 years old, Amadeo Peter Giannini had already become one of the most successful and admired in the Italian colony. Known for being a correct person and admired for his fascination. He was more than 6 feet tall and most of the girls considered him one of the most handsome men of the city. In 1892, at 22 years old, he chose a woman who was his same age Clorinda Flores Cuneo, who was the daughter of one of the richest Italo-americans in San Francisco. And this turned out to be one of the many lucky events of his life.

As Giannini made his way on the road to success, he also revealed to be extremely lucky thanks to his parents taught him deep respect for the values of tradition. This tradition was the exact opposite of the conservatism, because they taught him the base values, that everyone should take their own life path, banking on the certainty that they are heading in the right direction. And all his life, Giannini continued in this manner, without being attracted by either the euphoria of success, or by greed that people usually get when they become rich.

In 1901 he thought that it was no longer worthwhile to continue working in order to make more money. He had an income of $250 a month from property rentals and he decided to sell half of his part of the company ?L.Scatena & C? to his employees who would paid him with their future earnings ? his share was valued at $100.000 ? and this assured him an income that allowed him to pay for daily needs and it allowed him to not have to worry about daily tasks and it gave him the opportunity to be able to invest in himself, to read, travel and to get to know the world. Concerning this point, in his biography it is said that at the age of thirty three, one year before establishing the Bank of Italy, he had already developed a theory about money: ?I don?t want to become too rich, ? he said, ?because not one rich person controls richness, but is controlled by it?. And contrary to people who preach goodness, but who don?t practice these principles, Giannini stuck to this rule.

In 1902 the death of his father in law marked a turning point in Giannini?s life, who was already well off due to his well known integrity and correctness, was asked by the large number of his wife?s siblings to manage the entire family?s fortune, that was made up roughly of half a million dollars.

Among the assets that Amadeo Giannini managed, there were also of one of the most important banks in San Francisco, the COLUMBUS SAVINGS AND LOAN, who asked him to become their senior manager that same year.

Giannini thought it would be possible have a prestigious position where he would have been able to help society, so he decided to dedicate himself with his heart and soul.

Giannini worked their for 2 years, hoping that he would be able to change their financial strategy.

The partners with a bigger stake at COLUMBUS worked only with well off people and offered credit only to companies and entrepreneurs who were already consolidated. Giannini said that a dignified banker shouldn?t refuse credit to anyone because he was honest His dream was a bank for people who had never entered in a bank before, a bank for the emigrants.

After coming to California the poverty stricken people who had nothing, were eager to work to feed themselves, lived between hardship and humiliation. They didn?t know the language and the Americans from the older protestants class looked at them with distrust and kept their distance from them.

Giannini, remembering his origins, knew that most of the Italian immigrants, and particularly those who where not only armed with desperate courage but also with descent principles, would become backbone of development in California. He then resigned and dedicated his life to them. In spite of the fact that Amadeo had left his father?s company, when he decided to open a bank, his stepfather Scatena was happy to take part in this adventure investing his own patrimony and collaborated actively. But once he decided to establish the bank, he had to find a headquarters. Giannini knew that the emigrant Anania Quilici, who had a bar at a very strategically North Beach intersection, wanted to quit. And she offered her rental contract for 1250.

On the 17th October 1904 Amadeo Peter Giannini opened The Bank of Italy. Investing all that he had, as well as his spouse?s entire patrimony, his step father?s major contribution and money from partners from Italian origins.

However, once he established the bank he needed publicity. He was great doing this job, since he was well known by almost all the Italian emigrants. He went around to every house, offering services, help and loans, he suggested to start businesses, to buy land, real estate, and to open companies and in any case to start their own businesses.

In the beginning of the nineteenth century it wasn?t easy to have credit from a bank, especially for immigrants. The institutions didn?t agree to give loans of less than $200 and, in case of need, the emigrants had to turn to loan sharks.

At the Bank of Italy, after asking a few questions, Giannini gave loans starting at $25 and as a guarantee he looked at the calluses on their hands and at their faces. He personally chose his personnel who had to know many languages. In particular he wanted Pedrini, the teller at COLUMBUS to work for him. In order to convince him he offered double the salary. His partners protested but Amadeo said that Pedrini was a good worker, courteous with the businessmen, and polite with people that had problems. In order to ease the protests he decided to give half of his own salary to Pedrini. This clause was nullified after they had seen that Giannini was right. Giannini didn?t want to be the president of The Bank of Italy, and since he didn?t need the power that derived from the position, he assumed the position of vice-president and, after only a year he made his stepfather Lorenzo Scatena the vice president.

One of the regulations that was put into effect was that the administrators would have worked without pay, until the Bank of Italy started making a profit.

He decided to have a popular shareholding; he didn?t want anyone to have more than one hundred of the 3000 shares that were distributed. He also limited the value of the shares to a maximum of $100. He made sure himself that went to by bakers, fishermen, grocers, plumbers, hairdressers, everyone who had never been in a bank before. He was only satisfied when he verified that most of the shares were given to shareholders who had from one to four shares.

After only two months The Bank of Italy had deposits worth $70.000, but the loans were more than $90.000. The partners where worried, but Giannini knew that this was the only way to gain the public?s recognition and trust. How could you not be grateful to someone who allowed you to rent a decent house or to send your children to school? But Amadeo went beyond that: he subsidized builders who built public housing on the condition that they gave favourable prices for the buyers.

... to be continued ...

Guido Crapanzano is an expert in communications and Rector of the Institute for Communication Sciences in Milan (Italy).

Guido Crapanzano

Tags: guido crapanzano, amadeo peter giannini

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Finance

Amadeo Peter Giannini: The World's Bigger Banker (Part 1 of 2)

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