Corporations that we love to hate

Amadeo Giannini, founder, Bank of America

In 1904, Amadeo Giannini founded the Bank of Italy in San Francisco, California.   At the time, banks catered to the wealthy and couldn’t be bothered with the paltry deposits nor minuscule loans of Italian immigrants.  His bank grew quickly, with deposits totaling $18 million by the end of the first year of operation (2010 dollars).  Giannini’s bank, due to good fortune and arduous effort, survived the San Francisco earthquake of 1906.  He was able to reopen immediately after the quake, whereas other banks were closed for weeks.  His was the only source of loans to individuals and businesses trying to rebuild, and the bank flourished.

Over 100 years later, the Bank of America, directly descended from Giannini’s immigrant-friendly depository, has become the corporation that we love to hate.  In November, Occupy San Francisco protestors stormed a Bank of America branch, pounded on desks, defaced walls, and shouted their message, “make banks pay!”  The Federal Housing Finance Agency sued BoA in September, and the Massachusetts Attorney General joined the fray in December.

The Bank of America is, apparently, greedy, corrupt, evil, and yields no benefit to society.  Let’s put them out of business!

Or, perhaps, sit back first and ponder a few facts.

In 2010 (last year available), BoA employed nearly 300,000 workers to whom they paid over $35 billion in wages, health insurance, Social Security, and Medicare taxes. Those employees all paid federal and state income taxes amounting to billions of dollars on those earnings.  And BoA pays billions more in local property taxes for its thousands of properties across the nation.

The greedy shareholders of the bank are looking only for profit; the more, the better.  Who are these gluttonous capitalists?  One example is the teachers, fireman, police, and state workers of California, where CALPERS owns nearly half a billion dollars in BoA stock and fervently hopes that the investment grows.  Otherwise, pension benefits, and retirements, will be endangered.

All of this is not intended to make you want to remain with BoA if you are an unhappy customer.  But the answer is not new government regulations and politically inspired litigation.  The answer is to exercise some personal initiative. 

If you are unhappy with your bank’s fees, try one of these:

•       Consolidate and build your accounts in order to attain the amount needed for free checking.
•       Pay off your credit card balance in full each month.
•       Don't overdraw your account or make a late payment.
•       Find a local bank or credit union and move your accounts.  They will welcome you.
•       Start your own bank.

While that last one may seem whimsical, it is not.  All you need is to sign up shareholders to kick in $4-$10 million (usually 500-1,000 like-minded investors).  Then, incorporate and make a charter application to your state or the federal government.  (Yes, you must become a nasty, corporate capitalist, by law, in order to form a bank).

Once your charter is approved (typically 180 days or more), you are in business and can begin hiring employees, accepting deposits, and making loans.  Remember that the goal of the business is to make a profit and repay the investors.  In addition, as you build your deposits, you may make more loans to worthy individuals and businesses.  If any of those loans are not repaid, you must still ensure that your depositors’ funds are safe and can be refunded on demand, and also retain the faith of your investors.

So while you may sympathize with the Occupy crew, perhaps a whiff of reality will help you see a broader picture.  Corporations in general, and banks in particular, are simply associations of  like-minded people who strive to provide services and earn a profit in return.  In the process of doing so, they create a multitude of jobs and pay a staggering burden of wages and taxes to various jurisdictions.  That can’t be all bad.