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.

Waves of change

Railroad trestle in Spartansburg, PA

The first wave of prosperity to lift New Bedford, Massachusetts, was whaling and related nautical industries.  Through most of the nineteenth century, we lit our homes, streets, and factories with whale oil lamps.  Fortunes were made and New Bedford flourished.  Then, an innocuous event occurred in northwestern Pennsylvania just south of the small town of Titusville.   In the summer of 1859, Col. Edwin Drake drilled the country’s first commercially viable oil well, sealing the fate of the whaling industry.  A spur railway was quickly built from the nearest railhead in Corry, through the Amish village of Spartansburg, and on to Titusville.  Soon, tanker cars steamed eastward carrying petroleum to be processed at former whale oil refineries, at much less cost, risk, and greater profits.  Consumers and the country benefited, but the world’s whaling ports began to wither. 

New Bedford faltered, actually losing population according to the 1870 census, but quickly recovered on a new wave of textile manufacturing.  By the 1880s, the city was growing again, buoyed by robust, expanding textile manufacturing.  It was no secret, however, that former able bodied seamen and harpooners were not necessarily the best loom operators.  A new set of skills was required to become gainfully employed. 

Then, another wave.  By the 1940s, textile manufacturing moved to the southern United States where wages were lower and business burdens lighter.  New Bedford again faltered, but quickly rebounded on the wartime demand for manufacturing.  Tool and die operations sustained the city through the post war years but began to ebb in the 1970s as these products were increasingly supplied by Japan and other countries.

Today, New Bedford’s unemployment rate averages about 10%.  Still a robust fishing port, the employment offered by this industry cannot support the city’s population.  Health care and some limited manufacturing round out the employers, but many of the city’s workers lack the skills for these jobs.

What are the points that may be gleaned from this?  There are several.  First, it seems that waves of change are inevitable, and government can be of little help in assisting us.  We could subsidize whalers, and loom operators, and buggy whip assemblers, but to what effect?  The best that we can do for ourselves, and that government can do for us, is to provide training and skills enhancement.  In our increasingly knowledge-based economy, it is important to be agile, adaptable, and engaged in order to be employable.

Far be it from me to be an expert, but long observation gives me a few suggestions on how to achieve this goal of maximizing employability in an ever-changing economy:

• Be literate in spoken and written English.  While it may be comforting to press 2 for Spanish, that will not help your employability.
• Likewise, be literate with basic mathematics.  Math has to do with logic and reasoning, and will serve you well in many fields.
• Become comfortable with computers and the Internet.  They are the fabric of our information economy. 

How to accomplish these goals?  First, use your local public library.  In addition to supplying books and periodicals, they also provide computers, internet access, and often classes in English proficiency.  Many local high schools offer adult continuing education classes ranging from Photoshop to woodworking to welding.  Potential employers want to see that you have solid, basic skills and are capable of learning new ones.  This is what sets you apart from the permanent minimum wage crowd, who may well be comfortable where they are (which is largely unemployable). 

Titusville, Pennsylvania, suffered the same fate as New Bedford.  Multiple waves of change have washed over her, and her citizens are dumfounded.  Even the few manufacturing jobs that remain require the ability to operate sophisticated CNC milling machines.  The only cure is to rise to your potential, to learn basic English, mathematical, and computer skills, and to mentor those who are struggling.  We are all in this together.