Bank of America Corporation

• Date Founded: 1904
• Industry: Banking and Investment Services
• Corporate Headquarters: Charlotte, North Carolina
• Type: Public

Overview

Bank of America Corporation, headquartered in Charlotte, North Carolina, is one of the world’s largest financial institutions, providing a range of banking, investment, and other financial services. It has a global presence, with operations through the United States and more than thirty-five countries. By 2024, the bank had more than 213,500 employees and over $3.27 trillion in assets.

The bank originated as the Bank of Italy, which was founded in San Francisco in 1904 by A. P. Giannini to serve immigrants who were discriminated against by existing banks. Under Giannini, the bank grew by opening new branches and acquiring other banks, and, by the time the founder died in 1949, it had become the largest bank in California. It subsequently expanded into other states through acquisitions in the 1980s and 1990s. In 1998, Bank of America was acquired by the larger NationsBank of Charlotte, but the combined bank retained the better-known Bank of America name.

Two large acquisitions in 2008 resulted in huge losses. Subsequent legal settlements with the US government and others proved costly to the bank. Despite these struggles, Bank of America survived and regained some of its former strength.

History

Born in San Jose, California, in 1870 to Italian immigrants, Amadeo Pietro (Peter) Giannini founded the Bank of Italy in October 1904. Giannini was previously in partnership with his stepfather in a successful wholesale produce business and was already wealthy. Sensing a need for banking services by immigrants and ordinary working people who were shunned by existing banks, he formed the Bank of Italy.

In the great earthquake and resulting fires in San Francisco in 1906, Giannini saved the bank’s deposits by physically moving the cash and other assets to his home for safekeeping. Within days, he had set up a temporary bank and resumed collecting deposits and making loans on a handshake.

Giannini expanded by opening branches in San Francisco, and then in San Jose and other cities in California. In 1928, he merged Bank of Italy with Bank of America, Los Angeles, which had been founded in 1923. The combined entity adopted the Bank of America name. By 1929, the bank had over four hundred California branches. Giannini headed the bank until his retirement in 1941.

In 1950, Bank of America launched a project with the Stanford Research Institute to develop a computer system to automate check processing. The growth of the economy and of the middle-class following World War II dramatically increased the use of checks, which were labor-intensive to process. The new system was dubbed the electronic recording method of accounting (ERMA). General Electric joined the project, creating a special magnetized ink to print checks using a unique font that could be easily read by humans and computers. This technology was called magnetic ink character recognition (MICR) and was adopted by the banking industry in 1965 as the standard method of processing checks.

In the mid-1980s, the bank suffered massive losses in Latin American countries. At risk of being taken over, it retained its independence by selling non-core subsidiaries, including the brokerage firm Charles Schwab, which it had acquired in 1983.

Since the 1980s, Bank of America has expanded its footprint nationally by merging with banks in other states. It acquired Seafirst-First National Bank of Washington in 1983. In the early 1990s, it acquired California-based Security Pacific, which also owned banks in several other Western states. The bank acquired credit card giant MBNA in 2005 for $35 billion.

In 2008, Bank of America acquired Countrywide Financial, a large mortgage lender and servicer, for $4 billion. That acquisition made it the largest residential mortgage originator and servicer in the country.

In September 2008, in the midst of the global financial crisis and pressured by the government, Bank of America agreed to acquire investment firm Merrill Lynch for $50 billion. Merrill Lynch was just days away from filing for bankruptcy protection because of the large amount of risky assets it owned. By the time the transaction closed in January 2009, the magnitude of Merrill Lynch’s problems had increased manifold.

The bank borrowed $25 billion from the US government’s Troubled Asset Relief Program (TARP) in the fall of 2008 and another $20 billion in early 2009. As financial markets stabilized, and the panic eased, the bank was able to repay the entire $45 billion, plus interest, by December 2009. In 2011, Warren Buffett’s Berkshire Hathaway invested $5 billion in Bank of America, providing it a much-needed vote of confidence.

In August 2014, Bank of America settled with the US Department of Justice and other federal and state agencies for its role in the subprime home-loan mortgage crisis of the mid-2000s. The bank agreed to pay $9.65 billion in penalties and to provide $7 billion in consumer relief, primarily in the form of mortgage modifications (such as lower interest rates). This $16.65 billion was the largest financial settlement in United States history. The bank settled several other large lawsuits, including a $2.4 billion payment to shareholders in 2012, and $9.3 billion in 2014 to Fannie Mae and Freddie Mac, the two large government-sponsored mortgage companies.

Bank of America received positive press for its handling of employee and client relations during the COVID-19 pandemic that began in early 2020. Chief executive officer (CEO) Brian Moynihan, in particular, was praised for refraining from company-wide layoffs, expanding childcare benefits, and reducing his own salary during the pandemic. Additionally, the company pledged an additional $100 million in philanthropy to support communities impacted by COVID-19. Bank of America was consistently named one of the best places to work by Fortune and other publications during this period.

In 2022, the Consumer Financial Protection Bureau (CFPB) fined the bank $10 million for illegally garnishing thousands of customer accounts. The bank refunded nearly $600,000 in fees to customers, reformed their garnishment processes, and eliminated clauses from their customer contracts that were not enforceable.

In December 2024, the CFPB filed a lawsuit against Bank of America, JPMorgan Chase, and Wells Fargo, charging the banks with failing to protect consumers from fraud while using the Zelle payment app due to minimal verification requirements. The CFPB argued that the banks' conduct violated federal law and left consumers vulnerable to scammers.

The modern Bank of America is an amalgamation of banks, investment firms, and other companies combined over the decades. It is one of the Big Four banks in the United States, competing with JPMorgan Chase, Citigroup, and Wells Fargo.

Impact

Bank of America’s founder, A. P. Giannini, was a pioneer in providing banking deposit and lending services to ordinary working people. Not only did he expand the market of banking customers, he also created innovative ways to serve them.

Bank of America provided the financing for construction of San Francisco’s iconic Golden Gate Bridge. Construction began in January 1933, in the wake of the stock market crash and in the midst of the Great Depression. It is likely that the bridge would not have been built without the funding provided by Bank of America. When it opened in 1937, the Golden Gate Bridge was the longest bridge in the world.

The bank was a pioneer in credit cards, creating the BankAmericard in 1958, which changed its name to Visa in 1977. Though American Express and Diners Club had earlier introduced charge cards for travel and entertainment, BankAmericard was the first general-purpose credit card, offering revolving credit and not requiring balances to be paid in full at the end of each month. Visa, now independent, is one of the largest issuers of credit cards in the world.

Giannini’s bank developed a close relationship with the fledgling movie industry during the 1920s and 1930s. It financed the production of Walt Disney’s Snow White (1937), the first full-length animated movie in the United States, as well as movies such as It’s a Wonderful Life (1946) and West Side Story (1961).

In the twenty-first century, Bank of America, through their supporting communities initiative, had committed $500 billion to local communities, which supported small businesses, promoted economic mobility, and invested in sustainable projects. The bank also contributed to various other charities, including affordable housing, healthcare, education, and financial literacy programs.

Bibliography

"A. P. Giannini." Who Made America: Innovators, PBS, www.pbs.org/wgbh/theymadeamerica/whomade/giannini‗hi.html. Accessed 23 Apr. 2023.

“Bank of America Fast Facts.” Newsroom, Bank of America, 2024, newsroom.bankofamerica.com/content/newsroom/company-overview/bank-of-america-fast-facts.html. Accessed 10 Jan. 2025.

“Bank of America in Talks with Regulator to Resolve Zelle Probe, Evaluates Litigation.” Reuters, 29 Oct. 2024, www.reuters.com/legal/bofa-considers-suing-us-consumer-watchdog-over-zelle-inquiry-2024-10-29/. Accessed 10 Jan. 2025.

Bauerlein, Valerie, and James R. Hagerty. "Behind Bank of America’s Big Gamble." Wall Street Journal, 12 Jan. 2008, www.wsj.com/articles/SB120005404048583617. Accessed 10 Jan. 2025.

Bonadio, Felice A. A.P. Giannini: Banker of America. U of California, 1994.

Cohen, William D. "The Final Days of Merrill Lynch." Atlantic, Sept. 2009, www.theatlantic.com/magazine/archive/2009/09/the-final-days-of-merrill-lynch/307621. Accessed 14 Jan. 2025.

"CFPB Orders Bank of America to Pay $10 Million Penalty for Illegal Garnishments." CFPB, 4 May 2022, www.consumerfinance.gov/about-us/newsroom/cfpb-orders-bank-of-america-to-pay-10-million-penalty-for-illegal-garnishments. Accessed 14 Jan. 2025.

Eavis, Peter, and Michael Corkery. "Bank of America’s $16 Billion Mortgage Settlement Less Painful than It Looks." DealBook, New York Times, 21 Aug. 2014, dealbook.nytimes.com/2014/08/21/bank-of-america-reaches-16-65-billion-mortgage-settlement. Accessed 14 Jan. 2025.

Farrell, Greg. Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America. Crown, 2010.

Lee, Peter. "The World's Best Bank 2022: Bank of America—Prepared for Stormy Weather." Euromoney, 14 Jul. 2022, www.euromoney.com/article/2aa9f20bixa61vkeh3abk/awards/awards-for-excellence/the-worlds-best-bank-2022-bank-of-america-prepared-for-stormy-weather. Accessed 10 Jan. 2025.

"Our History & Heritage." Bank of America, about.bankofamerica.com/en-us/who-we-are/our-history-and-heritage.html. Accessed 10 Jan. 2025.

“Sustainable Finance: Supporting the Sustainable Development Goals.” Bank of America, Bank of America, about.bankofamerica.com/en/making-an-impact/sustainable-finance. Accessed 10 Jan. 2025.