Friday, April 4, 2008

Bank of America

Gary Hector's Breaking the Bank and Moira Johnston's Roller Coaster both chronicle the decline of Bank of America in the 1980s. In both cases the predictions of the impending death of Bank America was greatly exaggerated. Hector's book is an easier read, focusing more on the characters and told with more drama than Johnston's book. He also chooses to concentrate more on the early years of Bank of America and tells in more details the fight between AP Giannini and federal regulators. It is evenly divided between the Giannini years and the Clausen and Armacost periods. Johnston's book focuses more on the later years of Clausen and Armacost and does provide more details into Armacosts fights with regulators along with some information of Clausen's time at the World Bank. Her book is a little drier but contains more financial details such as the effect of Continental Illinois and Penn Square Bank on the bank. She is also more generous than Hector when assessing Clausens' return to the bank after the ouster of Armacost. They end with an unspoken theme that Bank of America would not survive the end of the decade.

With perfect hindsight, both underestimated the effects of deregulation, the bad loans of the 1980s, Volcker disinflation, and the changing environment just as much as the banks themselves did in that era. Both hold Wells Fargo, Security Pacific Bank and First Interstate and relatively more successful of the western models than Bank of America. Both books were published in 1990 but did not forsee that by 1992 Bank of America had over come its problems (or perhaps grew out of its problems).

By 1992, Security Pacific would merge with Bank of America and lose its identity. First Interstate was acquired by Wells Fargo in 1995, and which in turn was acquired by Norwest in 1998 which took the Wells Fargo's name. Only in 1998, was Bank of America acquired by NationsBank, so Bank of America survived almost a decade after its predicted demise.

No comments: