Ben Gilbert: belief

Transcript context

…To explain how we got here, we need to spend a few more minutes on Bank of America's history and the history of banking and payment industries in the US more broadly. Like we said, B of A was the biggest bank in America in the 1950s, but it was not like all the other big banks at the time. It was a consumer bank. The other large and influential banks in America back then were the JP Morgan's. They were white shoe corporate banks based in New York. We talked about this a lot in the Nike episode. It was illegal for banks to operate across state lines until much much later in history. For banks back then, the only way that you could actually get big for just about everybody else in the industry was to go the corporate route and to go the investment banking route, because you could service very large corporations that obviously were large themselves. It would generate lots of deposits, lots of lending activity. The investment banking activities around that were obviously very lucrative. That's how the JP Morgan's, the Morgan Stanley's, et cetera, of the world came to be. For the most part, consumer banks were backwater, small. There was no way to aggregate enough customers that you could get big enough. And in most states, they would have restrictions on the number of branches that banks could actually have. In some states—I think Texas was one of them—you literally could only have one branch. Other states would limit them as something like three. Other states would limit them and say, none outside the city. So you were a bank of a city. You could almost think about these more as credit unions than the big banks that we think about today. California happened to be unique in that you could actually have branches all over the state. California happened to have quite a large population, so it was the only place you could pull off a large consumer bank. Exactly. California was already the second biggest state in the nation at that time behind New York. But the New York banking industry was super fragmented, because Bank of America starting as Bank of Italy with all these immigrants had built up a consumer base, they really were unique. The business of banking is banking, you take deposits, you make loans, you make your money on the loans. B of A was doing tons and tons and tons of small, little, and disparate consumer loans and lending. Obviously, mortgages and car loans still exist today, but they were doing washing machine loans.…

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