Today's LIBOR Rates
1 M |
0.31563 |
 |
3 M |
0.47500 |
|
6 M |
0.68794 |
|
1 YR |
1.06438 |
|
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The Banks Behind LIBOR
Bank of America
July 23, 2009
“Contributor banks” selected by the British Bankers’ Association (BBA) report their daily interbank lending rates for different maturities and currencies, and from these data the BBA computes the LIBOR indices. This is an overview of one of those contributor banks.
Bank of America is a contributor for four of LIBOR’s 10 monitored currencies, the US Dollar, the Pound Sterling, the Euro, and the Yen. It is one of America’s “Big Four Banks,” along with JPMorgan Chase, Citigroup and Wells Fargo, and is billed as the world’s largest financial services company. During its century-long history, Bank of America has been a leader in branch banking, interstate banking, credit cards, and socially responsible practices. Most recently, the institution has been active in the financial industry’s massive transformation, acquiring Countrywide Financial and Merrill Lynch, two of the most prominent names among the era’s many notable collapses.
In 1904, Amadeo Giannini founded the Bank of Italy, the forerunner to Bank of America. The son of Italian immigrants, he had entered banking in his previous occupation as a produce dealer, creating financing opportunities for himself and farmers who were refused by other banks. Giannini’s populist persona became legendary during the San Francisco earthquake. Salvaging the contents of his young bank’s vault, he set up a temporary office consisting of a plank resting on two barrels, issuing reconstruction loans on a handshake.
In 1928, Giannini merged with Bank of America, Los Angeles, using the name “Bank of America” for the new, combined enterprise. The Los Angeles-based institution had pioneered expanded service regions for banks by centralizing functions such as processing and bookkeeping. The business model would be the foundation of Bank of America’s eventual dominance in California and interstate expansion.
Bank of America was known for making banking accessible to the middle class, introducing the bank branch. The institution backed many famed ventures: bonds to construct the Golden Gate Bridge; production financing for Walt Disney’s “Snow White;” start-up capital for Hewlett-Packard. At the midpoint of the twentieth century, the U.S. Government rebuffed Bank of America’s forays into interstate banking and ownership of subsidiary services such as insurance. In 1958, the company introduced BankAmericard, the first mass-market credit card. Advances in direct marketing and computer processing made the card feasible, although it experienced a rocky start with high incidence of delinquency and fraud. BankAmericard became a separate venture in 1970 and adopted the Visa brand in 1976.
By the 1980s, new legislation and relaxed regulation allow Bank of America to resume its long-time dream of a multistate presence. Its 1983 purchase of Seattle-based Seafirst began a series of acquisitions over the next two decades. Bank of America itself became an acquisition in 1998 when NationsBank took ownership in what was then the biggest bank purchase in history. The new venture assumed the Bank of America name and took up headquarters in Charlotte, NC.
In the 21st century, the new Bank of America continued its pattern of major purchases, including FleetBoston Financial, credit card colossus MBNA, and US Trust. This business model took on increased significance with the financial crash that peaked in 2008. During that year, Bank of America purchased Countrywide Financial, the American lender considered one of the key players in the mortgage meltdown, and Merrill Lynch, one of Wall Street’s top financial institutions. The acquisitions have brought controversy to Bank of America, burdening its balance sheet and lowering its stock price. Bank of America CEO Ken Lewis has cited intense pressure from the U.S. Government to buy the faltering Merrill Lynch in late 2008, this after the collapse of Lehman Brothers brought widespread panic to the markets. The government has give Bank of America $45 billion in bailout funds and over $100 billion in guarantees against losses.
The accuracy and relevance of LIBOR rests on its contributor banks. With Bank of America, LIBOR has a constituent that took shape in the literal destruction San Francisco to ultimately become the world’s largest financial services company amid the figurative destruction of today’s financial crisis.