What do earthquakes and banking have in common? The link is the 1906 San Francisco Earthquake, which led directly to the founding of Bank of America. In a random — and admittedly unscientific — survey of bankers and geologists, more bankers knew the connection between the San Francisco earthquake and the history of banking than did the geologists.

In 1906, A.P. Giannini had already retired from selling produce and begun working in the banking business, moving from a savings and loan to establishing the Bank of Italy in San Francisco’s Italian neighborhood of North Beach. He opened the bank with $150,000 in capital from friends and relatives, and it had been open for barely two years when, on April 18, 1906, the major earthquake struck.

Stories differ about whether the building that housed the Bank of Italy suffered major damage in the earthquake itself, but the bank was directly threatened by the subsequent fires that devastated much of downtown San Francisco. Giannini saved his bank by filling a horse-drawn wagon with $2 million in gold and securities, covering the valuables with vegetables, and rescuing the resources. The next morning, he opened for business on a wharf on San Francisco Bay. Many of the loans that were used to rebuild San Francisco came from these funds, as most of the other banks were destroyed.

Giannini is credited with a number of important changes in the banking industry. He believed deeply in the importance of lending money to working-class people, a group that had been previously ignored by banks as not being creditworthy. Giannini’s Bank of Italy offered good rates, bilingual tellers and a welcoming environment for farmers, small businessmen and immigrants.

The year after the San Francisco earthquake, his was one of the few financial institutions that had enough gold and hard currency available to survive a citywide run on the banks. He concluded that scale was important, and that large banks were the key to the future, so he built a network of branch banks that is the model we see today.

“We learn geology the morning after the earthquake, on ghastly diagrams of cloven mountains, up-heaved plains, and the dry bed of the sea.” -Ralph Waldo Emerson

Giannini purchased Bank of America in 1929, largely because he wanted to acquire the name. And nine years after Giannini’s death, in 1958, his bank invented the credit card (BankAmericard, which became Visa in 1975).

Of course, Bank of America has suffered some of its own seismic events in the years since its founding. Acquisitions of banks without sufficient resources, losses due to bad loans in Latin America, over-dependence on the petroleum industry, and leadership changes all created shock waves that affected the bank. However, despite the mergers, the bank represents a largely unbroken line from the geologic event that dominated 1906.

The moral of this story is that everything is connected, and that geology has driven the world economy in some unusual ways. Ralph Waldo Emerson wrote in 1860: “Bad times have a scientific value. These are occasions a good learner would not miss. … What had been, ever since our memory, solid continent, yawns apart, and discloses its composition and genesis. We learn geology the morning after the earthquake, on ghastly diagrams of cloven mountains, upheaved plains, and the dry bed of the sea.”

By New Year’s Eve 2006 and the conclusion of the San Francisco earthquake’s centennial year, we’ll all know a lot more about the immediate and long-term impacts of the event, including its contributions to the modern banking industry. One place to watch is the 1906 Earthquake Centennial Alliance (1906centennial.org), a collection of nearly 100 groups and organizations that is using the occasion to highlight the history, the science, and the impact of the event, as well as emphasizing planning and risk reduction.

And of course several books about the 1906 earthquake are in preparation now, including one by Simon Winchester, author of The Map That Changed the World: William Smith and the Birth of Modern Geology, published in 2001, and Krakatoa: The Day the World Exploded, August 27, 1883, published in 2003 (see Geotimes, October 2003). Scheduled for release in October 2005, Winchester’s new book gives examples of how the 1906 earthquake has shaped — and continues to shape — our world today.

The establishment of Bank of America is just one of thousands of repercussions of the 1906 event, and many of the results have been positive. One of these is increased public interest in geology. As Emerson so accurately noted, we do learn geology the morning (or century) after the earthquake.

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