THE BIGGEST BANK'S UNCOMMON ASSET

Rudolph Peterson Lends Some Advice

The head of the world's biggest bank saw inflation coming more than a year ago and tried to head it off. From public podiums and in private sessions with Government policymakers, Rudolph Arvid Peterson, 62, president of the Bank of America, urged a new federal policy to cool the overly expansive economy. As early as the autumn of 1965, he called upon the Government to do essentially what he still advocates today: declare a national emergency because of the Viet Nam war, defer some Great Society programs, impose a temporary 5% surtax on individuals and corporations.

Peterson believes that President Johnson should have selectively trimmed nondefense spending late in 1965 or early in 1966--and still should. "I'm not talking about cutting out food for the hungry and diminishing in any way the training programs for upgrading skills and putting people to work," he says. "We certainly should not shut down the slum-clearance program, but we could slow it down for the time being. Some of our urban-development and highway programs could be moderated a bit."

Even if federal taxes are increased, he believes that the economy will continue to be robust next year and corporate profits will advance on the order of 5%. And he argues that the U.S. would willingly accept tax hikes if Johnson would declare that Viet Nam is a very serious national emergency. Says Peterson: "There are not many mothers or families who do not consider this an emergency."

Pinching the Giants. The Bank of America was as well as or better prepared than any other for this year's tight money and inflationary situation. Late in 1965, Peterson told his officers to be much more selective in granting loans. Doing that, they took two unusual steps. "First," says Peterson, "we made routine loans more easily than before so that we could spend more time scrutinizing riskier 'grey area' loans. Second, we curtailed the loans of the big fellows before the little ones. Why? Because the big fellows--General Motors. U.S. Steel--have options, but the little merchant does not. His inventory has to be financed, or perhaps he has to shut up shop. G.M. or U.S. Steel do not have to alter their pattern drastically because we lend them $100 million instead of $125 million."

In the spring, the bank began paring its new mortgage loans, reducing them from 80% to perhaps 75% of the appraised value of the property, and shortening the terms from 30 years to 25 years. As money grew tighter in the summer, Peterson's bank reluctantly became less liberal in its small loans to installment buyers, farmers and merchants--setting standards that still apply today. "We finance the man who needs an auto to go to work," explains Peterson, "but if his teen-aged son wants an auto just for the fun of it or his family wants a swimming pool, that will have to wait. If someone wants a modernization loan to dress up his house, we'll probably say 'so sorry'--but if the roof is leaking, or the family needs an extra room for the twins, then there's no question about it."

In being selective, Peterson's officers are told to consider the ultimate purpose of the loan, and its usefulness to the community. "We're not supposed to be humanitarians," says he. "But we like to feel that we are and not talk about it."

The Sears of Banking. It has been that way with the bank ever since the legendary Amadeo Peter Giannini opened its golden gates in 1904 in a remodeled saloon. Giannini, a Genoese immigrant's son who had prospered in the produce trade, found the banking business patrician and made it proletarian. Catering to the unfulfilled financial needs of the little man, the modest homeowner and farmer, the bank lived through many crises, emerging from almost every one richer than before. It grew rich along with California.

Today, the Bank of America is an all-round department store of finance for 8,000,000 regular customers, to whom it is variously mortgage lender, investment counselor, estate trustee and auto creditor. Its money tree spreads 902 branches over the U.S.'s most populous state, provides the cash for almost half of its community bond issues, as well as for large parts of its agriculture and aerospace, electronics, transportation and movie industries. Through 44 foreign branches from Bangkok to Lima to Vienna, the bank is rapidly expanding its international reach.

As chief executive of this clearinghouse in money and ideas, Peterson is responsible for prudently spending, lending and investing the bank's assets of nearly $18 billion--more than the combined gross national products of Ireland, Israel and Norway. Though its customers reflect both mass and class, the Bank of America is by tradition and instinct more interested in small, individual customers than large corporations. "We will never be the Tiffany of banking," says Peterson. "We are the volume bank, the Sears, Roebuck of the industry."

From Chaos to Order. Peterson would never have reached the president's walnut-paneled office on San Francisco's Montgomery Street had he not, earlier in life, been willing to walk out on what seemed more promising careers, take some very unbankerish risks, and prove repeatedly that he could act wisely under stress.

Born to a big family in Svenljunga, Sweden, he was brought as an infant to the San Joaquin Valley by his childless aunt and uncle, who adopted him. He worked his way through the University of California, studying commerce. His first job was with the Commercial Credit Co., an installment-loan firm, which dispatched him to Mexico at a time of crisis. Mexico had gone off the gold standard and devalued the peso, and Commercial Credit's house of paper was collapsing. Peterson managed to collect on almost all loans owed to the company, gained a reputation as a man who could bring order out of chaos; later he was sent to rescue the company's tottering operations in Cuba and, during the Depression, in the Midwest. At 32, he was the clear successor to the president. Then he quit.

The Bank of America had heard of his troubleshooting virtuosity and made him a bid in 1936. Peterson accepted because the bank offered broader horizons and "it was an organization in a hurry." He rose rapidly as a protege of Giannini and his son Mario, in 1946 was offered three top assignments. He accepted the toughest one--taking command of a subsidiary, Allied Building Credits, which was in grave trouble. For six months, Peterson paid little attention to the hour of the day or the day of the week, but worked straight through, hoping to set an example for his subordinates. "It may be trite," he says, "but the speed of the boss is often the speed of the gang." Within 2 1/2 years, Allied Building Credits was flourishing.

Peterson's reward was a vice-presidency of Transamerica Corp., then a Giannini-controlled firm. But in 1955, several years after the death of Mario Giannini,* he left the Bank of America, moved to the Bank of Hawaii, soon became its president. In six years, he more than trebled the bank's earnings, built it from the 155th biggest U.S. bank to the 92nd. "Get away from desks and get out to meet your customers," Peterson exhorted his subordinates. He drove his aides hard, even had them work New Year's Eve to rush out the bank's annual report, which was invariably read by other bankers because it was the first to reach the mails. Peterson also added 22 branches in such places as Guam and Kwajalein, introduced the bank's successful credit card, and--like any B.O.A.-trained banker--pushed small loans throughout his bank's system. To competitors he said, only partly in jest: "I don't want to take away your business; I just want to get my fair share of the new business--like 80%."

The Bank of America's directors urged him to come back as vice chairman in 1961. He did, and became chief executive in 1963. Since then, he has enlarged the bank's resources more than 20% by doing on a billion-dollar scale what he had started in Hawaii. Together with Chairman Louis Lundborg, he expanded "BankAmericard," the world's most popular credit card, which is now held by 2,500,000 people, recently became franchised (under different names) to banks in a dozen cities, and is not only enormously profitable in its own right but brings many new accounts to the bank. Next year he intends to increase the bank's number of foreign branches--notably in Latin America and Asia--by one-half.

Like a professional athlete, Peterson makes hard plays look easy, is constantly toning his skills. He took a speed-reading course, nips up through 15 minutes of Royal Canadian Air Force exercises every morning, has trained himself to relax by walking or swimming half an hour a day. After breakfast with his second wife,* his houseboy drives him from his hillside home in Piedmont, a fashionable suburb above Oakland, to the bank by 8:45 --and then begins a steady round of conferences with officers of the bank, corporations and Government.

"Uncommon Men." To Peterson, banking is not cold cash and statistics, but millions of personal relationships. He remarks that every minute of every working day, 30,000 Bank of America employees meet the public face-to-face. He urges all of them--from vice president to cage teller--to call each customer by name. Says he: "A man's name is music to his ears, and it's awfully hard to be unpleasant and call somebody by his name." He is casual about rigid rules or regular hours, advises Bank of America executives: "No one gets Brownie points for coming in at 7:30, but you do get points for getting the job done."

Peterson also tells his colleagues that they have to be "uncommon men"--combining business realism with the characteristics of the dreamer, the idealist and the nonconformist. In his lonely position at the pinnacle of the great corporation, he is gregarious and outgoing. His six-foot frame comfortably encased in handsome worsteds, his face looking much less than his years, his smile as shiny and solid as a new silver dollar, Rudy Peterson is himself quite a bankable asset for the Bank of America--and the nation's economy.

* The only descendant of the late A. P. Giannini connected with the bank today is his daughter, Claire Giannini Hoffman, a director.

* His first wife died in 1960. Peterson married Mrs. Barbara Lindsay, a widow, in 1962, and on the wedding trip to Arizona took along her four children and his grown son and daughter, as well as his son-in-law. In all, it was a honeymoon for nine.

This file is automatically generated by a robot program, so reader's discretion is required.