You know the Italian economy isn’t doing that great when at Kane we can say that there’s a new lender of choice and it’s probably not a bank that you would of guessed, even if we gave you all day to take a guess. Before we jump the gun and tell you how it happened let’s just put things into perspective.
Could you imagine even asking these guys to hold the door for you?
As you may or may not be aware of, Bank of America Corporation (Bank of America or BofA) is the second largest bank holding company in the United States with over $2.2 trillion dollars in assets and while the company’s name may be synonymous with American banking it’s important to look back to the company’s roots. Dating back to 1904 the bank’s initial incarnation was founded by Amadeo Gianni as the Bank of Italy in San Francisco, by 1922 they founded Bank of America and Italy by purchasing Banca dell’Italia Meridonale.
By 1927 the Bank of Italy branches were consolidated with Liberty Bank of America resulting in the Bank of Italy National Trust & Savings Assocation. By 1928 Gianni ended up growing the business until the passage of the Bank Holding Company Act of 1956, then BankAmerica Corporation was formed for the purpose of owning Bank of America and hence, something resembling the current Bank of America Corporation.
So given the current restructuring and deleveraging of the Italian economy it may be sensible to see that capital consolidation has led to a possible foreign bank holding company becoming the lender of choice for small business owners in Italy right? Wrong.
What about asking for a favor you're probably going regret?
The exact opposite has happened, organized crime ended up tightening its grip on the Italian economy. And when we say organized crime, we’re talking about crime groups like the actual Sicilian Cosa Nostra, the Calabrian ‘Ndrangheta, and the Naples Camorra.
Now generating over $178 billion dollars in profits and $65 billion dollars of liquidity the mafia has been lending out money to thousands of small businesses all over Italy. Financially squeezing these companies dry by operating as corporate loan sharks.
The typical people borrowing money (i.e. being extorted) are middle-aged shopkeepers and small businessmen who are struggling to keep their family businesses afloat. Grocers, clothing store owners, florists, and butchers are the typical victims while the mafia relies on extremely high interest rates and thuggish recovery methods to fuel their growing profits. It’s literally become a national crisis on the Italian peninsula which is having a macroeconomic affect across the whole country’s economy and thanks to the fact that 56% of the Italian banks have tightened their lending requirements in the past three months we’re probably not going to see a change anytime soon.
