- Ed Sharpe has some Technical Information.
- Epilog
As hinted above, in Bank of America in the early 1950s decided to automate their rapidly expanding check handling business. Can you imagine a time when you could take a piece of paper of any practical size and color, hand write your bank name, the payee, the amount, and add your signature (maybe legible) and use that as your bank draft or your check?
Eventually this "document" would arrive at your bank for someone to try to process. Bank of America had set up a chain of banks in California, and their first problem was to try to determine from your signature which branch to forward this document to for further processing. (It was impractical to send the account summaries of each branch to all other branches on a daily basis.)
In any case the system was large, shaky, error prone, tardy, and very labor intensive. A number of bank employees figured there had to be a better way, and Al Zipf's ideas were effective and deemed worthy of further study.
The following is an unauthorized synopsis of the first 100 pages of "King of the Seven Dwarfs - General Electric's Ambiguous Challenge to the Computer Industry" by Homer R. Oldfield, available from Amazon and IEEE.
The answer is not on this web page :-( You need access toThe Bank of America was good at banking, had deep enough need and pockets, but did not claim automation expertise. They hired Stanford Research Institute of Menlo Park, CA to design a system for them. (Stanford Research Institute was "requested" by Stanford University (not its real name) to not use their name, so the name SRI was chosen and is still used.)
Among other problems that SRI addressed was the fact that there was no effective machine (computer) method of reading documents. (And OCR is still not reliable enough for financial transaction.) Ken Eldredge of SRI invented the MICR method of encoding and reading data from documents - this method prevailed over other competing methods - the American Banking Association adopted the MICR method.
At the same time, transistors became generally available for practical computer use, and SRI proposed a system using these new transistors instead of the vacuum tubes of the era. General Electric prevailed in suggesting general purpose computers instead of hard wired special purpose logic, which it designed, built & programmed.
And machines for encoding documents with MICR, and machines for reading/sorting documents had to be developed. SRI made a suitable prototype that showed sufficient promise for the Bank of America to want up to 36 commercial versions.
SRI did not want to get into the manufacturing business, so Bank of America requested major computer manufacturers to bid on making 30 banking systems for them based on SRI's ideas and prototype.
To everyone's surprise, the General Electric Computer Department, which did not exist, won the $31,000,000 contract. General Electric corporate headquarters didn't know of the bid, and didn't know of this new "department". The same day the contract was signed, the bid team received a stern letter for G.E. president Ralph Cordiner stating "Under no circumstances will the General Electric Company go into the business machine business."
The General Electric Computer Department chose Phoenix as headquarters, had a manufacturing building built, refined the prototype, built and/or OEMed the system elements, delivered the first system, passed acceptance tests December 31, 1958. Some "tightening up" of the equipment and operating procedures was necessary to reach the design goal of 55,000 accounts/day.
B of A "encouraged" their clients and others to use preprinted checks using the new MICR along the bottom edge. (Look at your current checks!)
By March, 1959, the machine(s) were processing 50,000 accounts/day and on September 14,1959, the Bank of America declared the system "operational".
Now what should the brand new G.E. Computer Department do?
Cover | 
Fly Leaf | 
1st Page of Table of Contents | 
1st Page of Preface |
And some scenes from my tour of the Bank of America Museum at 1655 Grant, near Clayton, (BART Station) in Concord, CA. For passes & group tours call Sharon Lyons, 925-675-1068
This machine was found in the basement of the BofA building in San Francisco - much the worse for wear and rough handling. It is the last survivor of over 30 machines delivered to BofA in the late 1950s. It was lovingly restored to like original appearance by over 50 BofA employees - some of whom had been through the whole life cycle from conception through replacement.
Warren Prince, of the late G.E. Computer Department, pointed out "The Development of the ERMA Banking System: Lessons from History", by Amy Weaver Fisher and James L. McKenney and was printed in the IEEE Annuals of History of Computing, Vol 15, No. 1, 1993. (A PDF version.) This document focuses on the development of the ERMA prototype by Bank of America and Stanford Research Institue (now SRI) during the period of 1950 to late 1955. SRI developed a system with "8,200 vacuum tubes, ... , two magnetic drums, and a refrigeration system." There are indications that this system was not programmable, requiring rewiring if procedural changes were needed by the customer, BofA.
Unfortunately, 1955 was a turning point year for computers. Transistors became competitive in price with greater reliability, and core memories could be competitively manufactured with far greater speed. No serious computer was designed hereafter with tubes and drums such as the prototype.
In December 1955, the Bank of America started to look for a company to manufacture the ERMA systems for them. SRI did not want to get into the manufacturing business. BofA contacted IBM, RCA, Texas Instruments, and others.
Some mavericks in General Electric won the manufacturing contract, and wanted to use the new technology. SRI had a working prototype, but with now outdated technology. GE engineering was uncomfortable with SRI which was pushing to have the prototype technology used. GE implemented the ERMA computer as a general purpose computer with the new technology.
On September 14, 1959, BofA and General Electric showed four of the proposed 30 systems running in a transcontinental closed circuit TV press conference. These 4 systems were capable of processing over 220,000 customer accounts in the Los Angeles area. The machines were using the newly developed and newly standard E13B magnetic ink font that GE had developed which was more human readable. This E13B font is used on the bottom line of your checks today.
Patent # 3,000,000 covering reading of magnetically encoded documents was issued to K. R. Eldredge of SRI and assigned to General Electric. 1 megabyte .pdf file.
| This is the E13B font which is the banking standard and first used on the ERMA. |
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Epilog
In any case, BofA went with IBM.
A short quote from "King of the Seven Dwarfs"
BofA ordered the 360/65 and took delivery in July, 1966 with conversion scheduled to be completed in December 1966. But conversion was deferred as a result of IBM's continued delay in providing a multi-tasking operating system and severe tape drive problems. Situation had not improved by spring of 67. Ray of hope came in late May 67 with the successful "start" of the demand deposit conversion, the banks largest ERMA application.But damage had been done - delays had a direct economic impact on the banks profit amounting to $1,471,000. Total impact was estimated to be on the order of millions of dollars offset partially by IBM's contribution in the form of paying all equipment costs, providing professional help valued at $2,700,160 and due to the fact that IBM during the entire period maintained an account balance of more than $14,000,000 in the bank.
Footnote 22 - "During the conversion, IBM had invested 66 man years of field engineers and 10 man years of tape specialists to make the tape system operable. After the conversion, IBM accepted the GE equipment as a trade in, allowing credit for the remaining book value of the ERMAs. A first for IBM, the allowance was kept confidential to avoid starting a trend."
George Snively says (January 2005)
If you have comments or suggestions, Send e-mail to Ed Thelen