III
Of all the deals that Aaron Giebel had made from his base of operations in Midland during the boom, the hardest part, by his own account, was figuring out which one was the worst.
Had the five planes, and the three full-time pilots to fly them, really been necessary? Should he have bought the Brangus bull for $1 million? Should he have paid cash for the thousand head of hybrid cattle? Did he think it through as carefully as he should have when he took a multi-million-dollar position on a method of breeding “super cattle” by hormone injection and embryonic implant? Had it been reason enough to pay $17.5 million for the seven-thousand-acre ranch in El Indio with the palm trees that had been flown in and the private runway and the breathtaking view of Mexico when he used it largely for entertaining and hunting? Should he have planted the twenty-eight thousand pecan trees when the only thing he knew about pecans was that “they’re all named after Indians?” Had it been such a wise thing to go into the home construction business with his former son-in-law and end up with a loss of $1.2 million? Had he really needed the trucking business that cost him $4 million to move drilling rigs in and out of the oil field? Had he been slightly impulsive when he decided to open five additional offices in San Antonio, Oklahoma City, Denver, Calgary, and Lafayette, Louisiana? Had the revolving $24 million line of credit over at the First National Bank of Midland truly been a good thing after all? Was it possible to have built a new house that wasn’t thirteen thousand square feet?
It was all so hard to know.
By the time you added it up, Aaron Giebel’s losses from boom to bust totaled somewhere around $55 million.
He had filed for bankruptcy, and by 1988 he was back on his feet again, in the oil business, although on a far reduced basis. He still had his wife and he had his health, which was more than he could say for a lot of his friends, who lost both when the absence of money for impulse trips to Paris suddenly made them seem a lot less attractive. He was the first to admit there was no justification for what he had done, except that he had gone literally mad in Midland. But he spoke about it with candor, as if he saw a danger in what had happened that needed to be exposed, materialism and a desire for money and wheeling and dealing that became as impossible to resist as any addiction.
“There was a euphoria round here that was almost like an opiate,” said Giebel. “It was an opiate. And I succumbed to it. And I don’t know a guy who did not.
“You just get caught up. You get caught up in the euphoria, like you’re sitting down at the gambling table.”
For a period of time Giebel had actually resisted it. By nature he was a careful man. He had a round, soft face with eyes that seemed incapable of anger, and there wasn’t anything remotely swaggering about him. He spoke softly, without the twang that in some seemed to reverberate from one end of the state to the other. Born in Fort Worth, he had moved to Midland after college and ultimately became the chairman and chief executive officer of the MGF Oil Corporation. The company grew enormously during the boom, and when Giebel resigned in 1979 he did so with millions of dollars’ worth of stock. He had resolved not to build another oil company, but he did, A. F. Giebel Petroleum Consultants. With the price of oil skyrocketing, Giebel found himself worth $100 million. He still restrained himself from other investments, but as he saw friends everywhere expanding, he wondered if he was not crazy to do the same. “I felt that I was behind the progress curve. I was demeaned by my peers—‘Giebel, you rich dog, what are you gonna do, eat it?’”
That got to him. In Texas, no man was more of a coward than the one who was chicken shit with his money.
So he had jumped, thoroughly convinced that all the odds were in his favor. And how could he lose? Not when the price kept going up and up, not when just about every banking and investment institution in the country said oil was going to go to $65 a barrel, not when Giebel Petroleum had drilled 195 wells with a fantastic 55 percent success ratio. He had the Midas touch. The moment was suddenly at hand not only to make ungodly sums of money but to build an empire, a lasting monument. “I made fast decisions. I just got to wheeling and dealing. . . . ‘I’ll have a dozen of these and a half dozen of these.’ I got in on so many deals. . . .
“It changed me, because I was one heck of a businessman,” said Giebel. “I became a fast-moving promoter type.” And so it went, from oil exploration, which he knew a great deal about, to loyally following the creed of Texas entrepreneurship during the boom: the less a man knew about something, the more money he was obligated to sink into it.
In 1981, with oil hovering around $40 a barrel, any idiot could have made money from it. But hitting big off something you didn’t know the first thing about had special meaning. Brangus bulls, pecan trees, trucking, home construction—they all became shiny new toys in Aaron Giebel’s ever-widening collection. Just hearing him talk about the technique to breed super cattle was enough to make the hairs on the back of the neck stand up and wonder how this man, with dual degrees in geology and petroleum engineering from Texas A & M, could have spent vast sums on a scheme that sounded as if it had been borrowed from one of those comic books about the possibilities of life in the twenty-first century. Giebel wondered that himself.
He had gotten into it through a “veterinarian friend.” The way it worked was that he bought “super cows” that cost $17,000 apiece. These super cows were injected with hormones to increase ovulation drastically and cause the production of multiple embryos. The embryos were removed and placed in common cows, who would then produce super calves. Every time his veterinarian friend came back and said he needed just a little more money before these Frankensteins dominated the cattle world, Giebel dutifully anted up.
He lost $7 million on the deal.
“We’re talking failure to the square root,” was the way he bluntly described it.
Giebel had also got caught in the classic Texas trap of who could be the most flamboyant and outrageous, flipping a coin once with a fellow oilman to see who would get the drilling rights to a tract near San Antonio. Giebel won. Frankly, it was hard to see how this method of investment differed from how he approached all the other ones he was making. If anything, it may have been a little less impulsive. If Giebel had been the only person acting out of character in the quest for crazy-quilt expansion, it would have been more difficult to excuse or explain his actions. But he wasn’t.
From 1973 through 1981, when the price of oil went up more than 800 percent, he and thousands of others made the fatal error of forgetting that every ounce of their success was due to the geopolitics of the Arab oil embargo and the Carter energy policy and the Iranian Revolution. They had actually thought that they themselves had something to do with what was happening and were somehow in control of their own destinies. Over at the country club, or in enormous corner offices with picture windows that seemed to deserve something more than wide-angle views of scrub brush and mesquite, they confused luck with business acumen. Instead of understanding that they were the beneficiaries of history, they began to believe they were the creators of it.
In Odessa, it had been a matter of riding the boom to the hilt and just trying to keep up with it. In Midland, it had been a matter of the town’s becoming even more improbably tall than it already was, the Brasilia of the United States with the linear coldness of Gotham, a town where all human scale was rendered insignificant by the sheer magnificence of achievement. Of all the places that got caught up in the frenzy of the oil boom in those days, Midland may well have been the most incredible.
There had been many indications that things were getting out of hand, but the one that confirmed it was the opening of a new business east of the airport. If you had something to sell, odds were you could do it in Midland or Odessa; at the height of the boom Odessa ranked second in the country in retail spending per capita and Midland fourth. After all, this was an area where people had developed an insatiable craving for boats, big, big boats, even though the nearest water was a hundred miles away. But it was
still hard to predict the success or failure of the new Rolls Royce dealership. The country was in the midst of a recession in the summer of 1980 and interest rates were close to 20 percent. But that didn’t matter. Even before the dealership opened, it had made about seventeen sales for its line of cars, which ranged in price from $85,000 to $200,000.
A year and a half later, the Rolls Royce dealership was barely noticed. “We’re experiencing a transition—from a town to a city,” said I. David Porras, a developer who tooled around in a Lear jet with red leather seats and painted black on the outside. Porras announced plans for a fifty-four-story office building. The First National Bank of Midland announced plans for two forty-story-plus bank towers. MGF Oil Corporation also announced that it was entering into a venture to build a forty-story-plus world-class luxury hotel to be designed by I. M. Pei.
In 1982, according to one report, the value of nonresidential construction that had been legally permitted in Midland led the state of Texas, even ahead of Dallas and Houston, both of which were undergoing incredible booms of their own. The 3.2 million square feet of office space actually under construction in Midland was equivalent to the amount in San Antonio, Fort Worth, and Austin combined. The population of these towns was twenty-two times that of Midland.
As real estate was booming, so was banking. The First National Bank of Midland, the great financial and moral beacon of the town for over ninety years, its $1 million corporate art collection with works by Thomas Moran and Norman Rockwell the essence of conservative good taste, had suddenly become a casino ten times grander than anything in Atlantic City or Vegas. Junior officers were making loans of up to $1 million without any review. Careful checks of collateral became almost laughable and utterly contrary to the ultra-competitive, machismo attitude that pervaded the banking industry in Texas. One of First National’s highest-ranking officers wasn’t above taking undisclosed interests in some of the ventures in which the bank lent money. As it turned out, the reckless, freewheeling ways of the First National Bank of Midland made it a trendsetter in the American banking industry during the eighties.
In 1980 and 1981, the assets of the bank had more than doubled in size, to $1.6 billion, and loans tripled as well, to $1.1 billion. The bank, the 205th largest in the country in 1976, was the 115th largest by the middle of 1982 and the largest independent bank in the state of Texas.
In February 1982, the bank’s economic research arm estimated a 13 percent increase in the number of oil rigs and concluded, based on careful consultation with the country’s leading economic experts, that the price of oil would increase at least as fast, if not faster, than general U.S. inflation for the next ten years.
It was around this time that Aaron Giebel had begun work on his house—although calling it a house was the same as describing the Statue of Liberty as a figurine. It really wasn’t a house at all but a private kingdom. Initially his wife was against building it, but Giebel pushed it because it was a wonderful symbol in a part of the country where subtlety was owning an eight-seater prop instead of a Lear. It was, as he said, “a salute to our success.” The thirteen-thousand square-foot house had a pool, a tennis court, a gazebo, two Jacuzzis, a workout room, ten bathrooms, and a special wing with a video room for his seven grandchildren. It cost $2.4 million.
Along with the other things going on in Midland—the trip to Palm Beach that one oilman had sponsored for himself and several hundred of his friends in a chartered 747, the announcement that the Rolls Royce dealership had received a Silver Lady award for being one of the three top Rolls dealers in the United States—Giebel fitted comfortably into the rhythm of things.
And then it had ended. Just like that. Not with a warning, not in a way so that those who got caught had only themselves to blame. One day the lights were on; the next day they were off. Demand for oil began to slacken significantly in 1982, and the result was a glut. “[The price] just dropped, like off the side of a building,” said Giebel. “We were like children. I said, ‘Oh, my God, it can’t stay like this. It can’t really be happening, the situation will rectify itself.’”
Almost as soon as Aaron Giebel had finished his house, he knew he was going to have to sell it to meet cash flow problems. And it was hard to remember a worse day in his life than the one when he turned to his wife and simply said, “This thing’s got to go.” He sold it without ever moving into it, at a loss of $700,000. In a year, from the end of 1981 to the end of 1982, his empire was in ruins. Thousands of other empires were in tatters also, including that of the seemingly untouchable bank that had financed him.
At the end of 1981, a record 4,530 drilling rigs were running in the United States. Ten months later that number had dropped to 2,379.
The First National Bank, which had dished out loans as freely as a doctor gives out lollipops, was in grave trouble. In July and August 1982 alone, deposits had dropped $150 million. An examination was quietly begun by the Office of the Comptroller of the Currency off the bank premises to preclude local panic. Every day, credit files were flown from Midland to Dallas, where examiners pored over the loans. The examination, done in the summer and fall of 1982, turned up startling news: $108 million in loans—8 percent of the total—was overdue; $357 million in loans—26 percent of the total—did not have sufficient documentation. To the examiners, the situation was crystal clear: the bank had become a running crap game.
The bank, which on its seventy-fifth anniversary had received a resolution from the Texas State Senate congratulating it for its “active, aggressive and effective” role in the community, became an example of all that had gone terribly wrong. The town’s mightiest symbol suddenly found itself on its knees because of the blindness of its greed and its utter lack of caution.
In the bank’s dire need for cash to keep it afloat, everyone became a potential pawn, even its best, most loyal customers. They trusted the bank blindly—stupidly, as it turned out. When asked to jeopardize millions of dollars of their own money to keep the bank going, they did so, still rooted in the ethos of the fifties, when you just gave help with no conditions attached when a friend asked for it. But this was the eighties, when nothing was sacred—except, of course, the making of money and the protection of glasshouse empires at all expense.
At the end of 1982 the bank, desperate to show a profit, proposed a whirlwind deal to sell its headquarters to a partnership of seven customers for $75 million. These men, either personally or through their companies, had over $200 million in loans from the bank. The way the deal was structured they would be able to do it without putting up any significant amount of cash, and there might also be some nice tax advantages in it. Beyond that, all of them felt a certain amount of moral indebtedness to the bank since it had helped them make their fortunes. Several of those who signed promissory notes did so without reading the paperwork.
“Come on, you know me better than that,” oilman Tom Brown, who had $160 million in loans from the bank through his company and had executed three promissory notes for $6.25 million, told a lawyer in subsequent court testimony. “I did not read any papers. I wanted to get back home, for one reason. . . . It was New Year’s Eve.”
The bank used the alleged profits from the sale to show a profit in 1982 of $11.9 million instead of a loss. The Securities and Exchange Commission later said that those figures were “false and misleading,” in part because the sale price for the headquarters had been overvalued by as much as $40 million. But for the time being, the First National Bank was still afloat. In June, however, the results of another examination by the Office of the Comptroller of the Currency showed that 39 percent of all of First National Bank’s loans were in trouble.
The bank was dying, but still the people of Midland, and even Odessa, refused to believe it. There was an air of unreality to it all, as if the situation would somehow, some-way, magically fix itself.
In the backs of people’s minds there had to have been days during the boom when they looked out at their world, a world so drenched
in materialism that even Ronald Reagan might have gasped, and wondered when, like a stage set, it was all going to disappear, when the Lears and the Rolls Royces and the eighteenth-century antique desks would eventually have to go back into their boxes. But never in a thousand years did anyone in Midland, in Odessa, in all of West Texas, ever think that the bank would crumble. Sure, it would take a few hits, just like everyone else did. But if anything could withstand the bust, it would be the First National Bank, the institution that had made Midland unique and had set its course from the very beginning.
“It was more important than the Father, Son, and the Holy Ghost,” said attorney Warren Burnett. “They truly thought it was untouchable.” But as for many other institutions in the eighties, greed overcame history. On Friday evening, October 14, 1983, at 6:13 P.M., the First National Bank was declared insolvent by the Comptroller of the Currency. In terms of the size of assets, the bank’s failure was second largest in U.S. history.
When the First National Bank of Midland went down, it certified not only that the boom had ended, but that a way of life had ended. Its failure was a precursor to the falls that would later inevitably take place all over the country, on Wall Street in New York and State Street in Boston. “It was like dropping an atomic bomb on a town,” said former mayor Hank Avery, and the explosion was felt in Odessa. For perhaps the first time ever, there was no gloating over the misfortunes of Midland.
“It was frightening,” said Lanita Akins. “It brought you back to reality and made you realize that the boom was over and that it wasn’t going to turn around the next day. I remember gasping for breath.”
But Aaron Giebel, who had been forced to file for corporate bankruptcy when the bank had foreclosed on several of his oil properties, had a different view of it, a view colored by his own experiences, but also by the craziness of the times that he had lived in. “There is no question the banks were tantamount to prostitutes during the boom,” he said, recalling how representatives of banks all over the country had called up begging to do business with him.
Friday Night Lights Page 23
