Shortfall

by Alice Echols

  Making It. (Author’s archive)

  Willard, the youngest of Walter’s brothers, worked for years as a gas station attendant, and then turned to raising poultry in his backyard. Eventually he got a job as a conductor for the Pikes Peak Cog Railway. When my family visited Colorado Springs in the mid-fifties we visited Willard and his wife, who lived in a rickety house on West Colorado. (Author’s archive)

  Lula and Eva may have understood this. Lula’s hard-nosed strategy of absenting herself always brought Walter around, at least for a while. And Eva’s willingness to play hardball worked as well. In the summer of 1928, after Walter decided impulsively to meet up with his family in Europe, Eva sent him a telegram while he was on an ocean liner. He had charged her with sending him telegrams about each day’s deposits and withdrawals at the City, and one day she sent him this terse wire: “Forty Seven and Twenty Eight. Leaving Fifteenth Job. Terry.” When he returned her desk was indeed empty.

  This photograph of Dorothy was likely taken in 1927, after a year spent at boarding school. (Author’s archive).

  A flapper-like Dorothy, post-boarding school. (Author’s archive)

  For a while during this Eva-less period Walter showered Lula with gifts, including a Model 640 Packard Deluxe Coupe. But then Walter insinuated himself into Eva’s life again. Eva had moved to Denver, where she was working as a stenographer. He discovered she was living in the Washington Arms Apartments, just a short walk from the Brown Palace, where he now kept an apartment year round. Walter insisted she quit her job. To dissuade her from being a working girl in anybody else’s office he began depositing $350 each month into her bank account. Maybe this was when he went on a spending spree, buying Eva an automobile as well as furniture, a baby grand piano, and Oriental rugs—perhaps the cousins of our very own rugs—with which to outfit her apartment. In May 1929, three weeks before he and Lula would head east for their daughter’s graduation, he composed a brief note to Eva in advance of what he promised would be a proper letter. “It isn’t too good to be true,” he wrote. “It is true. I am going through with it.” With Lula and Dorothy in Europe that summer he could have run off with Eva. Instead, he presented Eva with a $1,300 diamond ring. True to form, Walter was soon sending Lula ingratiating telegrams, on this occasion to see if she wanted him to get the wheels on her new Packard nickeled. Once again he met up with his family in Europe. When the Davises returned home that October Lula’s Packard had been nickeled and there was a brand-new Cadillac sitting in front of their house.

  According to a letter from police chief Hugh Harper to J. Edgar Hoover, Walter never sent this letter to Eva. (Photostat copy, Bureau of Investigation File 62-27247; author’s archive)

  Ten days after the Davises returned to the Colorado Springs, Black Tuesday, the most devastating of the late October stock market crashes, happened. In those parts of the West that became the Dust Bowl—the Springs was just outside it—the downturn in the economy happened before Wall Street cratered. Still, the October 1929 stock market crash registered in Colorado Springs, where agonized investors badgered their brokers with telephone calls and crowded into their brokerage offices.67 Throughout the nation, stock exchanges the day after the crash were filled with “perspiring, white-faced people.” Just as quickly, many people decided the market crash signaled only a temporary downturn. The Springs dailies even joked that local investors got a kick out of bragging about how much they lost because it gave them an excuse for dodging their debts and their charitable obligations. Less than two weeks after Black Tuesday the big news in the Springs wasn’t the crash but the imminent arrival of Alexander Film Studio, which had announced it was relocating to the Pikes Peak area, where it anticipated having an annual payroll of $60,000.68

  Inside the Davis family there was some belt-tightening, but Walter continued to deposit $350 each month in Eva’s bank account and to pay rent on his apartment at Denver’s Brown Palace hotel.

  Even before the economic downturn, Walter had to have been concerned about the outsized costs of mollifying the three women in his life. A partial list of some of his biggest expenses from 1926 through 1929 reveals that what he spent on them alone came to more than $33,000, that is, $463,170 in today’s dollars:

  3 years at Knox School: $8,100 ($113,687)

  2 European trips, 1928: $6,000 ($84,213)

  2 European trips, 1929: $5,000 ($70,177)

  1929 Packard coupe (after trade-in and with nickeled wheels): $2,826 (nearly $40,000)

  1930 Cadillac: $3,000 ($42,115)

  Outfitting Eva, 1929: $4,000 ($56,456)

  Eva’s maintenance for one year: $4,200 ($56,142)

  One hedge against the precariousness that these expenditures introduced into his life was life insurance. Beginning in the 1910s Walter had started to buy premium policies that offered “universal” coverage, that is, they paid out no matter the circumstances of death. The earliest records I have go back to 1918. Over the course of the next three years he took out a $5,000 policy each year, which seems prudent. However, from the mid-twenties onward he seemingly could not buy enough insurance. By 1930, he had accumulated more than a half million dollars’ worth of life insurance, with an annual premium cost of about $6,000. That year the Denver Post carried an article entitled “Rich Coloradans Carrying Millions in Life Insurance.” In a state that could claim many a millionaire, including Spencer Penrose, Bert Carlton, and Oliver Shoup, the Post reported that Walter Davis was tied for second place on the list of the most-insured men in Colorado. He shared that spot with another North End resident of the Springs, a Texas-born oil man whose family enjoyed the services of two maids, one servant, and a nurse. Charles Tutt II came in two positions below them, at number four.

  For Lula and Dorothy the Post story must have felt vindicating, as if it proved that it was only the stuffiness of Springs society that kept them from being part of the town’s fashionable set. Would Lula have kept this clipping folded neatly inside one of her diaries had she not been proud of her husband? For at least some of the area’s working people, his heaps of life insurance likely seemed further proof of Walter Davis’s financial acumen and solidity. After all, he was a self-made man who had become enviably rich. Yet surely there were other people—members of the town’s elite—who were brought up short by this news item. Why was it, they must have wondered, that the head of a local building and loan association, even one with 3,600 depositors, was carrying more than a half million dollars’ worth of life insurance?69 But if the story did give them pause, it was likely short-lived because, after all, Walter Davis was not their banker.

  Part Two

  4

  Slipping Through Your Fingers

  By the time the local building and loan business began to implode in December 1931 the country had been in a depression for over two years. Its effects were everywhere as banks failed, factories turned idle, shops were shuttered, houses were abandoned, and more and more shantytowns began to dot the landscape. Individual experience varied enormously, as some people got by with careful budgeting while others got by through eating every other day, wearing clothes that turned to rags and shoes with makeshift cardboard soles. Some people, of course, did not get by at all. Despite real differences in circumstances between working people and professionals, few people were entirely immune to worry, especially as they came to realize that the economy was broken, frozen.

  In September 1931, U.S. Steel announced a wage cut of 10 percent, and not long thereafter General Motors, Bethlehem Steel, and U.S. Rubber followed suit. Henry Ford had already fired 75 percent of his company’s workforce, but he, too, slashed wages. By 1932 American factories were producing less than they had in 1913. Automobile production was only a quarter of what it had been before the Depression. Steel factories were operating at 11 percent of their capacity. By the end of 1931 nearly 2,300 banks had shut their doors.

  Herbert Hoover, who had been elected president in 1928 with widespread support, had a stellar record in humanitarian relief i
n Belgium and France during World War I. But now that he was president and there was talk of starving Americans, he turned belligerently defensive, denying that any Americans were going hungry. As for all those men selling apples on the corners of American cities, it didn’t mean that the economy was tanking. They were there, he said, because selling apples proved to be more profitable than their previous jobs. Hoover believed in voluntarism, not government solutions. Rather than devising ways to fix the system, he took to applauding the superiority of free enterprise over communism. Meanwhile, as Hoover celebrated the American way, the United States was shedding jobs, so much so that when the Soviet Union, the one country not in depression, advertised six thousand job openings, one hundred thousand Americans applied.1

  Even formerly well-heeled professional men—doctors, dentists, and lawyers—found they had to tap their depleted savings to pay for necessities. As professionals, they discovered that when it was a choice, say, between groceries or a trip to the doctor most people felt there was really no choice. Take the case of the doctor in Youngstown, Ohio, whose income one week was a one-dollar bill. A friend of his, a lawyer and an astute chronicler of the Depression, recalled watching him carefully smooth the bill out on his desk. And there was the lawyer’s dentist, who begged the lawyer to keep sending his family in for visits, even if he could not immediately pay for them. As for salesclerks, it was not unusual for them to learn that their pay would be solely based upon sales commissions.2

  As elsewhere, merchants in the Springs, scrambling to pay rent, slashed prices on their merchandise. With property values in El Paso County plunging, those who worked in the building trades and in real estate found themselves sidelined, with many workless days. Even in Colorado Springs the inventory of vacant houses increased, and many were in such a state of disrepair that real estate agents despaired of ever being able to move them.3 The collapse of the real estate market was a national problem, and it was especially tough on building and loan associations, whose assets were meant to be primarily in real estate. When it came to police and schoolteachers, they counted themselves lucky if the worst that happened to them was a reduction in pay; but some were laid off and joined the already swollen ranks of the unemployed. A local Springs group calling itself the Organization of the Unemployed sought to relieve joblessness with its “Give a Job” campaign. You might imagine that in a town such as Colorado Springs, with so many wealthy families, this campaign might have had an impact. However, in January 1931 the group’s secretary reported that wealthy families had rarely made use of their registry of 821 unemployed men. Middle-income and even poor families were the ones, he claimed, who hired their men.4

  America’s agricultural sector had been in a slump since the end of the war. If the twenties had been boom years for some Americans, for plenty of farmers they had been lean years. Toward the end of the twenties, Colorado’s growers, who raised everything from sugar beets and cantaloupes to cauliflower and beans, rebounded. But the recovery was short-lived and soon the combination of drought and the global collapse in the price of agricultural goods made for desperate times. In the more rural parts of El Paso County, only a hundred miles from the dust bowl, officials noted evidence of both starvation and what they termed “comparative nakedness.”5

  In the wake of the Wall Street crash of October 1929 people who had invested heavily in the stock market discovered that their net worth was a fraction of its former value. If residents of Colorado Springs needed a lesson in this, they got it on Christmas Day 1931 with the news that the estate of Bert Carlton, once valued at several million dollars, was now worth only $991,069. The onetime “King of Cripple Creek” had been a heavy investor in the stock market, and by late 1931 fifty separate stocks in his portfolio had absolutely no value and many others were close to worthless. Carlton’s case was not unusual, as the ranks of the wealthy plummeted. Colorado, the home of 181 millionaires in 1929, could boast only 29 by 1932.6

  By 1931 faith that recovery was just around the corner had worn thin. And yet if you lived in those parts of the country that, like the Springs, leaned Republican, you had grown accustomed to journalistic appraisals of the economy that parroted the view of President Hoover, which was that the worst had already passed. Newspaper columnist Heywood Broun captured the cynicism felt by some when he said that the GOP “seems to want to solve unemployment by keeping it a secret.”7 The ongoing depression forced even Hoover to make an about-face of sorts. By December 1931, faced with an economy that was inert, enervated, and unresponsive, he dropped the cheery predictions of recovery and began pushing for an expanded role for the federal government in fighting the Depression.

  Hoover waited far too long and his Democratic opponent in the 1932 race, Franklin Delano Roosevelt, won in a landslide. During the waning days of the campaign the once-popular Hoover looked so broken, his face so ashen, that he resembled a “walking corpse.”8 In contrast to Hoover’s voluntarist interventions, Roosevelt advanced collectivist, big-government solutions to the Depression. FDR’s New Deal created America’s welfare state by vastly expanding both the power and the reach of the federal government. Critics have characterized the New Deal as “improvisational, inconsistent, almost half-hearted.” True enough, but it did help many Americans who were in need of relief, facing foreclosure, and looking to more equitable relations between labor and capital at the workplace. And Social Security, once it finally took effect, proved enormously significant.9 That said, in the end the New Deal was more successful at generating a right-wing backlash than in pulling the country out of the Depression. It would take World War II to decisively change America’s fortunes. What that meant, as we shall see, is that suffering continued for many Americans during the entire decade.

  As the economy worsened, every week seemed to bring fresh news of a financial scandal. In the fall of 1931 lawyer and diarist Benjamin Roth noted that his local paper wrote of bank closings in Philadelphia, Detroit, and Pittsburgh. He knew that these closings, many of which he blamed on outright fraud, would have a knock-on effect on surrounding communities. “The whole banking fraternity is in public disfavor,” he wrote, “and many face prison.” In his history of the Great Depression, economist John Kenneth Galbraith claimed that the most spectacular scandal of all was the much-publicized looting of the Union Industrial Bank of Flint, Michigan. The men behind that swindle—twelve in all—were found guilty of embezzling $3.5 million and drew prison sentences totaling 240 years. They were, predictably, pillars of their community—Sunday school teachers, family men, and Boy Scout supporters. Each one of the bankers had been embezzling individually when adversity—losses on the stock market—led them to band together. From that point on, they engaged in carefully coordinated looting. They not only kept the bank’s books in perfect order but for months had lookouts standing by at Flint hotels to warn them whenever a bank examiner arrived in town.10

  However, the embezzlement of the Union Industrial, big and complicated though it was, turns out to have not been the biggest embezzlement in the country. That honor belongs to one of the largest building and loan associations in California, which crashed just days after news of the Union Industrial scheme hit the papers. With 24,000 depositors, some of them big-draw movie stars, the Hollywood Guaranty Building and Loan Association seemed too big to fail. And it would have been had it not been for its president, Gilbert H. Beesemyer. The forty-five-year-old businessman was a fraternal society leader, a layman in the Presbyterian Church, and a big-time Hollywood booster. Investigators discovered a jaw-dropping shortfall of $8 million after noticing discrepancies in the accounts of the Bank of Hollywood, another Beesemyer institution. After initially claiming his innocence, the Hollywood native came clean. During Christmas week he admitted there was “a lot more wrong with the books than you imagine.” He didn’t stop there, stunning friends and colleagues in a crowded courtroom by confessing that he was “a dirty crook.” Southern California real estate had been the start of Beesemyer’s undoing. He had tried t
o lure a department store to Hollywood in order to increase property values and attract other businesses to Hollywood Boulevard—a quixotic project, one that continues to animate developers to this day. When that failed, he devised a system of “honoring his own overdrafts with depositors’ money,” as the New York Times put it. His next move—investing in oil wells—proved much more disastrous.11

  Other thrifts would be thrown into receivership as California’s once booming real estate market sagged. Perhaps it was the overheated quality of real estate there, but California boasted behemoth associations, quite a few of which, including Pacific States, would sustain losses during the Depression. The Los Angeles Times was reticent in its coverage of building and loan impairments, receiverships, and liquidations. Still, the crisis in California was serious enough that the state’s much-disliked B&L commissioner became the object of bomb threats and was forced to temporarily vacate the family home.12 By August 1933, the state of California had moved its overburdened building and loan department to a larger building to accommodate the seventy-two staffers hard at work on liquidating eleven associations.13