Shortfall
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Few residents of the Springs would have been surprised to learn that Lula had been less than totally honest with the authorities. After the newspaper announced the terms of the insurance settlement, Lula found this letter in the mailbox:
We will call at your???? home
for the missing money and bonds
also a part of the insurance money.
will also visit your ????? attorney in Denver. BE READY.
It was signed, “The crowd of poor you owe.”57
Among the depositors, the presumption that Lula, Roy, and Eva were all guilty died hard. For nearly a decade Roy struggled to keep his typewriter shop open. As for my mother, her most vivid memories of those times were of being “cut dead” on the streets and in the stores by people she had once counted as friends. After three years of feeling like a pariah she left town, not to marry her fiancé, Dewey, but to work as a journalist for the oil press bureau, first in Tulsa and then in Dallas. Likely Eva, who spent the rest of her life working as a stenographer and secretary in the Springs, was also threatened by depositors, especially after the press revealed the return of Walter’s gifts to her. Remarkably, despite the snubs, the whispers, and the threats, all of the principals stayed put in Colorado Springs, the town where the daily paper predicted that in ten years’ time the name of Walter Clyde Davis “would still arouse hatred and reviling.”58
During the building and loan crisis the authorities, anxious to underscore the venality of the accused B&L operators, emphasized that it was indeed poor people who had been disproportionately victimized. Whether their concern was genuine or gestural, actual poor people would not find much sympathy or understanding during these years from officials at the city, county, or state level. Humiliation came with poverty and even (or perhaps especially) with the programs meant to ameliorate it. This was certainly the case with old-age pensions, which my great-uncle Roy Davis helped to enact and the Pratts supported.59 Historians estimate that in 1934, 50 percent of all elderly Americans lacked sufficient income to be self-supporting. In Colorado, the measure mandated that only citizens sixty-five and older who had resided in the state for at least fifteen years and whose homes were worth less than $1,000 were eligible. Yet in Colorado resistance to the law was substantial, with the Gazette opposing it and the statewide Federation of Taxpayers’ Associations, of which the EPCTA was a member, fighting it all the way to the state supreme court.60 In El Paso County payments came to less than $28 a month, an amount sufficient to arouse suspicions that some pensioners had misrepresented their circumstances. In March 1936, county officials dumped four hundred people from the rolls. Officials assured the press that this culling would be followed by a reinvestigation of blind pensioners and of those women receiving mothers’ compensation. Their aim was to keep “an almost continuous check” on pensioners.61
The letter was meant to be from the poor, but whoever sent this letter used good stationery that included an envelope with a gilt-edged flap. (Author’s archive)
As for those on relief—an even less “deserving” group—the scrutiny was perhaps even more intense. By Thanksgiving 1934, one-quarter of Coloradans fit this definition. The situation had not improved seventeen months later when L.G. Niles, El Paso County commissioner in charge of administering to the poor, declared that World War I veterans on the county welfare rolls who were due to receive bonus certificates would find themselves automatically dropped from the rolls.62 Six months later, in January 1937, the Gazette acknowledged that relief did have its virtues—“homes kept intact, hungry children fed and clothed, jobless persons kept at work, and in the more material sense, of lasting civic improvements.” However, the newspaper bemoaned what it called the “relief snowball,” which it said had grown at an “appalling” rate. In less than four years the city went from having no relief program to being in the relief business to the tune of nearly $3.5 million.63
The Rocky Mountain News, August 9, 1933.
The era’s massive relief efforts troubled many people who worried that the “dole” would sap the self-sufficiency of recipients, who would grow lazy and dependent. “Chiselers,” “shovel-leaners,” and “bums”—these were just a few of the terms commonly used to disparage people on relief.64 In the West, conservative Democrats attacked the New Deal. William B. King, Democratic senator from Utah, railed against such spending on the grounds that the rich didn’t have enough money to support the poor. Moreover, he argued, relief was eroding the very individualism that had made the United States the “greatest republic in the world.” In truth, even President Roosevelt was ambivalent about the welfare state being created on his watch. However, Republicans as a group hated relief, not only because they believed it was destroying individualism and industriousness but also because they believed its beneficiaries would vote Democratic.65
Colorado initially supported the Democrats, giving landslide victories to progressive Edward Costigan in 1930 and Roosevelt in 1932. Roosevelt even won traditionally Republican El Paso County in 1932 and 1936.66 Over time ordinary Coloradans’ opposition to the New Deal grew. In 1936, when failing health caused the state’s liberal senator, Edward Costigan, to exit politics, Coloradans voted for conservative Democrat Edwin C. “Big Ed” Johnson, who had held the governorship since 1933. And in 1940 and 1944 Coloradans, in contrast to most of the nation, voted for Roosevelt’s Republican rivals.67 Throughout his presidency, the Colorado Springs newspapers, the Daily Twins, attacked Roosevelt as well as those benefiting from New Deal relief programs. In 1944 Big Ed Johnson went so far as call the New Deal “the worst fraud ever perpetrated on the American people.”68 For many Westerners, taking government aid was nothing less than “a confession of failure.”69
Few people of means in Colorado Springs spoke out for the “economically damned” during the Depression. In January 1931, when a politically nonaligned group of unemployed men asked the local taxpayers’ organization to go on record supporting a public works project for the unemployed, the taxpayers declined. At the meeting with the Organization of the Unemployed, some taxpayers attacked members of the group whom they claimed had turned down offers of employment in order to stay on relief—a sensible move, actually, given the difficulties in getting approved again for relief.70 The taxpayers were not about to make common cause with people they regarded as rabble. They certainly were not going to meet with the local chapter of the Communist-led National Council of the Unemployed. The Colorado Springs chapter attracted 175 unemployed men and women to a planning meeting for a hunger march in Denver. Members of the chapter also went before the city council and demanded that it provide its unemployed with free water and electricity and enact nondiscrimination policies toward Spanish-speaking workers and “colored” workers.71 There is no evidence those demands were taken seriously. When the group’s leader appeared before the city council in 1933 to request a permit for a May Day parade, police chief Harper made it clear he would not tolerate an “organized communist demonstration” in the streets of Colorado Springs, certainly not one “planned by New York communists.”72
There were other pockets of dissent, too. For a brief while the Colorado Springs Independent, the westside weekly and onetime KKK mouthpiece, became a surprisingly spiky left-wing alternative to the local dailies. The Independent had been an anodyne paper for some time. Its coverage of the B&L scandal had been subdued. But in the middle of the Depression, its editor took to denouncing not just Colorado Springs but capitalism as well. Week after week, the paper excoriated officials at the local Works Progress Administration (WPA) for the humiliating way in which they treated female relief workers. He attributed administrators’ punitive policies to the town’s history as a resort area, which meant that the city was skewed toward those who were somewhere on the spectrum between rich and comfortable. These people, argued the paper, were uniformly and tenaciously anti-union.73 These were the people who controlled the Chamber of Commerce, which openly opposed relief, and its members were determined to keep the city’s rel
ief numbers down. The paper also blamed negative attitudes toward relief on the fact that the Springs was a city that lacked large industries and therefore lacked a substantial working class. In the beginning of 1937 the Independent was sold to a man who returned it to its bland ways.
By now, onetime members of the City with uncontested claims had received two dividend checks—one in August 1935 and the other in October 1936—amounting to 22 percent of their claims. A third payment of 9 percent went out the following November, so by the end of 1937 depositors had recovered 31 percent of their money. The assignment mess held up the checks, and so did the receivers’ decision to hold off on selling the association’s real estate assets until the market rebounded. As late as fall 1942, depositors were still waiting for the fourth and final dividend check of 10 percent. With that final payment they would have recovered 41 percent of their money.74 The receivers for Railway Savings B&L had taken a different route, dumping hundreds of properties on the market at once, with disastrous consequences for Pueblo’s real estate market. Going slowly rather than quickly unloading the association’s holdings—136 of which were in Pueblo’s already saturated market—meant that the City’s depositors were forced to wait for that final dividend payment a full decade after the City had put a stop on withdrawals in the spring of 1932.
In the end, what helped some residents of the Springs hold on to their property was the Home Owners’ Loan Corporation.75 A New Deal agency, HOLC was meant to refinance home mortgages that were in default so that those holding such mortgages could escape the maw of foreclosure. Beginning in the summer of 1933, the HOLC office in the Springs began converting first mortgages held by receivers of building and loan associations into HOLC bonds, with terms more favorable to consumers. As early as March 1934, the HOLC had authorized $260,000 in loans at 6 percent interest to 160 homeowners in the region. Two years later that number had grown to 684 homeowners, whose combined loans came to $1,202,739. By 1936, when the agency’s active lending program ended, more than a million homeowners, accounting for roughly one-tenth of all mortgages across the nation, had been assisted by a loan from the HOLC.76
Even with the HOLC rescue effort, the fallout from the thrift industry’s collapse was long-lasting and substantial. In Chicago, one HOLC study found that as late as 1940 only a sliver of the city’s pre-Depression building and loan associations had survived, and most of those that had pulled through were in poor shape. Complicating any industry-wide recovery were lingering allegations of fraud, and not just in the scams involving assignments and passbooks. In the spring of 1937 the Gazette’s lead story concerned irregularities in the B&L business that had been uncovered by a special committee of Colorado’s house of representatives. Once again there were calls for a grand jury investigation. And then there was the Railway B&L case, which kept turning up in the news like a bad penny. The lawsuit against the three Railway B&Lers was not resolved until 1942, a decade after it was initiated. The Supreme Court of Colorado upheld the Pueblans’ convictions on charges of embezzlement. All of these stories kept alive the connection between building and loan associations and financial wrongdoing.77
In Colorado Springs, updates on pending dividend payments and on Ed Sharer’s endless appeals kept the B&L scandal in the news most of the decade. The drama around Sharer was not resolved until April 1935, when the Supreme Court of Colorado reversed his convictions on forgery on a technicality. He had already been freed on $10,000 bond in November 1934, after having spent two and a half years in the county jail. No other charges against him were pursued, and he lived the rest of his life in Los Angeles.78
Another reminder of the industry’s crookedness came on May 9, 1938, when the local press announced that Fred Bentall had been freed on parole. His release came nearly six years after his arrest and eighteen months after depositors received their final dividend check. A model prisoner, Bentall had been transferred early in his sentence to a low-security state reformatory, where he worked as a bookkeeper and later as a teacher. The B&L man’s losses had been so large the authorities suspected him of having salted away association funds. The total disbursement to depositors amounted to 13 percent. Bentall’s talk about devoting himself to paying back defrauded depositors proved to be just that.79
Understandably, people in Colorado Springs remained extremely wary of the industry, even the new federally chartered and insured savings and loans. The first such outfit to open up in the Springs called itself the Federal Savings and Loan Association. “It will be as different from those defunct associations,” promised a spokesman for the Federal, “as a national bank is from a pawn broker’s office.”80 It would be an old-fashioned mutual organization, he said, and he emphasized that it would not offer bloated interest rates and that all deposits, up to $5,000, would be insured by the federal government, just as with banks. Federal Savings and Loan, which opened its doors in 1934, grew slowly. As records of the HOLC reveal, people mistrusted these associations, even if the word “building” appeared nowhere in their name.81
In 1938 one HOLC official in Denver conducted an informal study in which he tried to gauge the “typical” attitude toward building and loan associations. Many thousands of people in the Denver area had been members either of Railway or of the Silver State Building and Loan Association, both of which had failed. The sixty-three people whom the official questioned held a variety of jobs, from office workers and salespeople to barbers. He also polled virtually everyone in HOLC’s Denver office. What he discovered was that absolutely no one he surveyed saved in a building and loan. Nearly 70 percent emphasized that they stayed away from them because of negative experiences that they, their family, or friends had had during the meltdown. Many termed the whole business “crooked” and said that even with the guarantee of federal deposit insurance they would avoid thrifts at all costs.82 A 1936 report, this one from the HOLC field office in Pueblo, reported “intense bitterness towards anything that smacked of ‘building and loan’” and predicted that it would be a long time before that bitterness dissipated.83
That bitterness may not have entirely receded ten years later when It’s a Wonderful Life was released. Hopes ran high for the movie—the first postwar Hollywood movie for both Jimmy Stewart and Frank Capra. For director Capra the movie was a chance to explore something more daring than the “Hollywood version of how life should be lived.” Yet as production wound down, there were worries that Capra had produced too un-Hollywood a movie, and its release was scheduled for just before Christmas 1946. Releasing it during a time of holiday cheer failed to save the film. It’s a Wonderful Life lost over a half million dollars at the box office and won no Oscars. The movie also attracted the attention of the FBI’s Red-hunting Los Angeles field office, which believed its treatment of Henry Potter was meant to discredit bankers. It was, the FBI claimed, “a common trick used by Communists.”84 Discerning critics disliked the film, too, but on different grounds. “A figment of simple Pollyanna platitudes” was the New York Times’ judgment.85 The New Yorker found it “so mincing as to border on baby talk.” As for audiences, it’s hard to know whether they felt patronized by the ending, depressed by everything but the film’s final eight minutes, or annoyed by the whole package. Perhaps the traumas of bankruptcy, bank runs, suicide, and war were too much a part of America’s recent past for audiences to stomach the movie.86
It would take more than a decade before Americans once again began to trust the thrift industry. That they did owes a lot to thrift leaders who oversaw the creation of new federally chartered and insured savings and loans. Crucial to the eventual success of the thrift industry was the insurance offered by the Federal Housing Administration (FHA). With their own risks diminished, savings and loans attracted customers with mortgage loans that featured low interest rates of 4 percent to 5 percent and required as little as 10 percent down. These shifts ushered in an era of easy and inexpensive credit for many, one that made homeownership in many cases a better bargain than renting, particularly for
whites. African Americans continued to face racial discrimination in the housing market, and savings and loans were sometimes part of the system of exploitation that entrapped black homebuyers.87
By 1950 savings and loan associations were the dominant provider of residential mortgage finance.88 For nearly thirty years S&Ls performed well. Doubtless there were savings and loan men who, working with developers and lenders, used their positions to line their own pockets. That was the view of Richard Netzer, a professor of economics and prominent municipal finance expert. According to Netzer, even during the industry’s so-called halcyon years S&L operators treated their businesses like veritable “honey pots.” The thrift business, he argued, was full of “self-dealing, kickbacks, and other ways in which money collected from homeowners taking out mortgages was intercepted on its way to depositors.”89 However self-serving some of their operators’ wheeling and dealing may have been, the industry was no longer beset by outright embezzlement and malfeasance. Indeed, savings and loan businessmen such as Los Angeles’s own Mark Taper and Walter Ahmanson developed such solid reputations as civic leaders and philanthropists that their names today grace university buildings, theaters, and museums throughout L.A.90
As for Colorado Springs, conditions there during the Depression bordered on the dire. Cripple Creek gold mining briefly rebounded, but it would never again be the city’s engine of growth.91 By the end of the thirties my mother’s hometown was little more than a “Depression-ridden resort town.”92 One resident recalled that by decade’s end, with people leaving and nearly 20 percent of the city’s housing stock vacant, it began to feel like a ghost town. Even the town’s heartiest supporters knew that it could not depend solely on tourism for its survival. As war in Europe once again loomed, some of them set about reinventing the place. Aware of how lucrative military installations could be, they “decided to try to get something out of” that war.93