Shortfall

by Alice Echols

  27. Glass quoted in Kennedy, American People, 66.

  28. Garb, City of American Dream, 48; Cohen, Making a New Deal, 82; Snowden, “Transition,” 170–72.

  29. One 1893 national survey showed that B&L membership was drawn disproportionately from the working classes. Mason, From Buildings and Loans, 28–29.

  30. Morton H. Bodfish, influential thrift industry leader, quoted in Calder, Financing, 67. Bodfish’s 1931 History of Building and Loan in the United States was published by the industry trade group, the United States Building and Loan League.

  31. For example, in the suburbs of Boston, Massachusetts, a house and lot that cost $3,000 would often be financed in the following fashion: A prospective homebuilder would accumulate savings of $1,500. He would then pay $500 cash for the property and $1,000 for the material and labor to build the house. The remaining $1,500 he owed would be raised through not one but two mortgages. The first would be obtained from a savings bank or from one of many private small investors working through mortgage dealers. The first mortgage would be for $1,200 at 5–6 percent interest, and it would enjoy legal priority over all other debts. When the building was almost finished a second mortgage for $300 at 6–8 percent interest was obtained from a real estate professional. By the time the house was finished, he still owed $1,500 and was required to pay interest payments semiannually for the next three to eight years, and the payment of the principal in a lump sum at the end of the term. Calder, Financing, 65–66.

  32. Ibid., 65–67.

  33. Snowden, “Transition,” 166–67; Calder, Financing, 67.

  34. Mason, From Buildings and Loans, 28–29.

  35. Mason emphasizes that many leaders of the “thrift business” identified with the movement toward economic, political, and social cooperation; ibid., 22–23. See also Alex Gourevitch, From Slavery to the Cooperative Commonwealth: Labor and Republican Liberty (New York: Cambridge University Press, 2014), 123. Robert Nelson, who is at work on a dissertation about the Knights of Labor, estimates that there were between fifteen and twenty Knights-affiliated building and loans, as well as proposals, which were never realized, for setting up another fifty. For the most part, the Knights of Labor focused on productive property rather than residential property. Email communication with Nelson, January 7, 2017.

  36. Mason, From Buildings and Loans, 32–35.

  37. Snowden, “Transition,” 172.

  38. The plaintiff in the case was Isadore Neuman and the defendant was the New York Mutual Savings and Loan Association. On April 18, 1891, Neuman subscribed for twenty-six shares in the New York association at $100 a share. He then borrowed $2,600 from the association. He was meant to pay interest at 6 percent a year, payable monthly. An agent of New York Mutual assured Neuman that his debt would be much smaller because the association enjoyed robust profits—on average between 15 and 20 percent—and that percentage would be deducted annually from Neuman’s debt. In fact, the agent explained, because his interest would be between 3½ and 4 percent, Neuman’s debt would be canceled within seven years. Neuman secured his loan with a first lien on real estate, which he owned, and by assignment of his twenty-six shares. However, he discovered that his obligations to the association included payments of $5.20 a month on the principal and another $13 a month in interest, as well as additional monthly fees of $10.40. These additional charges of $18.20 for principal and interest and $10.40 for handling costs came to $28.60 monthly and were said to cover the association’s expenses, such as its salaries and commissions. All in all, the expenses involved in procuring the loan came to $79.40 and were deducted from the amount given Neuman, who received $2,520.60. From May 1, 1891, until March 1, 1894 Neuman paid the $26 entrance fee, $176.80 on the principal in dues at 20 cents a month, $448.00 interest at 6 percent, and $858.00 in additional dues for expenses—a total of $998.40. Deducting the interest at 6 percent, which he had paid for thirty-four months, it seemed that Neuman had paid $554.40 on the principal, but the association credited him with only $190.86 paid on the principal. See “Two Ways to Lend Money,” NYT, July 13, 1897.

  39. “Biennial Report of C.H. Leckenby, Auditor of the State of Colorado, from December 1, 1916 to November 30, 1918,” CSA.

  40. Mason, From Buildings and Loans, 37–38.

  41. Ibid., 38.

  42. Ibid., 71.

  43. See Snowden, “Transition,” 171.

  44. The United States League of Local Building and Loan Associations, its institute, and allied associations also published histories of the industry. These self-serving industry accounts, which historians have often relied upon, are one reason that histories of America’s thrifts in the decades before the S&L debacle tend toward the triumphalist. For example, Henry Morton Bodfish was both the executive director of the League and a historian of the building and loan industry whose work is much cited in accounts of the industry. See Bodfish, History of Building and Loan. Another prominent example of a history sponsored and published by the industry is Josephine Hedges Ewalt’s A Business Reborn.

  45. Mason, From Buildings and Loans, 74.

  46. Once the state regulators of the B&L industry formed their own national organization in 1920 they held their annual meetings in conjunction with those of the League in order to share information. In 1922, thirty years after the founding of the League, representatives of the thrift, lumber, and real estate trade associations would come together to form another powerful trade association, the American Savings, Building and Loan Institute. See Mason, From Buildings and Loans, 72.

  47. Ibid., 49.

  48. Calder, Financing, 64.

  49. No better evidence of the rising tide of radicalism was the success of the Socialist Party in 1912: its presidential candidate, Eugene Debs, snagged 6 percent of the vote, and twelve hundred of its candidates were elected to a variety of state and local offices.

  50. Nicolaides, My Blue Heaven, 17.

  51. Hoover quoted in “No Rent-Receipt Song,” NYT, December 6, 1931.

  52. Lewinnek, The Working Man’s Reward, 86.

  53. See W. E. B. Du Bois, Black Reconstruction in America, 1860–1880 (New York: Free Press, 1998); David Roediger, The Wages of Whiteness (New York: Verso, 1991); Cheryl I. Harris, “Whiteness as Property,” Harvard Law Review 106, no. 8 (June 1993).

  54. For a useful discussion of black homeownership in the Chicago area, see Lewinnek, The Working Man’s Reward, 92–93.

  55. Biennial Report of Roady Kenehan, Auditor of State of Colorado, from December 1, 1912, to November 30, 1914, Inclusive (Denver: Smith-Brooks, 1914), 52, Box 13827, CSA.

  56. 63rd Congress, Rural Credits: Joint Hearings Before the Subcommittees of the Committees on Banking and Currency (Washington, DC: Government Printing Office, 1914), 312.

  57. Eli Gross, Commissioner of Building and Loan Associations, letter to Governor William H. Adams, January 5, 1933, Box 13829, CSA.

  58. Biennial Report of Roady Kenehan, 40–41; Biennial Report of M.A. Leddy, Auditor of State of Colorado, from December 1, 1910, to November 30, 1912, Inclusive (Denver: Smith-Brooks, 1912), 237. Despite the concerns raised in these reports, it was the growth of out-of-state corporations masquerading as local building and loan associations that state officials found most troubling, and worked to eliminate. These were companies doing business as contract investment companies or contract loan companies, and their sharp business practices drew many complaints from consumers.

  59. Biennial Report of H.E. Mulnix, Auditor of State of Colorado, from December 1, 1915, to November 30, 1916, Inclusive (Denver: Smith-Brooks, 1916), 128, Box 13827, CSA.

  60. These figures are from the biennial report of 1920.

  61. “Miller Hid Money Under Dining Table,” DP, July 19, 1932; “Building-Loan in New Hands,” LAT, July 16, 1927.

  62. By June 1931 when Eli Gross was appointed commissioner of building and loan associations, a position that represented an improvement upon the position of deputy inspector, the assets of Colorado’s B&Ls were reported
to be $64 million, outstripping the reported assets of Colorado’s state banks by $14 million, and yet the powers and funding conferred upon the commissioner were considerably less than those of the state banking commissioner. “Report: Governor’s Special Committee on Building and Loan Associations,” State of Colorado, Denver, 1932, Box 13829, CSA.

  63. People of the State of Colorado vs. The City Savings, Building and Loan Association, in the Claim of the Exchange National Bank of Colorado Springs, Colorado, Administrator de Bonis of the Estate of Thomas F. Woody, Deceased, case no. 18902, February 27, 1934, Box 38445, CSA.

  64. The City Savings Building and Loan Association vs. P.J. Hecox, case no. 16827, Box 37675, CSA.

  65. A typical ad: “To Have Money When You Need It” was in large, bold type. The ad claimed that the City had long allowed depositors to withdraw “part or all of their money as needed without sacrificing accrued interest.” CSG, January 1, 1923, 3.

  66. People vs. City Savings . . . Estate of Thomas F. Woody.

  67. Franklin W. Ryan, “Why Usury Laws Have Failed,” NYT, April 9, 1922.

  68. Edward Ewing Pratt, “Cooperative Savings and Loan Associations,” Proceedings of the Academy of Political Science in the City of New York 2, no. 2 (January 1912).

  69. The movie script was based upon a twenty-four-page story, “The Greatest Gift,” that the writer and book editor, Philip Van Doren Stern, distributed as a Christmas card in 1943. Stern had been unable to sell his story to the glossies, but his Hollywood agent succeeded in selling it to Capra for $10,000. His holiday story of uplift was about a small-town bank clerk who, feeling trapped by the narrowness and the uneventfulness of his life and wishing he’d never been born, contemplates suicide. The protagonist is not a B&L owner whose business has enabled working people to become homeowners, but a bank clerk. The story was subsequently reworked by Marc Connelly, Dalton Trumbo, and Clifford Odets, who produced early scripts. Connelly created two Georges, a strategy then followed by Odets. Originally Cary Grant was set to play Bailey. See Jeanine Basinger, The It’s a Wonderful Life Book (New York: Knopf, 1986), 103–7; Doug Molitor, “A Different Life: Cary Grant as George Bailey,” letter to the editor, LAT, January 1, 2005. Molitor reveals that Michael Wilson, a victim of the Hollywood blacklist, performed an uncredited polish of the script.

  3: Racketeers and Suckers

  1. It was Nancy Cott, writing about gender-based solidarity among women, who used the term “we-ness.” See Cott, The Grounding of Modern Feminism (New Haven, CT: Yale University Press, 1987), 5. For a very useful exploration of how historical scholarship on consumption has shifted, see Meg Jacobs, “State of the Field: The Politics of Consumption,” Reviews in American History 39, no. 3 (2011). For examples of more upbeat appraisals of consumption: Roy Rosenzweig, Eight Hours for What We Will: Workers and Leisure in an Industrial City 1870–1920 (New York: Cambridge University Press, 1985); Kathy Peiss, Cheap Amusements: Working Women and Leisure in Turn of the Century New York (Philadelphia: Temple University Press, 1986); Cohen, Making a New Deal; James Livingston, Against Thrift: Why Consumer Culture Is Good for the Economy, the Environment, and Your Soul (New York: Basic Books, 2011).

  2. Hyman, Debtor Nation, 10.

  3. Ibid., 31–33. It wasn’t until the mid-1930s that the government went after auto finance companies such as General Motors Acceptance Corporation (GMAC) for deceptive advertising that claimed interest charges of 6 percent that turned out to be 12 percent. “Auto and Finance Firms Attacked,” CSG, December 4, 1936, 1.

  4. See Calder, Financing, 283–86, 260–61. Andrew L. Yarrow writes of the way that installment buying encouraged a “psychology of affluence.” See Yarrow, Thrift: The History of an American Cultural Movement (Amherst: University of Massachusetts Press, 2014), 30–32. Some scholars have exaggerated the divide between the “producerist” nineteenth century and the consumerism of the twentieth century. Veblen was an influential early critic and was followed by Galbraith, Vance Packard, Warren Sussman, and Christopher Lasch. Their influence has been enormous.

  5. Mason, From Buildings and Loans, 61.

  6. Ibid., 60.

  7. “Building and Loan Associations Show Growth Since War,” New York Herald Tribune, September 1, 1929, D1.

  8. “Building and Loan Associations Gain Millions in Assets,” New York Herald Tribune, May 31, 1925, B2.

  9. Snowden, “Transition,” 167–69.

  10. Mason, From Buildings and Loans, 57.

  11. See the Historical Society of Pennsylvania’s digital history website, “Closed for Business: The Story of Bankers Trust Company During the Great Depression,” by R. Daniel Wadhwani, http://digitalhistory.hsp.org/bnktr/essay/soothing-peoples-panic-banking-crisis-1930s-philadelphia.

  12. “Report Governor’s Special Committee on Building and Loan Associations,” State of Colorado, September 1932, Biennial Reports, Box 13829, CSA, 9.

  13. It was the 1932 Special Committee to the Governor on the B&L crisis that attributed the industry’s collapse to the growth of this new-style B&L. It is, however, worth noting that there certainly were building and loan associations operating on this supposedly new-style basis well before 1920. The City was one, and so was Pueblo’s mega-association, Railway Savings, which also predated my grandfather’s business. See “Report Governor’s Special Committee.”

  14. Mason puts the figure at 22 million; From Buildings and Loans, 44. Also see Cedric Cowing, Populists, Plungers, and Progressives: A Social History of Stock and Commodity Speculation (Princeton, NJ: Princeton University Press, 2015), 95–96; Cohen, Making a New Deal, 74.

  15. Well-placed articles in the press promoted the “investment merit” of building and loans as well as the personal attention given to customers accustomed to being treated elsewhere like a “mere cog in the financial wheel.” See, for example, “Building and Loan Associations Are Helping America,” Atlanta Constitution, May 16, 1927, 10.

  16. See Julia Ott, When Wall Street Met Main Street (Cambridge, MA: Harvard University Press, 2011), 65; Cowing, Populists, 95–96.

  17. See WPA Guide, 116.

  18. My discussion is informed by David Hochfelder, “‘Where the Common People Could Speculate’: The Ticker, Bucket Shops, and the Origins of Popular Participation in Financial Markets, 1880–1920,” Journal of American History 93, no. 2 (September 2006).

  19. Benjamin Roth, The Great Depression: A Diary, ed. James Ledbetter and Daniel B. Roth (New York: Public Affairs, 2009), 6.

  20. Merton E. Stubbs vs. Colorado Investment & Realty Co., District Court, County of El Paso, case no. 16738, October 6, 1928, Box 37675, CSA.

  21. In her study of New York City in the twenties, Ann Douglas argued that with the arrival of mass culture Americans increasingly came to see that “everyone, wittingly or unwittingly, gets to play the ‘sucker’ one minute and the ‘racketeer’ the next.” See Douglas, Terrible Honesty: Mongrel Manhattan in the 1920s (New York: Farrar, Straus and Giroux, 1996), 20.

  22. J.R. Robinson, “The Ideal City,” in Colorado Springs City Council, Town Incorporation, City Organization and Reorganization (Colorado Springs: City Council, 1901–2). Robinson, the mayor, cited the state’s “unlimited mineral wealth.”

  23. Governor Shoup quoted in House Journal of the Twenty-third General Assembly of the State of Colorado (Denver: Smith-Brooks, 1921), 19.

  24. Edgar T. Hunter, “A Thumbnail Sketch of the Cripple Creek/Victor Mining District’s History,” www.ccvgoldmining.com/downloads/History.pdf (accessed November 16, 2014). Hunter explains that gold production in the mining district began to slide after the turn of the century “because as the mines went deeper, ore grades decreased with depth, and water increased with depth.” Production continued to decline even with the expensive construction of drain tunnels to facilitate mining. With the exception of one discovery of a lucrative cavity in 1914, gold production grew less and less profitable. Things improved somewhat in 1934 when the price of gold was raised from $20.67 to $35 per ounce. Howeve
r, with U.S. entry into World War II, the gold mines were shut down as the government restricted the mining of nonessential metals.

  25. According to the local press, gold production in the state was in decline in the 1910s, but really fell off during and after World War I. By 1926 profits from gold mining stood at just under $7 million; compare this to 1905, when profits were $25 million. See “History of Gold Output in State,” SGT, March 6, 1927.

  26. The Pikes Peak Highway, originally a toll road, was made free in 1936. “Pike, Palmer & Penrose Lauded,” CSG, June 29, 1936; “Thrilling Two-Day Program to Mark Opening of Free Peak Auto Highway,” CSG, June 14, 1936; “M.V. Park Spring Should Make City Famous Spa, Belief of Enthusiasts,” CSG, Dec 17, 1922, 1. Earlier, in 1909, businessmen hit on the idea of constructing a tourist attraction in addition to the area’s Short Line, the Midland railroad, and the Pikes Peak cog road. This new venture, what came to be called the Crystal Park Road, was meant to include a hotel and numerous cottages in the park, but these plans never materialized. The road itself went into the hands of a receiver in 1919, at which point it was consolidated with the Pikes Peak cog road. In 1925, Penrose acquired the cog railroad, Crystal Park highway, and Manitou Street Car Company. “Cog Railroad and Crystal Park Change Hands,” CSG, June 25, 1925.

  27. “Yount’s Deep Drilling for Hot Water Recalls Other Manitou Well Projects,” SGT, August 3, 1930, 8.

  28. “Taxpayers’ Association Opposed to Gas Franchise,” CSG, June 25, 1931, 1.

  29. “A Residential City of Rare Charm at the Gateway to the Roofgarden of America,” The “Greater Colorado” Edition of the Sunday Gazette and Telegraph, April 6, 1930.

  30. For the aerospace industry see William Deverell, Daniel Lewis, and Peter Westwick, “The End of the Aerospace Century,” LA Observed, January 7, 2010, www.laobserved.com/visiting/2010/01/the_end_of_the_aerospace_centu.php.

  31. The WPA Guide, 113.

  32. Four million out of a total population of 120 million may sound small, but it was an unprecedented number. See Jules Tygiel, The Great Los Angeles Swindle: Oil, Stocks, and Scandal During the Roaring Twenties (New York: Oxford University Press, 1994), 10; Roth, The Great Depression, xv.