Shortfall
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Skepticism about Gross grew when it came to light that his “advisory board” included both Walter Davis and Miles Saunders, one of the Railway B&L men (and a powerful Democrat who had served as Pueblo’s district attorney). Nevertheless, Gross’s critics ignored the state’s miserly support of his office. He was never given adequate resources or qualified examiners. One of his two assistants, Byron Miller, the former deputy inspector, was so resentful about having been passed over for the new position that he shirked his duties. None of this mattered to the Depositors’ Committee, which would only have been satisfied with Gross’s head on a platter. As for Walter Davis, they were hoping to nab him with a widely circulated notice offering a $1,000 reward for his capture.38
It wasn’t just Eli Gross and Walter Davis who came in for what one reporter called “scorching criticism.” At a meeting of the Depositors’ Committee late that summer the crowd also went after receiver Charles Fertig and his lawyer, Thomas C. Turner, who had shown up for the meeting. “How much is Fertig being paid?” people in the audience demanded. Turner responded that he had no idea because the City’s receiver was actually an agent of the district court, which had set his pay. “You should know because you’re our lawyer,” someone yelled. The place grew a lot rowdier when Turner explained that he was technically representing Fertig, not them. As Turner tried to explain how a receivership actually worked, the place practically blew up. Turner became even less popular with this group when he told the press that people with money in building and loan associations misunderstood their relation to these businesses. They were investors, not depositors. Making matters worse, most of their money was now tied up, he said, in a badly depreciated real estate market where properties were worth only somewhere between 50 and 75 percent of what the loans were for.39
The detail in this police circular about Walter Davis is exceedingly fine-grained, as it captures his odd gait—bending his body forward at his hips as he walks—and his habit of moving his lips before talking. (Bureau of Investigation File # 62-27247; author’s archive)
The Depositors’ Committee was comfortable inveighing against government officials, particularly Eli Gross, who presided over the agency mandated with supervising the thrift industry. Members of the committee were willing to use the power of the state to prosecute anyone they believed was a part of the scandal. And they were eager to indict all those who were cleaning up the mess—the receivers, lawyers, accountants, and secretaries—as insiders who were profiting from it.40 Some of the group’s members, such as those who plotted my mother’s kidnapping, gravitated easily to vigilante justice. What they appear to have never contemplated was pushing their legislators to fight for a stiffer regulatory regime for building and loan associations.
The choices made by the Depositors’ Committee should be understood as stemming, at least in part, from government’s treatment of the “little people” who did business with building and loan associations. The thrift industry had successfully fought any effective regulation, leaving association members largely on their own in their dealings with their B&Ls. Some state legislatures and governors did take action during this crisis, although in Colorado it amounted to nothing more than a special committee appointed by the governor. And at the federal level the plight of building and loan members never received the attention or thought given to bank depositors, who mattered more than the working classes who comprised the ranks of B&L members.
One sees the privileging of bank customers over B&L members in the summer of 1932 when a congressional committee held hearings to discuss President Hoover’s Home Loan Bank Bill. The discussion turned to the recently formed Reconstruction Finance Corporation (RFC). One congressman claimed the RFC had failed to meet the expectations of the great masses of people that the RFC would help them. He had in mind B&L members who he said were “thronging the doors of these associations, trying to get the money they must have to buy bread and clothing, and they can not get it.” Another congressman representing Philadelphia pointed out that B&Ls there were in a terrible mess because “they are loaded up to-day with properties that they are forced to take over, owing to the fact that payments cannot be made.” Isn’t it incumbent on the federal government, he asked, to help B&L depositors as well as better-situated bank depositors?
However, for opponents of government assistance, including a congressman from Missouri, it was not “the business of the United States Government to go into partnership with some private institution to help them realize on what perhaps turned out to be a bad investment.” Just as the Colorado Springs lawyer T.C. Turner had argued, the Missourian noted that these people were not depositors, after all, but investors who chose badly by investing in poorly run businesses. When asked by another congressman about the recent closing of Missouri’s own Farm and Home association, the third-largest in the country, he said, “I am not familiar with that situation.”
Indeed, the hearings reveal just how little these congressmen knew about the building and loan business. To some extent their confusion reflects the hodgepodge quality of the thrift industry, whose practices and governance varied enormously from state to state. However, these hearings revealed that some congressmen didn’t even know that B&Ls in many states paid dividends to depositors. Judging by these hearings, lawmakers paid attention to the leaders of the thrift industry trade organization. However, when it came to actual B&L members—the proverbial “little man” of the B&L world—well, they turned up in discussion, only to be forgotten. So if members of the Springs Depositors’ Committee had little confidence in government to help them, one can perhaps understand why.41
Still, the way that the building and loan scandal played out in Colorado Springs was not the way events unfolded in every community where such scandals occurred. In California, depositors pressed the state to pass the Beesemyer Bill, named after the famously crooked B&L head, to provide compensation for their losses.42 The situation played out very differently in Chicago, too. There, the building and loan industry was often organized along ethnic and racial lines. The men who ran these associations presided over them not because of their knowledge of banking and finance but rather, says historian Lizabeth Cohen, because of their “wealth and their prestige in the ethnic community.” Investigations revealed that many of these Chicago operators had been financially irresponsible, which led their depositors to demand that they be treated like crooks. In Chicago, depositors’ experiences disillusioned them about the “big men” in their communities, which in turn eroded the class harmony that had existed within the city’s ethnic communities. Quite in contrast to depositors in Colorado Springs, Chicagoans came to see the federal government as their savior, and pressed for it to protect their savings and mortgages. When the Home Owners’ Loan Corporation (HOLC), a New Deal agency, began to rescue homes from foreclosure, Chicago’s workers reportedly took “tremendous comfort” in the government’s new activist role.43
In contrast to their swindled counterparts in Chicago, the leaders of the Colorado Springs Depositors’ Committee viewed the federal government warily and the local government as yet another swindler. In large measure the group’s hostility toward the state stemmed from the fact that several of its most prominent leaders were veteran activists in the local anti-tax, anti-government movement. Westside newspaperman and conservative firebrand J. Herbert Pratt and two former KKKers, Judge John Little and Golden Cycle mill worker Arthur Elvis Walker, were already active in the El Paso County Taxpayers Association (EPCTA). Across America taxpayers’ leagues such as the El Paso County group proliferated in the 1930s. These organizations mushroomed in the wake of sharp increases in local and state taxes, which were caused by a variety of factors. Across the nation, local taxes shot up from 5.4 percent of the national income in 1929 to an astonishing 11.7 percent in 1932. State taxes rose, too, from 1.9 percent in 1929 to 4.6 percent in 1932. As tax delinquencies grew so did the ranks of America’s tax rebels. Tax revolts remain an understudied feature of the 1930s, but they were,
as one well-known New York Times reporter put it in 1932, “the nearest thing to a political revolution in this country.”44
The El Paso County group advocated, as did other such associations, scaling back the size and the power of local government, particularly its power to levy taxes.45 Initially the local taxpayers association attracted homeowners who were somewhere between struggling and just barely comfortable. There were certainly many such people in Colorado Springs, where the rate of homeownership was 54 percent, and where 67 percent of all homes were valued at less than $5,000.46 For wage earners of modest means living in small cottages, many of them on the west side, their homes represented the only economic safety net they had.47 During the 1920s they had struggled to curtail what they viewed as a profligate city council and city manager. The city’s leadership had long been pro-development, whether that meant constructing a small airport, building a public golf course, or repaving the city’s key downtown streets with low-grade gold. To the taxpayers’ group, whether it was street paving or schools (run by “theorists with no practical ideas”), it was all was frivolous spending. It also opposed the municipal ownership of utilities and was leery of workers on the government payroll, with the exception of the police.48
Some members of the taxpayers’ association were, socioeconomically speaking, working class. Yet their allegiance was to their families and their homes, not to the class with which others might identify them. As memories of working-class solidarity receded further from residents’ consciousness, it’s not surprising that many such people identified first and foremost as homeowners. It’s not as though unions, which might have kept alive such memories, had any clout in Colorado Springs. The upshot was that working people viewed with suspicion the gains of others, particularly public-sector workers whose salaries they paid for.49 As the economy remained frozen, taxes became an even greater source of anxiety. The fear of coming up short, of falling, and of losing one’s home through a tax sale loomed large for some members, which doubtless helps explain the fierceness of the group’s rhetoric.50 Particularly during the 1920s both the EPCTA’s hostility to the development plans favored by the Republican elite and some of its own leaders’ participation in the KKK had put it at odds with that elite and its favored politicians. In the thirties, however, class polarization between the taxpayers’ association and the town’s ruling elite became somewhat more muted as wealthier residents joined the taxpayers group.51
By 1931 Merrill Shoup, son of millionaire and former Colorado governor Oliver Shoup, had become the president of the group. Only thirty-two years old, Shoup, who held degrees in both law and business, would become chairman of the board of Holly Sugar and president of the Golden Cycle Corporation. Under Shoup’s leadership the group attracted a number of affluent members. In fact, Mayor George Birdsall argued that the group’s tax limitation plan, which looked to tap the resources of the city’s municipally owned utilities, was actually an effort to shift the burden of taxation away from large property owners, including the Antlers Hotel, to small consumers. Colorado Springs had been embroiled in a decade-long fight over public utilities. Utilities there, after years of mismanagement by private corporations, were now city owned, but the debate continued to rage. In the mid-twenties former governor Oliver Shoup opposed municipal ownership of utilities on the grounds that “neither the community, nor state nor nation should engage in any enterprise which can be best conducted by private enterprise.” To argue otherwise was “socialistic.”52 These debates didn’t go away.
Colorado Springs was hardly the only city whose residents were divided on the question of utilities. The question of public ownership of utilities was so hotly debated that it made its way into Sinclair Lewis’s Babbitt. Babbitt opposed it, of course.53 And it remained a hot topic in the thirties. As the 1936 election approached and President Roosevelt tried to firm up his support among everyday Americans who opposed big business and “Wall Street,” he went after utility companies. These companies were characterized by a pyramiding of holding companies atop actually operating utility firms, and they were among the most hated businesses in America. Utility holding companies were not themselves productive entities. Their only assets were stock in the lower companies, which they would issue more of and whose profits they made sure grew. They monopolized the country’s private utility interests, with the result that there were “huge profits for speculators and grossly overpriced electricity for consumers.” When Roosevelt targeted these utility companies big business cried socialism, just as Shoup had done a decade earlier, but this move cemented the president’s support with many working people.54
What was happening in 1933 in Colorado Springs was part of a much larger conflict that would soon play out nationally, but here the class lines were blurred, as they so often were. Mayor Birdsall argued the taxpayers’ plan would “transfer so large a portion of the tax burden to the utilities that they will falter under it, fall into bad repute because of it, and the one outstanding example of successful municipal ownership and the remaining sore thumb to the power interests will be wiped out and public ownership will have received its death blow.”55 Privatization would prevail. Although powerful interests would have benefited from the plan, the taxpayers’ group maintained that working people were the true beneficiaries of their policies, and some of them apparently agreed. The group included both the president of the Antlers and City Coal Mines as well as the assistant engineer at the Antlers.56
In certain respects these taxpayer associations foreshadow our present-day Tea Party movement.57 Judge Little believed the city of Colorado Springs should “emulate the example set by the public itself” and tighten its belt as ordinary citizens had. First on Little’s chopping block was the minimum salary law for schoolteachers. He and other anti-tax activists routinely went after “high-powered educators,” whom they accused of using the PTA to advance their “tax-spending programs.” The group also attacked as wasteful the federal government’s plan to build post offices throughout the country. Merrill Shoup argued that the biggest problem facing America was the expansion of government, which was overwhelming Americans with what he called “bureau after bureau and bureaucrat after bureaucrat.” Here he was following in the footsteps of his old-line Republican father.
The taxpayers’ association in El Paso County went so far as to push for passage of a bill in the state legislature that would have given such associations veto power over budgets. If a taxpayers’ organization opposed any single item in the budget, the city council in question would have to then submit it to the state tax commission for arbitration. Moreover, the bill would have prevented the city council from putting a bond issue proposal to the people for a vote if the taxpayers’ group objected. In fact, the proposed legislation empowered the group to sue any city official who the group believed had violated any of the bill’s many provisions. “You only have to think contrary to the taxpayers to be sued for damages,” observed the attorney for the city. If the bill became law, argued city officials, it would effectively “destroy local self-government and transfer governing powers from duly elected public officials to self-constituted taxpayers organizations.”58
The B&L collapse represented an opportunity for those members of the El Paso County Taxpayers Association who were politically ambitious. Judge Little had already run for public office and would again. J. Herbert Pratt ran for county commissioner, and Merrill Shoup had his eye on the governor’s seat. They used the fury of building and loan depositors to take down local politicians and elevate themselves. They attacked the “city gang” and its “rotten” mayor, George Birdsall, whom they blamed for the scandal, and used language that insinuated that the Springs was under the thumb of corrupt machine pols—the rap against nearby Denver.59
Taxpayers’ associations reveal a side of the 1930s that departs from the feel-good, collectivist-oriented political activism we often associate with that era. These activists were full of anger, but not of the sort that compelled working people to come t
ogether to resist evictions or farm auctions or to build or strengthen labor unions. Instead, cross-class movements that deployed the trope of the “little man” were predicated upon the idea that old-fashioned self-reliance, not handouts to the “undeserving,” was the cure for what ailed America.60 Journalist Lorena Hickok, who traveled across the United States for the Roosevelt administration in order to report back to the administration on its New Deal relief efforts, wrote of many Americans’ horror of dependence, and particularly of white-collar people who, it seemed, would rather starve than apply for relief. One Arizona man asked her what would happen to men like himself, “men who have been the backbone of commerce, who have had ambitions and hopes, who have always taken care of our families.”61 It was a fear for both blue-collar and white-collar Americans, and it helped to fuel these cross-class tax revolts across America.
By the mid-thirties the anti-tax movement had lost steam nationally, but it had played an important role in state and local politics.62 Between 1932 and 1934, seven states enacted limitations on the general property tax, and several dozen localities established similar limits.63 Republicans (and some Democratic politicians, including Colorado’s governor, Ed Johnson) took the anti-tax ball and ran with it as they attacked the New Deal for expanding the power of the federal government. Often they opposed the New Deal on the grounds that it was “soaking the poor,” whose taxes, they alleged, went to pay for all those proliferating alphabet agencies.64 When it came to Colorado Springs, voters there did not overturn municipal ownership of public utilities or vote out Mayor Birdsall. Nor did the Colorado state legislature grant taxpayers’ associations veto power over local budgets. However, Merrill Shoup did sit on Governor Johnson’s tax advisory committee, and he claimed that the taxpayers’ movement was instrumental in reducing taxes.65