by Alice Echols
In courting the military, Colorado Springs boosters touted the area’s ample sunshine and all its available land, some of it farmland that had gone dry and been abandoned as a result of the drought. They practically turned the city’s two leading hotels—the Broadmoor and the Antlers—into “war facilities.” Charles Tutt Jr., the son of Spencer Penrose’s onetime business partner, helped to spearhead a group of boosters committed to luring the military there. The president of the Broadmoor Hotel, Tutt and his friends wined and dined the Army’s top brass, who came to view the Springs as offering them an essential “time-out,” where they could “get tight and tell their woes.” Between 1941 and early 1942 the Army announced that Colorado Springs would be the location for Camp Carson and the Peterson Army Air Base. During the war more than a hundred thousand men trained at Camp Carson.
The town’s courting of the military continued, and in 1950 the Air Force (now an autonomous branch of the armed forces) chose the city as the site for its Air Defense Command, now known as NORAD. The city’s Chamber of Commerce helped to seal the deal by offering a shuttered airfield on attractive terms and by promising to build a thousand housing units for the needed workforce. Four years later the Springs was named the site of the future Air Force Academy, in no small part because the state legislature appropriated $1 million to buy a huge parcel of land north of the city for its site. The military sector of the local economy was further solidified when, in the early 1960s, the Air Force opted to keep Fort Carson open. Twenty years later the Air Force “permanized” its presence in Colorado Springs when it chose it as the site for its Consolidated Space Operations Center, the unified United States Space Command, and the new SDI National Test Bed Facility.94 By the 1980s, 60 percent of the Colorado Springs economy was tied to the military.95
Bolstering the city’s economy further during the Cold War years were high-tech companies, many from California, that began relocating or opening facilities there. A big draw was the city’s relative cheapness, the absence of unions, and its “tractable blue-collar work force.”96 Colorado Springs had been an open-shop town for decades, and in 1949 the city charter was even amended to bar the city from negotiating with labor unions.97 The Springs became, as one study puts it, “an archetype of the new military-industrial city,” or what the Chamber of Commerce preferred to call the “Space Capital of the Free World.”98 The city’s dependence on the government did nothing to diminish its ideological commitment to free enterprise.
That free enterprise and anti-statism remained articles of faith in the city owed a lot to the grip the hard right had on the local media. In 1946 R.C. Hoiles, then the owner and publisher of California’s right-wing Orange County Register, acquired the local daily, and it stayed under that family’s control for sixty-five years.99 When, in the mid-fifties, Merrill Shoup led a new group to protest “reckless” spending, he would find an important ally in Hoiles.100
The military remade Colorado Springs. Life changed for some members of the Davis family as well. Roy Davis became the main supplier of office machines for the town’s military. Perhaps being the town’s biggest seller of Liberty Bonds during World War II helped him snag that contract.101 And in the final months of the war, my thirty-five-year-old mother met an army lieutenant (a former HOLC employee from Washington, D.C.) whom she would marry. She had spent the past seven years living with her mother and working at a downtown bookstore owned and operated by Edith Farnsworth, a member of the town’s social set. Hers was a nine-to-five existence with few diversions. Sometimes she characterized this period as hell, and it certainly wasn’t the way she had imagined her life unfolding. On the other hand, talking about and selling books brought her pleasure. So did knowing that customers were curious about her. Farnsworth may have taken a gamble on my mother, but she may have also figured that Dorothy Davis might be something of a draw for her shop. At least my mother, who seems to have used her notoriety to feel like somebody, thought so.
As long as interest rates did not rise America’s savings and loans did well, as they earned an income spread on the difference between the higher long-term interest rates they received from their mortgage loans and the lower short-term interest they paid out to depositors.102 However, in the latter part of the seventies, growing numbers of consumers started to invest their money in a new product—lucrative money market mutual funds. S&Ls were stuck with hundreds of billions of dollars on their books that were tied up in thirty-year fixed-rate loans (usually at 6 percent), and with their interest rates on new deposits limited to 5.5 percent. The once-thriving thrift industry began to sink. It declined further in 1979 when interest rates climbed higher in the wake of efforts by the Federal Reserve to bring down inflation. The Fed’s move triggered a recession that resulted in S&L defaults and foreclosures. Under President Reagan the push to deregulate accelerated, particularly when it came to the thrift industry, which many believed had been unfairly hampered by nearly fifty-year-old restrictions, born of a different era.
The first time I came across this picture I didn’t recognize the woman on horseback as my mother. By the time she was raising me, my mother no longer had the bearing, daring, or flirtatiousness of the woman pictured here. At first I imagined that this photograph pre-dated the scandal, and that it was her father’s ruin that had changed her, but this photo was taken in 1937. My mother recalled these years as having been extraordinarily trying, but this photograph suggests she was still a spirited woman. (Author’s archive)
Faced with a thrift industry teetering on insolvency, the Reagan administration, with crucial support in Congress, decided that the “self-regulating mechanisms of the free market” should determine the industry’s fate. S&Ls would no longer be restricted in what they could offer depositors by way of interest. At the same time, in a distinctly non-free-market move, FSLIC insurance for S&Ls was increased from $40,000 to $100,000 per deposit. Even at the time, some worried that this would enable risk-free fraud. When the industry failed to recover, further deregulation was pursued. With the Garn–St. Germain Depository Institutions Act of 1982, S&Ls were allowed to increase their consumer loans, make commercial corporate and business loans, and invest in nonresidential property, up to 40 percent of their total assets. Thrifts were also permitted to provide 100 percent financing, without any down payment from the borrower. “I think we’ve hit a home run,” Reagan said upon signing the bill.
De-regulation was “like a freight train . . . and everybody just got on board,” recalled one thrift regulator. The fact that the history of the building and loan industry was largely unknown meant that there was no effective way of countering those who dismissed Depression-era regulations as “anachronistic and debilitating.” Savings and loans, now promoted as “moneymaking machines,” did indeed emerge from their doldrums. The only problem was that these new free-market thrifts proved to be the “perfect vehicle for self-enrichment.” What happened in the eighties was nothing short of “collective embezzlement,” as operators, enabled by politically connected co-conspirators, plundered their businesses as they went on ludicrously outsized spending sprees. “The best way to rob a bank is to own one” was the judgment of the commissioner of the California Department of Savings and Loans. It’s been estimated that the cost of the S&L crisis to taxpayers was somewhere between $150 billion and $175 billion.103
Texas was the hardest-hit state, but Colorado did not escape unscathed. Denver-based Silverado Savings & Loan, whose board of directors included Neil Bush, son of President George H.W. Bush, suffered one of the worst crashes of all, which was said to cost American taxpayers $1.3 billion. Some analysts now believe that the government’s bailout of the S&L industry set a dangerous precedent in which the government subsidized risky behavior, a move that may have encouraged the recklessness that led to the subprime mortgage crisis of 2007.104
Colorado Springs’ right-wing media and its militarized economy consolidated the town’s reputation for conservatism. It became a magnet for conservatives such as th
e libertarian Robert LeFevre, who in 1954 moved there and began writing editorials for the Gazette-Telegraph. Within two years LeFevre established the Freedom School, which he operated there for twenty years. In the early twentieth century Colorado Springs had boasted that it was “the City of Churches,” and as its economy struggled through a downturn in the 1980s city leaders decided to pursue economic development through Christian evangelism. Of the groups that settled there, none was more powerful than Dr. James Dobson’s California-based Focus on the Family, whose recruitment the city sealed with a $4 million grant from a local foundation. By the mid-1990s there were nearly a hundred conservative Christian groups in Colorado Springs as well as Ted Haggard’s New Life mega-church, which had set up shop there in 1984. In 1992 evangelical conservatives made Colorado the first state to pass an amendment preventing localities from outlawing discrimination on the basis of sexual orientation. With a lopsided two-to-one vote in favor of the bill, its supporters proclaimed Colorado Springs the “Vatican of evangelical Christians.” Although the courts eventually overturned the amendment, it gave rise to similar efforts in four other states.105
During this period, taxes continued to galvanize Springs residents. It was California’s Howard Jarvis who in the 1970s captured headlines with the property-tax-slashing Proposition 13. However, by the late 1980s anti-tax activists in Colorado Springs once again took the lead nationally when former El Paso County commissioner and state representative Douglas Bruce devised what he called the “Taxpayers’ Bill of Rights.”106 Some sixty years after the taxpayers’ league in El Paso County first mobilized, at least some of that group’s dreams came to fruition. TABOR, as it is known, called for amending Colorado’s constitution to prohibit state government from raising taxes or tax rates without a referendum. It also proposed that state government be barred from spending the money it collects under existing taxes if tax collections rise faster than the rate of inflation or population growth. Surplus revenue, under the law’s terms, must be given back to taxpayers, no matter the needs of the state. 1992’s TABOR law became a model for the anti-tax movement nationally, but it has proven hugely complicating for the state of Colorado, whose system of public education has suffered under it.107 The libertarian law raises a fundamental question: is a government that cannot tax really a government?108
The back cover of a passbook for the City Savings Building and Loan. (Author’s archive)
Epilogue
In the spring of 1956, when I was five years old, a moving van pulled up to our house. Out came furniture, steamer trunks, and well over a hundred boxes. It had all been in storage in Colorado Springs ever since Lula’s death in the spring of 1945, just weeks after Dorothy’s wedding to a lieutenant stationed in Colorado Springs at Peterson Army Air Force Base. The van was timed to arrive as we were making the two-mile move from Bethesda to Chevy Chase Village, where my parents had purchased a house big enough to hold Lula and Walter’s belongings. Days later, my father was taking stock of it all when he came upon a box filled entirely with gloves. As he lifted a pair he noticed that its fingers were stiff. By the time he had removed all the hundred-dollar bills that Lula had rolled up and deposited into the fingers of all those gloves, he was staring at something like $2,500.
I have no idea if my mother knew about the money-stuffed gloves. The fur coats were another matter. She had expected that her mother’s furs would be heavy with cash when they arrived in Maryland. And they would have been if the furriers had not ignored her instructions to store the furs whole rather than taking them apart—apparently the preferred method for long-term fur storage. Had the furriers felt curious bulges in the lining of the coats and, knowing the Davis name and reputation, decided to open them up? Probably. But the $2,500 was hardly all that remained of my grandfather’s onetime fortune. Take, for example, my grandfather’s black diamond ring, which my parents sold to a District of Columbia jeweler in 1958. That alone netted them $16,000. And this was in addition to Lula’s estate. After that was settled in 1945 my mother inherited $85,000.
Lula died with an estate that in today’s dollars was worth roughly $1 million. That figure does not include the cash and jewelry that went uncounted in the final estate tally. In planning for their future in the wake of Walter’s suicide, Lula might well have figured that she would live beyond age sixty-two—the age at which she died. Still, what those numbers suggest is that my mother and grandmother could have parted with thousands of dollars without themselves suffering during the Depression.1 Would it have mattered to those depositors? I would wager that for many of them just about any size check would have made a difference. And here’s the thing: although my parents were not frivolous, it wasn’t as if that money went for essentials. Mostly it paid for a house in the tony suburb of Chevy Chase Village and private schools and colleges. Rejected by the charmed circle back in the Springs, my mother tried her best to launch her rebellious daughters into it in Washington, D.C. No luck there.
Like many girls of the sixties, I systematically thwarted my mother’s social ambitions for me. Still, her father’s money shaped me, even the terms of my rebellion. It gave me opportunities I understood at the time to be primarily the consequence of my father’s hard work. Growing up, the value of hard work (and implicitly the payoff that follows from it) was drummed into me. To be clear, it’s not as though I came to this project with any naiveté about the American dream. Coming of age in the sixties, I developed a healthy skepticism toward national narratives that claim America to be a meritocracy, that imagine free enterprise and individualism as guarantors of our freedom. But somehow that political analysis didn’t quite extend to me. Shortfall has made me rethink just about everything. What if I hadn’t attended Sidwell Friends, among D.C.’s preppiest prep schools? What if Walter hadn’t been both ambitious and ethically challenged? Perhaps nothing other than my grandfather’s ingenuity at stealing other people’s money separated us from my great-uncle Willard and his wife, stuck in a ramshackle house on west Colorado Avenue.
My grandfather had a cruel disregard for his customers, whether they were looking for security, a lifeline, or fast money. I wish he had been an outlier, a lone maverick, but he wasn’t. Whether in Colorado Springs, Los Angeles, Philadelphia, or many other places, the building and loan business bore little resemblance to Bailey Brothers. However, this book is not just the story of one small group of people in a Western town; it’s also a history of America’s uneven playing field, or one significant corner of it. It takes aim as well at a larger cultural narrative, the fairy tale at the heart of It’s a Wonderful Life—that capitalism is redeemable, and not because of bank examiners and government regulators, but because of wonderful people like George Bailey. I’m not sure how much traction this fantasy has any longer, but it’s worth asking why it has had such a hold on Americans. Have we needed George Bailey to keep at bay all the real-life Walter Davises of the world, to keep us from losing faith in the fairness of our system?2 And might it be that we ourselves are more deeply implicated than we know in this cultural fantasy of capitalism’s goodness? What if our own investments in this system, and our own hopes of making it, also have figured in this fairy tale?
Acknowledgments
Shortfall took me somewhat beyond my comfort zone as a historian. Researching this book meant leaving behind the long sixties, immersing myself in multiple histories—of the American West, banking, and conservatism—and plunging deeper into early twentieth-century U.S. history. Not all of my colleagues and friends were persuaded that this should be my next book project. Years ago, historian Moshe Sluhovsky was the first friend to ask the question I imagined I had already answered: “But why should we care about this?” Figuring that out took a while.
Ultimately, getting to that larger story required a deeper immersion both in the archives and in the relevant secondary sources. In the early stages of writing, my literary agent, Geri Thoma, wisely advised “pulling back the camera” and giving readers a wide-angle view of the story, a
judgment seconded by my friend Wini Breines. My college roommate and friend Torrey Reade, who worked for years as a Wall Street investment banker, read a later draft of the book in the summer of 2015. She shared with me what she believed needed fleshing out and clarifying, and at that moment when my spirits were flagging she restored my faith in the project. Barry Qualls, Anne Hyde (a professor for two decades at Colorado College in Colorado Springs), and Charlotte Nekola read and commented on the manuscript in ways that improved it immeasurably. Many thanks to all those who usefully read and commented on drafts of the prologue: Steve Aron, William Deverell, Karen Halttunen, Susan Johnson, Seth Koven, Constance Samaras, Jacob Soll, and Marla Stone.
Over the years my thinking was sharpened by conversations with the following colleagues, friends, and acquaintances: Elinor Accampo, Joe Boone, Anthony Tirado Chase, Ellen DuBois, Ann Fabian, Ray and Joy Flint, Daniel Goode, Sofia Gruskin, Bill Handley, Sharon Hays, Janis Holm, Maria Lepowsky, Tania Modleski, Donna Murch, Becky Nicolaides, Molly Pulda, Steve Ross, Brett Sheehan, Bette Skandalis, Ann Snitow, Jeff Solomon, Carole Vance, Devra Weber, Ginny Yans, Pat Yeghessian, and Gilda Zwerman. The friend who crucially got me working on this book with her discovery of those New York Times articles is Alice Wexler, with whom I have had many a conversation about the challenges of writing one’s own family history.
This book forced me to retool, and the University of Southern California gave me the time and support to do so. An early sabbatical through USC’s Advancing Scholarship in the Humanities and Social Sciences, an initiative of then Vice Provost Beth Meyerowitz, proved helpful at a critical juncture in the research of this book. Thanks are also due to Vice Dean Peter Mancall and then Dean Steve Kay.