Jackpot of the Plains
My unsentimental education in the wheeler-dealer ways of the most American of Texas cities.
(Page 2 of 2)
I’m embarrassed to think about it now, how young and dumb I was. Parts of it I liked: paydays, happy hours, the adrenaline buzz of fast deals, the sheer weirdness of practicing law in a de facto casino. A young partner and I once spent three weeks in New York closing a loan for the purchase of a fish-factory trawler. The ship was in Norway, the purchaser a Bulgarian prince who planned to have the ship overhauled in Japan, then it would be put to work in the Bering Sea, catching and processing Alaskan pollock for the Japanese market. Surimi, the finished product was called, a high-salt, high-protein concoction that the Japanese ate by the ton, so the prince informed us in his crisp Euro-English.
What business, you might ask, did a Texas S&L have lending money on a factory ship halfway around the world? A good question, in retrospect. The prince defaulted on his very first scheduled payment, but in my personal pantheon of S&L antiheroes he’s not even close to the top tier. Those worthies are enshrined in the hall called Felons I Have Known, where you’ll find, among others, the owner, chairman, and three subsidiary presidents of Vernon Savings & Loan; Danny Faulkner, king of the land flip; and gnarly old Herman Beebe of Shreveport, who had the grizzled looks of an ex–pro wrestler from the county fair circuit. Herman would fly into town trailing his extended entourage, which sometimes included his daughter Easter Bunny Beebe, so named for having been born on that special day. Others enshrined in the hall: Joe Grosz, senior vice president of San Jacinto Savings Association; James McClain, a tough street kid from Detroit who had impeccable manners; and Ed McBirney, the boy-wonder CEO of Sunbelt Savings Association, a.k.a. Gunbelt Savings. The silhouette of Sunbelt’s headquarters, as represented in the architectural drawings, bore an uncanny resemblance to the profile of McBirney’s seventies lounge-lizard hairstyle.
They could be charming and even fun, as long as they got their way. Buccaneers of the boardroom, you could call them, their quirks colorfully endearing when they weren’t being assholes. And as for their faint tang of sleaze? Later, as the deals unraveled, it would all come to light: the kickbacks, the side deals and drunken bets, the slush funds and corporate retreats starring the Rolodex Madam’s A-team girls. The minister and I, we closed deals for these people, but we didn’t hang out with them. We weren’t in the club. We read it in the papers like everybody else.
“All in all,” said President Reagan in the Rose Garden on that sunny day in October 1982 when he signed Garn–St. Germain into law, “I think we’ve hit the jackpot.” Long live the free market! And to hell with regulation. This particular jackpot would end up costing U.S. taxpayers upward of $500 billion and set the template for all the busts and bailouts of the decades to come, each one more horrific than the last. We didn’t know it then, doing those deals in the mid-eighties, but we were on the cutting edge of the financialization of the American economy, when the center of gravity began to shift from industry and manufacturing to capital. The S&L model wasn’t about producing things or supplying a service to meet a naturally occurring demand. It was all about spinning wealth out of thin air through the creative manipulation of capital, cash flow, and hard assets. The deal itself became the product—that was the great discovery. The features of American business that are so common today—leveraged buyouts, private equity, collateralized mortgage obligations, credit default swaps, and all the rest, all the financial engineering by which busy bankers churn and skim the economy—can trace their roots to the days of the go-go Texas S&L.
It’s no accident that Dallas, a town founded by a manic-depressive real estate speculator and that invented, among other things, the silicon chip and the modern shopping center, was ground zero for this new phenomenon. Millions of dollars were made doing real estate deals even as the market sagged from overcapacity. “You can’t get hurt in dirt” became the new mantra as oil fell below $20 a barrel, and kept falling. Softness in real estate was declared to be “a buying opportunity,” and when the softness endured and deepened, the banks started handing out gimme caps with exhortatory slogans: “Stay Alive Till ’85,” “Final Fix in ’86,” “Oh Thank Heaven for ’87.”
A few of the saner minds among us saw what was coming. “We’re Chicken Little,” a VP from Bright Banc told me over lunch one day. “We think the sky is going to fall.” Conjured rigorously enough, financial voodoo can spin off amazing reams of wealth even in the face of impending doom, but eventually, ultimately, reality catches up with all of us. S&L’s failed in droves across Texas and the Southwest, and by 1987 the commercial banks were following. First RepublicBank, MBank, First City, all homegrown pillars of the regional economy—gone. Household names began to file bankruptcy: the Hunt brothers, Clint Murchison Jr., and former governor John Connally. Cowboys owner Bum Bright’s travails would lead him to sell America’s Team to a guy from Arkansas. The SMU pay-for-play scandal erupted in the middle of all this, implicating more establishment names and the sitting governor of Texas. Trouble upon trouble. It felt biblical.
These days our disasters aren’t sourced so particularly to Texas. We’re international now; Dallas rises and falls according to the health of the global economy, but the culture of Wild West capitalism remains the same. Preston Road is a parade of “I Am John Galt” bumper stickers. Conspicuous consumption seems to be striving for drug-kingpin levels, as a quick drive along Strait Lane or any Highland Park street will show. And as everyone who hasn’t been living under a rock knows, Dallas made its triumphant return to television last year, with a new generation of deal makers following in the footsteps of the old. It seems never to occur to the younger Ewings to rebel against their elders. A lack of imagination, maybe? Of initiative? Yet they’re so fearsomely energetic when it comes to making money.
I left Akin Gump in early 1988, a very tired thirty-year-old husband and father of one. I was done with the practice of law, but every few months I’d put on one of my suits, slide a tie up my neck, and go downtown to be deposed by the Resolution Trust Corporation. A couple of days before Christmas, I got a call from an agent of the FBI, inviting me to come in for a talk after the holidays. So I had the pleasure of thinking about that for the next few weeks, and when that January day arrived, I drove my hunk-of-junk Grand Prix over to a shabby office building on Stemmons Freeway, one of the thousands of properties that the federal government now owned in the wake of the great S&L crash.
I did not “lawyer up,” as they say. I went in alone, feeling equal parts resigned and reckless. When the agent, a courteous, clean-cut white man of early middle age, showed me his badge, I almost laughed—it was just like TV! We sat down in a conference room and talked for a couple of hours. I think he recorded the conversation, though my memory is hazy about that. He wanted information. Who was at this closing, that meeting? Who said what? After a while I got the feeling he already knew most of the answers to the questions he was asking.
When we were done, he thanked me and walked me to the door.
“We might call you again at some point,” he said.
“That would be fine,” I said.
They never did.
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