“This is a land flip.”
Early in my legal career, these words were spoken to me by an ordained Methodist minister. At the time, this young minister-turned-lawyer and I were associates in the Dallas office of Akin, Gump, Strauss, Hauer & Feld, that juggernaut of corporate law and per-partner profits co-founded by Texas überlawyer Bob Strauss. Land flip? It didn’t sound right to me, a piece of land changing hands six times in two hours with the price increasing on each sale. But the minister was casual as he explained the deal. Apparently this was how things worked in Dallas.
I’d graduated with honors from Duke Law School, passed the bar exam, and didn’t know squat about law, business, Texas, or the ways of men and money. The years 1983 to 1988 were my education, my diploma conferred at decade’s end in the form of an FBI hip-check.
If the Dallas TV show began as a cartoon version of the real Dallas, by the time I arrived the city seemed fixed on living up to the cartoon. The program had demonstrated that excess and villainy not only were fun but could be extremely lucrative as well. People seemed to be auditioning for the show, at least in their minds, emulating J.R. and all the rest of the gang, whose heroics consisted not of fighting off Comanche, curing disease, or crusading for truth and justice but of doing deals and making money. Ayn Rand’s mythical capitalist hero came to life on our TV screens every Friday night.
At the time, I thought this all might simply be a question of style, of a kid from North Carolina needing to acclimate himself to Dallas’s culture of hedonistic capitalism. “Who’s the richest man in North Carolina?” someone asked me shortly after I arrived in Dallas. Not only did I not know, the question had never occurred to me. In mostly rural N.C., the few people who had any money—the local Coca-Cola bottler, say, or the owner of the oil distributorship in town—took pains not to advertise their wealth. If I instinctively distrusted this wheeling-dealing culture I’d landed in the middle of, I distrusted my distrust even more. Maybe I was naive. Maybe I just didn’t know enough. Imagine Opie from Mayberry stumbling onto the set of Dallas, and you get the idea.
One of my fellow associates, a smirking, nightclubbing libertine, liked to wander into my office intoning his personal mantra, “Money-money-money-money-screw-screw-screw-screw.” Oil had crested at $35 a barrel, and a country song urged us to “drive 75 and freeze a Yankee.” Real estate was booming too, but more pertinent to our story was the passage, in 1982, of the Garn–St. Germain Depository Institutions Act, which opened the floodgates of easy money and easier profits for the savings and loan industry. Whereas S&L’s had previously been limited to issuing home mortgages at modest fixed rates, they could now, thanks to this landmark act of bipartisan deregulation, take in deposits at whatever rate of interest the market would bear and in turn lend out those deposits for a wide range of speculative deals.
Folks of a gambling nature knew a good thing when they saw it—real estate developers, among others. Scores of developers bought themselves an S&L once they recognized the leveraging opportunities made possible by a virtually endless stream of cheap capital, in the form of federally insured deposits. No longer restricted to issuing home mortgages, S&L’s could now lend out their deposits for 100-percent-financed commercial projects, take a profits percentage in the deals, and pay themselves an array of fees, points, and commissions out of the loan proceeds. Even better, the developer/S&L owner could have his S&L set up a development subsidiary and use FSLIC-insured deposits to fund his own real estate projects, in effect lending the S&L’s money to himself.
For deal-junkie Dallas, this was the financial equivalent of crack. The beauty of it was, you didn’t have to game the system—the system was already gamed! Take those land flips, for instance. As long as real estate appraisals supported each successive increase in the property’s value, nobody was breaking any laws, and thanks to inflation, the appraisers were happy to oblige. It was a perpetually rising market as far as the eye could see.
“You wanna know how to make money, kid?” a developer asked me once. “Go out to where the houses stop and buy land.” This was wheeling and dealing on the grand scale—thousand-acre tracts of raw land, housing developments, shopping malls, condos, and office buildings. S&L deals tended to be chewing-gum-and-bailing-wire affairs, conceived on the fly, fuzzy on the details, and almost always burning on a short fuse. As the Methodist minister explained, we—the lawyers—had to be the brakemen on these runaway trains. It was our job to slow down the business guys long enough to get the deal properly papered and secured. The minister was a good egg and a straight arrow; he showed me the ropes, including how to stand firm when the business guys were yelling at us to just close the damn deal!
Many a late night was passed in conference rooms stinking of cigarette smoke, stale pizza, and the frowsy musk of a bunch of stressed-out hustlers who hadn’t showered in thirty hours. Most of my life had been spent around teachers, scholars, and agrarian philosophers, and now it seemed I’d fallen in with a tribe of people who were hell-bent on making gobs of money and didn’t give much of a damn about anything else. But surely there was more to them than that? I’d always assumed there was a core goodness in most people, even a measure of altruism. You wanted to make some money, sure, you aimed for a certain level of comfort and security, but to pile up money just for the sake of piling it up? This was uncharted territory for me. I bought a pair of cowboy boots at Sheplers, my one gesture toward Texas style,