Alice Echols - Shortfall: Family Secrets, Financial Collapse, and a Hidden History of American Banking

ALSO BY ALICE ECHOLS

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2017 by Alice Echols

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Published in the United States by The New Press, New York, 2017 Distributed by Perseus Distribution

ISBN 978-1-62097-304-2 (e-book)

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Composition by dix!

This book was set in Fairfield LH

Printed in the United States of America

2 4 6 8 10 9 7 5 3 1

In memory of my mother

Shortfall, n.

A falling short; the amount by which a supply falls short, shortage, deficiency. Also, a decline; a shortcoming, a fault; a deficit, a gap; a loss.

Oxford English Dictionary

Contents

Table of Contents

George Bailey. Its a name that most Americans, or at least those of a certain age, recognize in a flash. With just a bit of prodding (You know, Jimmy Stewart... Its a Wonderful Life), even those who have never watched the 1946 film in its entirety usually know whom it is youre talking about. George Bailey is the small-town banker at the center of Frank Capras classic Hollywood movie. A man filled with dreams of a big and exciting life, he finds himself, when his father dies suddenly, stuck in his hometown, Bedford Falls. This untimely death shackles George to his fathers struggling building and loan association (B&L). Consigned to what he disparagingly calls this business of nickels and dimes, he tries to make the best of it, albeit grumpily at first. Kindhearted, altruistic, and willing to take on Henry Potter, the towns evil banker, George is the sort of person most Americans have rarely, if ever, encountered in the world of financial services.

At the same time that George Bailey was doing his best to bring the American dream of homeownership to the working people of Bedford Falls, Walter Clyde Davis was operating a different kind of building and loan association in Colorado Springs, Colorado. George Bailey was a beloved figure, whereas Walter Davis aroused in others feelings of wariness, sometimes even dread. Yet Davis turned his building and loan into the biggest in central Colorado, with 3,600 depositors. His success enabled him to buy into a tony neighborhood, drive luxury cars, and finance summer-long European vacations for his family. And then there was Daviss mistress, another telling difference between the real-life B&L man and his fictional counterpart.

Each man faced financial calamity during the Depression. But George Bailey selflessly handed out his own honeymoon money to forestall a bank run engineered by his nemesis, Henry F. Potter. By contrast, Walter Davis went on the lam before news of his associations failure hit the papers. Back home in Colorado Springs, investigators discovered that the towns financial wizard had left his business with a jaw-dropping $1.25 million shortfall. In todays terms, that translates into nearly $22 million.

The building and loan industry, once a central part of our countrys financial fabric, is barely remembered today. What has lived on in our cultural memory is George Bailey, who has become a fixture in books about banking and finance, homeownership, and the Depression. As for Walter Davis, well, hes pretty much gone missing from our history books.

In studio photographs, Walter Davis looks like someone with whom one would prefer not to tanglevery much the antiGeorge Bailey. (Authors archive)

Midway through Its a Wonderful Life, just as newlyweds George and Mary Bailey are heading off on their honeymoon, something goes terribly wronga bank run at Bailey Brothers Building and Loan. Its 1932. The depositors are desperate but restrained, until they learn of Old Man Potters offer to pay fifty cents on the dollar for their B&L shares. George tries to win back his depositors by explaining the power dynamics behind Potters offer. However, the run only comes to an end after Mary hands over their honeymoon money to George, who selflessly distributes it to the crowd. (Image courtesy of Getty Images)

Yet among building and loan men of that period Walter Davis was hardly anomalous. Neither was his failure or the circumstances surrounding it. This is no small thing. During the Great Depression the industrys cratering brought untold grief to millions of depositors. Despite this, the history of the American thrift industry during the interwar years remains hidden, buried in the bowels of state archives and local libraries.

My discovery of this forgotten financial history did not begin in the archive, however, but with an almost chance conversation some twenty years ago. I was home, visiting my parents, when the dinnertime banter one evening went too far. After my mother left the table, slamming shut her bedroom door for good measure, my father explained the roots of her cellophane-thin sensitivity. He spoke about her family, particularly her cad of a father. His was not a story with a Capra-like happy ending. Our conversation that night was my introduction to the man at the center of this book, a man whose name I did not yet know. Within our family everything about himstories, photographs, and memorabiliahad been banished. Walter Clyde Davis, my grandfather, had been scrubbed as clean from my family as he was from the history books.

Its embarrassing to admit, but until that evening it had never occurred to me that it was weird how little I knew about my mothers past. Even though I grew up surrounded by her parents possessions, I dont recall ever inquiring about them or how they had come by all their swanky stuff. The room-sized Oriental rugs, the salmon-colored Art Deco chaise longue, the mahogany furnitureall of it was strikingly at odds with the midcentury blondness of my friends homes. And so it was with our pantry, crowded with variously sized Wedgewood plates, cups, saucers, and bowls, not to mention an array of delicate stemware for every conceivable kind of alcoholic drink. Some who have written about family secrets report a disjuncture between the accepted family narrative and their own perceptions, and others of being haunted by an unknown knowledge, what psychoanalysts have dubbed nescience. Admittedly, the shattering events in her familys story were not at a generational remove; still, how was it that I never registered as strange our homes faded, antique opulence or our familys conversational voids?