Loaning Home: Unmaking an Industry that Made LA
Bill Deverell handed me a book the other day, with the recommendation that the author had put together a good story. The book is Building Home: Howard F. Ahmanson and the Politics of the American Dream by Eric John Abrahamson. (It's the sort of book that puzzles some of my friends, who can't imagine how the biography of a savings-and-loan pioneer also could be a good story.)
Ahmanson (who died in 1968) is remembered - if at all - through the cultural institutions he supported: the Los Angeles County Museum of Art and the Music Center. Abrahamson makes a compelling case that Ahmanson ought to be better remembered - positively and negatively - as a man who made much of Los Angeles.
Ahmanson's Home Savings, once the largest savings-and-loan in California, was acquired by Washington Mutual in 1998 and ultimately disappeared in the disasters of 2007-2008. Only the monumental Home Savings buildings that Millard Sheets designed and decorated in the 1950s and 1960s remain, mostly as branches of Chase Bank.
Jeremy Rosenberg has been unpacking the legal infrastructure of Los Angeles in his series Laws That Shaped LA. The story of the rise of Home Savings is another way of looking at why Los Angeles looks the way it does. As much as ordinances and statutes did, banking regulations, their interpretation by state and federal agencies, and a consensus that was specifically Californian about the interaction of big government and big business made Los Angeles the way it is.
Home and two or three other savings-and-loans dominated the mortgage market in Los Angeles and Orange counties from 1950 through the 1970s to a degree unmatched in the rest of the state. Their growth depended on the swift transformation of farms and orchards into housing tracts. Their profitability depended on the tax and regulatory advantages that state-chartered institutions had that other banks did not. The raw material they turned into mortgages (and into the houses the mortgages financed) came in the form of tens of thousands of passbook savings accounts earning a modest two percent annual interest.
By the late 1950s, Home Savings was closing in on a billion dollars in assets, supported by the habitual thrift of middle- and working-class depositors and their increasing incomes in a booming economy.
The "wealth machine" that the financial services industry hitched to the "growth machine" of suburban development was dependent on cheap, buildable land; on the conviction of regulators and lenders that home mortgages should be the principal business of savings-and-loans; and on the better wages that went partly into savings accounts.
When cheap land became scarce in the 1970s, when banking regulators adopted the values of anti-regulatory "Chicago School" economists, when wages stagnated relative to the cost of living, when banks pushed consumer debt to generate greater profits, and when the habit of saving declined as a result, savings-and-loans began their slide into the S&L Crisis of the 1990s.
The route from crisis to the near collapse of the nation's financial system was, if not exactly predictable, at least plausible. (The end point of this trajectory is given a harrowing immediacy in Douglas McCulloh's Dream Street, which combines oral history, McCulloh's photography, and his sensitive observation of a low-coast housing tract in Corona being built and sold as the "sub-prime" bubble is about to burst. This is part of the territory that McCulloh and Susan Straight have been documenting in these pages as Notes of a Native Daughter.)
The financial system that built Los Angeles is gone, but the homes - indeed, entire cities - are still here, sheltering an anxious working class and a shrinking middle class. Nothing like them will be built again. What we should make of the place that was made for us remains obscure, but it is best that we know how we got here.