FIFTEEN
Crisis of the Managed Economy
SAVINGS AND LOANS in Los Angeles and across the country suffered their first serious downturn in the postwar era in the mid-1960s. Although the fourteen counties in Southern California had close to twelve million people—more than any state except California as a whole and New York—the region was finally saturated with housing. Immigration continued, but employment growth, especially in defense-oriented industries, slowed.1
As demand for housing softened, the savings and loan industry in Los Angeles entered a downward spiral.2 When residential construction dropped sharply in January 1964, opportunities to make good investments in mortgages diminished. Without good opportunities to invest their capital, thrifts cut spending for advertising. Reduced advertising led to a reduction in savings deposits and assets. In 1964, for the first time in years, the overall annual rate of asset growth among California savings and loans fell to 18.2 percent, well below the average rate of 27.1 percent for the previous five years.3
The downturn deepened in 1965. During the first two months of the year, the net increase in savings for all California thrifts was $261.7 million, just over half the $514 million collected in the same period in 1964.4 Meanwhile, residential construction in Los Angeles declined to the lowest level since the end of the war.5 By the middle of 1965, foreclosures had begun to rise along with interest rates. By the end of the year, the growth of savings accounts was only 8.8 percent, the worst performance since the end of World War II.6
Unfortunately, savings and loans were not able to simply shutter their loan windows and wait for housing demand to return. They needed cash—and preferably income—to finance current operations and pay interest on the depositors’ savings accounts. But as the drop in residential construction constrained profit opportunities, rising interest rates increased the cost of a lender's most basic resource—cash. Thrifts were suddenly squeezed on two sides. Holding large portfolios of loans written at lower rates, thrifts had to finance current operations with more expensive money provided by either savings depositors or loans from the Federal Home Loan Bank.7
For a while, most thrifts preferred to borrow from the FHLB. By June, the average thrift in California owed the FHLB an amount equal to nearly 14 percent of its assets. Since FHLB rules prevented new loans that would allow a thrift to exceed 17.5 percent, regulators were understandably worried about a liquidity crisis.8 By the end of 1965, thrifts had no choice but to compete more aggressively in the market for savings deposits. To attract these deposits, they offered to pay higher interest rates and once again offered giveaways—from toasters to transistor radios—to bring new accounts in the door.
Like the industry he regulated, newly installed FHLBB chairman John Horne was trapped by conflicting policy initiatives and the changing economic landscape. On the one hand, he did not want to allow thrifts to become even more leveraged than they already were. At the same time, he berated them for aggressively raising the rates paid on savings deposits. Higher rates increased the cost of operations and increased the risk that a thrift might fail, leaving the taxpayer (through FSLIC deposit insurance) to pay the bill. Indeed, he suggested that providing loans to those institutions that were paying high dividend rates to savers would be a “betrayal of the public trust.”9 Horne wanted thrifts to finance operations the old-fashioned way—with earned revenues generated by lending. On the other hand, he and other FHLB officials worried that, given the soft housing market, thrifts might lower their credit standards just to keep their volume of loans up and that a wave of foreclosures would have an equally devastating impact on the government's insurance programs.
While regulators and industry leaders fretted publicly over the state of the industry, Ahmanson expressed confidence. “It has become fashionable to worry about the savings and loans,” he told a reporter in June 1965, but the only savings and loans in trouble were “those growing too swiftly"—in other words, the companies trying to catch up to Home.10
Across town, Howard Edgerton didn't share his friend's point of view. As the competition for savings deposits intensified, he was continually frustrated by the misalignment between state and federal rules. In August 1965, Edgerton wrote to the head of the California Savings and Loan League, with a copy to FHLBB chairman Horne, to complain that since state thrifts had begun to advertise that they compounded interest daily on savings accounts, which the FHLBB didn't allow federals to do, the state-chartered thrifts had taken in twice as much in deposits as the federals in the first half of 1964, 50 percent more in the second half, and three times as much in the first half of 1965. Edgerton insisted that the playing field needed to be leveled. He suggested the need for a new law that would either force California-chartered thrifts to compute interest in the same way as the federals or restrict their ability to advertise anything but the basic rate.11
Fundamentally, Edgerton looked to the government to protect California Federal in the marketplace, but that didn't stop him or CalFed from exploiting their own position in California to the detriment of savings and loans in other parts of the country. For years, some California savings and loans had solicited so-called hot money from other parts of the country. As opposed to funds invested by local households and businesses, “hot money” came from individual and institutional investors, usually on the East Coast, who wanted to take advantage of higher interest rates in the West. In 1965, CalFed and Lytton Savings and Loan began advertising their deposit rates aggressively on national radio programs hosted by Arthur Godfrey and Don McNeill. When Edgerton and Lytton took to the airwaves, Henry Bubb was furious. The president of Capitol Savings and Loan in Kansas, Bubb complained and asked FHLBB chairman Horne to prevent this national competition for deposits.12
Climbing interest rates exacerbated these tensions. In December 1965, the Federal Reserve shocked the industry when it decided to allow banks to pay savers 5.5 percent on certificates of deposit (CDs) over five thousand dollars. The Fed was responding to a larger crisis in the banking industry and trying to ensure that banks would not lose corporate time deposits to other markets.13 The Fed insisted that this decision would have little impact on the competition for regular passbook savings deposits (which were still capped at 4 percent).
Savings and loan officials weren't so sure. They described the Fed's action as “irresponsible” and “nothing short of incredible.”14 For the first time in postwar history, banks were able to pay more interest on some deposits than savings and loans. Thrifts were sure that banks would take advantage of the situation and create small-denomination CDs for household savers, siphoning the vital stream of deposits they needed to stay in business. Thrifts were also concerned that the Federal Reserve's decision to increase the federal funds rate would cause another spike in interest rates.
Savings and loan officials pleaded with legislators and regulators to do something. Shocked by the Fed's action, John Horne sent a telegram to the FHLB's twelve district banks acknowledging that the new rate would put pressure on thrifts already reeling from the credit crisis.15 The FHLBB cautiously allowed thrifts to raise their premium rates to 4.75 percent, but this gesture was widely interpreted as too little, too late.16
Most thrift leaders believed a rate war was imminent. One savings and loan executive in Chicago told the Wall Street Journal: "We're all just sitting around hoping someone doesn't light the fuse.”17 In fact, the fuse was already sizzling. Bart Lytton announced that his savings and loans would begin offering a “bonus” payment of an extra half a percentage point on large savings accounts deposited for three years or more.18
The emerging rate war worried California and federal regulators. Residential construction lending in California virtually ground to a halt.19 As the credit squeeze and housing slump continued into the first half of 1966, some thrifts reported losses on apartment developments that were failing and some associations seemed headed for trouble. For Howard Edgerton, the news was not good. CalFed lost savings deposits to other institutions at a disturbing rate. In the middle of a merger with First Federal Savings and Loan Association of Alhambra in the spring of 1966, the company was spending money faster than it was taking it in. Moreover, CalFed had promised money that it didn't have for loans and had to borrow nearly $71 million from the Federal Home Loan Bank between March and June 1966.20 And FHLB officials were putting increasing pressure on Edgerton to improve his balance sheet.
In the middle of the crisis, Ahmanson seemed as cool as if he were steering the Sirius in the middle of a race. Planning a trip to Washington in February 1966, he asked to have lunch with Horne, describing himself as a “visiting fireman” with no particular mission. “In fact I am so happy about the types of things you folks have been doing in recent months I might go so far as to say I haven't even got any complaints.” At lunch, he offered to help the chairman and FSLIC with the troubled Bellehurst subdivision in Buena Park—an offer right out of the Milton Shaw era of regulatory cooperation.21 Ultimately, the project was taken over by another developer, but Ahmanson had made it clear that he was available to help the chairman if he could.
In the week or two following the lunch, Ahmanson appeared to be the FHLBB's number one cheerleader. In interviews with American Banker, the San Francisco Chronicle Examiner, and the Los Angeles Times, Ahmanson praised the FHLBB's efforts to hold down deposit savings rates and increase liquidity requirements. “The carpetbaggers almost ruined us in trying to make a quick buck,” he said in reference to the fast-growing new entrants to the business, which, he believed, were taking too many risks in order to increase their share prices in the public markets.
“I'm not mad at the banks and I don't have any desire to enlarge our field,” Ahmanson said.22 In fact, he believed that banks and savings and loans competed intensely in only one arena—the market for savings accounts. He thought Home could beat the holding companies and the banks in this arena.23 Chairman Horne wrote Ahmanson to praise his comments and to say that the members of the Federal Home Loan Bank Board agreed with him.24 But this interlude of good feelings and collaboration would soon come to an end.
TAKING ON COMPETITORS AND REGULATORS
In many ways, Howard and Ken Childs had seen the crisis coming. As early as 1963, judging that the market for single-family homes in Southern California was on the verge of saturation, they had virtually stopped making tract loans. In the first quarter of 1966, loans for new construction accounted for only 3.2 percent of the company's nearly $83 million in new loans. Meanwhile, major competitors like Great Western and Gibraltar invested more than 9 percent of their loans for new construction, and at some smaller associations the number rose to 30 to 50 percent.25 When housing sales slumped in the first half of 1966, these companies were hit hard. Home Savings didn't have unfinished housing projects, so it had very few troubled loans. It also had enough government bonds to be extremely liquid at a time when many savings and loans were borrowing heavily from the FHLB to meet their cash needs.
Home Savings’ competitive advantages in the situation became dramatically apparent in the spring and summer of 1966. And Howard Ahmanson's unflinching willingness to press these advantages at a time when his competitors, including friends like Edgerton, were struggling desperately to stay afloat revealed much about his competitive and entrepreneurial instincts, as well as his changing attitudes toward regulators and the managed economy.
For months, Bank of America had remained above the fray over savings deposit rates while competitors waited to see what the giant would do. In the postwar years the bank had become the largest in the nation. By doubling the size of its branch system, pioneering the automation of transaction processing, and expanding its reach into consumer and mortgage credit markets, the bank enjoyed remarkable success in California's booming postwar economy.26 But the company had also battled a series of antitrust suits that forced it to break off parts of A. P. Giannini's empire. By the mid-1960s, under the leadership of the politically savvy Rudolph Peterson, the company was reluctant to make competitive moves that would engender the wrath of regulators or lead others to complain about anticompetitive behavior.27 Despite its size, Bank of America was not immune from the growing credit crisis, particularly as corporate customers turned to foreign capital markets, bonds, and equity to finance continued expansion.28 At the end of March, Bank of America decided it had to take action to attract deposits. The bank announced that it would offer a 5 percent rate on CDs for five thousand dollars or more.29
Bank of America's action ignited a fusillade of responses. Within days, Gibraltar Savings declared that it would raise its dividend rates to 5 percent. A spokesperson for Home Savings said that the company had “no intention of not remaining competitive” and signaled that Home would raise rates to keep pace with the market.30
In Washington, John Horne was dismayed. Another round of rate hikes would further weaken thrifts that were already overextended. He warned the industry about “panicky” increases.31 When the industry pushed back, the FHLBB allowed thrifts to offer CDs at a higher yield to customers who deposited more and kept their accounts intact for periods ranging from one to three years. Great Western and Mark Taper's First Charter quickly announced that they would offer these 5 percent certificates.32 Home Savings said that it would do the same.33 For a few days, an uneasy calm prevailed.
But Ahmanson was not happy to let the regulators dictate his relationship with customers. To follow the FHLBB's guidelines, Home Savings would have had to convert nearly three hundred thousand accounts, which would be “very costly.” Moreover, customer surveys showed that eight out of ten people had no idea what CDs were. Ahmanson didn't see the point in a costly strategy to confuse his customers. He also recognized an opportunity to stay one step ahead of Bank of America. He chose simplicity instead, at the risk of angering the regulators.34
Howard announced that Home Savings would pay 5 percent on all of its deposit accounts, including the most simple passbook.35 This was a clear violation of the FHLBB's guidelines. When reporters asked how Home could disobey the regulators, Ahmanson explained that the FHLBB's guidelines affected only a company's ability to borrow from the bank. Because Home Savings was so highly liquid and borrowed very little from the FHLB (4 percent), it could afford to lose this source of credit. Howard was willing to trade his borrowing privileges for the freedom to make his own entrepreneurial choices.
Ahmanson's bet was incredibly well timed. When the market price for three-month U.S. Treasury bonds surged past the prevailing rate of 4.85 percent on deposits, California thrifts suffered a massive $469 million outflow of funds in April.36 Home Savings, however, experienced a $21.5 million increase.37
This newest round of rate wars set off alarm bells across town in both Sacramento and Washington. In May, Congress opened hearings to consider whether the government should control interest rates for savings and loans as it did for banks under Regulation Q.38 In Sacramento, Fred Balderston's successor as commissioner of savings and loans, Gareth Sadler, wrote Governor Brown that a severe crisis was brewing that, though national and international in its origins, would hit California hard because the Golden State was still dependent on imported capital and because savings and loans were disproportionately important to the housing industry.39
In Washington, the FHLBB was stuck. Reluctant to allow thrifts to increase their costs of doing business in a fragile market, but unable to provide them the liquidity they needed by increasing FHLB lending, the bank was slow to react.40 After some delay, the FHLB agreed not to penalize thrifts in California if they increased their savings deposit rates to 5 percent on CDs as low as one thousand dollars. And at the end of May, Ahmanson's leading competitors, including Mark Taper's First Charter, Great Western, and Edgerton's California Federal, matched Home Savings’ rates. Regulators and executives at most of the other savings and loans hoped that the rate war would end with this increase.
Ahmanson thought differently. He believed that extreme measures were necessary to keep pace with the banks. He may have also sensed an extraordinary opportunity to take advantage of his competitors’ weaknesses. For years he had supported the regulators in their efforts to manage the financial markets. When they blocked Home's move into Northern California in the 1950s, he had bowed out graciously and earned their gratitude. By 1966, however, he recognized that regulators in California had clearly signaled that they weren't going to allow Home to continue to grow by acquisition or through new branches, and Howard was determined to protect the market he had. He also believed that the FHLBB's efforts to control interest rates with brute force were misguided and could seriously injure Home Savings and the savings and loan industry.41 As the sole owner of Home Savings, he was free to take an extraordinary entrepreneurial risk. In early June, he let it be known that he was thinking of raising Home Savings’ deposit rates again—to 5.25 percent.42 “A month ago I wanted to do it,” he told a reporter. “I just haven't decided at what price this industry can compete for money.”
With already weak balance sheets and higher operating costs, many of Ahmanson's competitors blanched at the idea of another increase. Regulators were furious. Ahmanson acknowledged their concerns. “I've been sitting here going out of my mind trying to decide what to do,” he told a reporter in mid-June. He knew others were thinking of making the move. “One thing is for sure,” he said, “We'll meet any competition. . . . We'll raise our rate in five seconds if anybody else goes up.”43
Slouched in his high-backed leather chair with a cigarette in his left hand, a full ashtray on his desk, and a cup and saucer for coffee, he knew that Home Savings had a unique opportunity. As he bragged to a Los Angeles Times reporter, Home was in excellent shape because the company was so liquid. Real estate that had been acquired for $36 million was now worth close to $150 million. In addition, Home's operating costs continued to be incredibly low. While most of the larger associations and holding companies in California had an average overhead expense of 1.30 percent, Home's expense was 0.76 percent—almost half.44 The company also had very little debt. “We don't borrow for expansion purposes from the Federal Home Loan Bank,” Ahmanson explained. Nor did the company go after the hot money from the East. Thus, even if Home's cost of funds was slightly higher, “as long as we can prosper on what we've got,” Ahmanson said, “I believe we should. I don't want to be subject to the whims of any other area, or any other money.”45
Hoping to mollify the FHLBB chairman and underscore the point that Home Savings was financially secure enough to offer these new rates, Robert DeKruif sent a copy of the Los Angeles Times clipping to John Horne. Horne acknowledged that Ahmanson's “good judgment puts him in a very favorable position today,” but—evidencing his continuing belief in the cooperative relationships between regulator and regulated that were at the heart of the managed economy—he told DeKruif that Ahmanson's good judgment “also imposes on him a responsibility not to act in a manner that will jeopardize his competition since to do so would jeopardize the industry generally and in the long run would even be harmful to Home Savings and Loan Association.”46
Everyone waited for Ahmanson's decision. Late in June, he made it official—Home Savings would raise its rate to 5.25 percent. He told the press the move was necessary for the survival of the industry: “I hope the industry will join me in this move.”47 Wrapping his move in the traditional mantle of the industry, Ahmanson painted Home's decision as an effort to save the housing industry and to support the cause of home ownership. He was simply trying to “avert a near-catastrophe in the all-important housing industry and the allied trades that must rely upon it.”48
In Washington, Horne politely told reporters that the FHLBB “regrets the decision” and warned that any association that tried to follow Home up to this higher interest rate “should be aware that it may very well be overreaching . . . and could therefore encounter difficulties further down the road.”49 Privately, Horne telegraphed Ahmanson to say, “I am disappointed in your decision and am in disagreement with it. I strongly feel that your action was not necessary and certainly is not in the best interests of the savings and loan industry.”50
Ahmanson's decision strained personal, as well as political and professional, relationships. A number of savings and loan executives proposed that the California Savings and Loan League should support new legislation that would give the California commissioner of savings and loans the power to control the maximum rates thrifts could pay on deposits.51 Mark Taper supported this effort. He called a news conference and made a direct appeal to savings and loans executives to “hold the line” against further “premature and inflationary interest rate increases.” At the same time, Taper “lashed out at what he called ‘the hysteria for growth’ shown by ‘one or two or three’ associations.”52 When reporters asked him if he would favor direct control of interest rates by the government, Taper asserted: “For over 100 years the savings and loan industry has regulated itself [on interest rates]. But unless it shows responsibility, some form of regulation will have to be given to federal or state authorities.”53 A New York Times writer agreed: “In the long run the success of the California associations in overturning informal Federal rate control may backfire and lead to a fixed national ceiling set by statute.”54
Even Bart Lytton looked to Congress to fix the crisis. He announced that his company would match whatever Home offered. He even raised the stakes by promising to compound interest daily, raising the effective yield to 5.39 percent.55 “If this be a rate war,” Lytton told the Wall Street Journal, "we're big, strong and ready.” But Lytton also chastised Congress for not being willing to “put a ceiling on commercial-bank—or for that matter, savings-and-loan—interest rates.”56
Howard Edgerton refused to follow his friend's lead, and the conflict strained their professional and personal relationship as they argued in the press. Edgerton called Home's decision “a direct violation of Federal Home Loan Bank Board regulation.” He said it would be morally wrong to follow suit. If California Federal raised its savings interest rates, he said, it would have to raise mortgage rates as well. “We think those rates are just plain high enough already.”57
While Edgerton cast his decision in a civic light and misrepresented the nature of the FHLBB's guidelines, the reality was that California Federal, the nation's largest federally chartered savings and loan, was in trouble. With its cash seriously depleted and its credit line with the FHLB at the limit, the company was unable to make new loans. Privately, Edgerton wrote to FHLB officials that he had even had to turn away the bishop of the Los Angeles Diocese of the Episcopal Church. He said other federal thrifts in Los Angeles were in the same position. If the FHLB didn't offer new loans to the industry, “public confidence in savings and loans in this area would deteriorate to the point where it would cause a tremendous strain on the liquidity of the bank system.” In other words, there would be a run that might force some thrifts to close, leaving the FSLIC with huge liabilities to repay depositors.58
Edgerton pulled out all the stops to ensure that California Federal would survive the crisis. Enlisting many of the state assemblymen who had long been friends of the industry in Southern California, he organized a delegation to meet with members of the House Banking and Currency Committee in Washington. With Chairman Horne attending, Edgerton pressed the FHLBB to loosen restrictions on borrowing and reduce the amount of net income that had to go into reserves to free up cash for the associations. Horne again asked the thrifts to hold the line at 5 percent on savings rates, putting enormous pressure on Edgerton and the managers of other federal savings and loans.
For Edgerton, the situation was exasperating. Thrifts that cooperated with the federal regulators watched as money drained from their accounts. California Federal lost more than $8.6 million in deposits. Gibraltar Savings complained that $4.78 million walked out the door in just five days. The company's chairman made it clear that his company had taken this hit in deference to the government's desire to hold the line on interest rates.59 Still, regulators held back advances or loans as a way to keep thrifts in line. Without access to these government funds, some thrifts, including California Federal, faced dire circumstances. In a letter to the head of the Federal Home Loan Bank in San Francisco, Edgerton fairly shouted that his association had no money to lend.60 It was like a store with overhead but no merchandise.
Some thrifts running out of cash threatened to take the government to court. Meanwhile, the FHLBB and FSLIC were forced to find a buyer for at least one savings and loan in serious trouble, and others seemed on the brink. California commissioner Gareth Sadler wrote to Horne expressing concern for the financial stability of several of the state's largest savings and loan holding companies.61 When reporters tried to follow up on these stories, insiders at the FHLB were tight-lipped and intimated that their efforts “to resolve the ‘California problem’ [would] hinge on their ability to keep the California public in the dark about the true state of affairs in the California savings and loan industry.”62
Under tremendous pressure, Ahmanson stood his ground. Unable to get regulators to fix the situation quickly, most of Howard's competitors were ultimately forced to follow his move. Great Western, United Financial Corp., and Mark Taper's First Charter Financial Corp. (owner of American Savings & Loan) all matched Home's rates by the beginning of July.63 A deeply chagrined John Horne conceded that “events this week demonstrated that lacking specific statutory authority to control dividend rates,” the FHLBB was powerless to control the industry.64
Over the next month, events proved that the FHLBB also was powerless to protect the industry. Ahmanson's insights into the threat posed by the credit crisis were borne out across the country as thrifts suffered a $1.5 billion outflow of deposits in July, the biggest one-month decline in the history of the industry. Meanwhile, Home enjoyed an enormous rush of new customers—16,805 new account holders by the time the July reinvestment period ended. The inflow of new money increased by 421 percent over the same period in the preceding year, for a total of $71.4 million.65 “We're ecstatic,” Robert DeKruif told reporters.66 In large display advertisements in the Los Angeles Times, the company thanked the public: “You have honored us with the largest dollar growth in savings accounts ever received by any association in the world in ten working days.”67
While Home Savings beamed with success, the crisis deepened for other savings and loans. By August, their situation, combined with a bank-led withdrawal from the bond markets, precipitated a crisis on Wall Street.68 Under pressure from thrift managers, bankers, and others anxious to end the credit crisis, legislators in California and Washington sought to give regulators more power. In California, state senator Luther Gibson proposed legislation that would create a three-member commission to supervise the state's savings and loans. These steps sought to change the character of regulation, to make the new commission a rule-making body with greater control over the industry, as opposed to a line organization focused mainly on compliance.69 They also sought to curb political influence on the savings and loan commissioner.70
Meanwhile, the federally chartered thrifts in Los Angeles turned to Congress. They found allies in the American Bankers Association, who were delighted to put thrifts on the same regulatory footing as commercial banks.71 They also received support from the National Association of Home Builders, which hoped that the restrictions on bank CDs would help steer money back into the mortgage market.72 Even President Johnson, who announced a sweeping effort to control inflation in August, encouraged Congress to pass a bill giving the government the power to set thrift interest rates.
In the face of this pressure, Ahmanson and the managers of other strong, independent savings and loans who did not want the government to control prices offered only weak resistance. Tom Bane, the former California assemblyman who had helped Ahmanson in political situations before, testified before a House committee as a lobbyist for state-chartered stock companies like Home Savings. He blasted the bill, blaming the FHLBB for the current predicament, and lauding the leadership of one or two thrifts (he did not name Ahmanson or Home but the reference was clear) for exercising good business sense.73 Bane's testimony was to no avail. In September 1966, Congress passed the Interest Rate Adjustment Act, which gave the FHLBB the authority to cap deposit rates and thereby impose price controls.74
The new federal legislation turned out to be a disaster. During the entire postwar period, interest rates on Treasury bills had never risen above 4 percent and had provided a stable backdrop for interest rates in the savings and mortgage markets. After 1966, as the inflationary pressures of federal spending for the Vietnam War increased, rates on three-month Treasuries rose. “That really hurt us,” Richard Deihl remembers, “when people started advertising T-Bill rates on television and telling investors how to buy them.”75
With caps on deposit rates, savings and loans were forced to engage in nonrate competition, offering more valuable giveaways than before and providing depositors with other amenities. These efforts increased the average cost of each dollar deposited.76 Even so, investors pulled their money out of savings and loans and invested elsewhere.77 Because of its low cost structure, Home and other large thrifts continued to do well while others suffered.
Again and again in the ensuing years, savings and loans would ask the California legislature or Congress to fix a broken industry, but what they really wanted was a return to the protected markets that had characterized the golden era of the industry in the managed economy. In 1966, Howard Ahmanson recognized that regulators no longer had the capability to protect the industry and in some cases did not have the desire. The salvation for Home Savings and the industry in the new era lay in its ability to compete head-to-head for deposits and mortgages. Home could do that because it had sufficient scale, a strong balance sheet, and a marvelous track record of prudent lending.
Beyond what he said to the press, it's not clear how Howard felt about this crisis of the managed economy. As a businessman he had clearly resisted a policy that he felt to be wrongheaded, but his actions did not represent a fundamental shift in his perspective on the relationship between business and government. Indeed, as his empire increased beyond imagination, his view of the partnership between private wealth and public purpose expanded to include a major role for philanthropy.