AU 631 OHP 233; OHP 234 Interviewee: Robert Walter Warren ...
Transcript of AU 631 OHP 233; OHP 234 Interviewee: Robert Walter Warren ...
AU 631OHP 233; OHP 234Interviewee: Robert Walter WarrenInterviewer: Charlotte Capers.
Title: An interview with Robert Walter Warren, April 14, 1978/ interviewed by Charlotte Capers
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An Interview With:
ROBERTWALTERWARREN
By Charlotte capers
Ocean Springs, Mississippi
April 15, 1978
MISSISSIPPI DEPARTMENTOF ARCHIVESAND HISTORYPost Office Box 571
Jackson, Hississippi 39205
.ET . ybe
"'ItI •I 1 ~ I I U. . C.ode).
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Charlotte Capers: This is ChanIotrte Capers in the homeof Mr. and Mrs.
Robert W.%Tarren,the beach house at OceanSprings, Mississippi.
The date is April 14, 1978 i and ~tr. ~!Jarrenhas agreed to
discuss with me the savings and loan crisis that resulted a.n
the legislative action in closing the Bankers Trust, and his
very important role in reopening the savings and loan indus-
tries in Mississippi, which had been closed as a result.
First, I think I'd like to ask Robert to tell us sameting to
identify himself for the tape. Robert, do you mindgiving us
your full nameand the date of your birth?
Robert Warren: My nameis Robert Warren, born February 26, 1912.
capers:
Warren:
Capers:
Warren:
Capers:
Andwherewere you born?
I was born in Columbia,Mississippi, and rrovedsix rronths
later to Jackson, where I've lived ever since.
Please give us the namesof your rrother and father.
Myfather was Robert S. Warren, my rrotherI Ruth Sims. Ruth
Sims lived in Jackson, Mississippi, and myfather, Robert S.
Warren, was born and reared in Hinsdale, Illinois, a suburb of
Chicago. He cameto Mississippi at the turn of the century
with his brother. Theywere in the lumberbusiness i and there
he met my rrother, and was marr.i.ed in 1908, I believe, or
1909 - 1909, I guess it was, 1909.
Andthis will just lead us off. Wehave time to get back to
the savings and loan, but did your grandparents, Dr. and Mrs.
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Sims, did they build the house on North State Street where
your mother lived?
Warren: 'Ihey built that homein about;- well, let's see, he camehere
fromMeridian as the superintendent of the blind institute.
Capers: Whatwere his initials?
Warren: Walter S. Sims; and he headedup the blind institute for
several years and then went into - whichwas then located up
on North State Street where Carlisle Street intersected State
Street, where the Baptist Hospital nowownsa large, owns
the whole block, as a matter of fact.
capers: Andthis is the sameblind institute that was the scene for
the Little Theater plays whenwewere growingup in Jackson?
Warren: That is right.
capers: The sameone. All right. This is another slight deviation
from our subject, but I think it's quite interesting. Your
uncle built the house which is, at the present time, occupied
by William S.ilmDnson, what, Fairview Street?
Warren: Fairview Street. Heemployedan architect fromChicago, and
they camedown,the architect camedown,and they decided to
go to Natchez to look at someof the fine homesin Natchez.
Andthis homewas designed by the Chicagoarchitect after an
inspection of a numberof the better homesin Natchez, and was
built out of very' fine material. I think it's one of the
showplacesin Mississippi, although it's on a very narrow,
very short street; and manypeople in Jackson don't even----
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capers: Don't knowit's there!
Warren: Don't knowit's there, never have seen it.
Capers. Andit's very sturming.
Warren:
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Yes, it's a beautiful house. Mr. S:i.mrronsand I - I inspected
it with him not long agoi and he must have spent another fifty
or seventy-five thousand dollars on it since he has acquired
it.
Well, did your uncle live in it for awhile?
Hebuilt it and lived in it for several years, and then he
went out to Rapid City, South Dakota to get rich, and went
broke.
An then, what happenedto the house? Whobought it?
The house, then, was bought by a manwholater becamethe
president of the Federal Reserve Board in St. Louis. I can't
think of his namenow.
Gile?
Mr. Gile, Mr. Gile ownedthat house.
Hewas a lumberman.
Hewas a lumberman. Andit later went into the hands of
another manwhowas a banker, and then Nr. D. C. Sirmons
bought it and lived in it manyyears, and then gave it to his
son. His son inherited it.
Yes. Well, you were brought up in Jackson.
About two blocks from this house on North State Street, across
the street frxmMillsaps College.
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Capers:
Warren:
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Capers:
Whatwas that address?
1802North State Street.
That was pretty muchnear the corner of North State and Euclid.
Right. Andthat house, for manyyears, was outside the city
limits. Andour house was adjoining someland ownedby the
state of Mississippi, someeleven hundred acres; and back in
those days, the land was not being used for anything. The
insane asylumwas further out on North State Street, about
another half a milei but we enclosed a large piece of land,
and we kept a horse and a cow and had all the advantages of
country life. As a matter of fact, we enclosed all the land
south of Riverside Drive, where the BoySmut office is today,
and where the Methodist church is, and where the - I don't
know, there are several churches in there - and the Red
Cross----
Yes/ Salvation Army.
No, the Salvation Armywas not included in that. Wehad all
this land, and as I said, we kept horses, and had a little
garden/ and we lived just like country people lived/ but we
were on the edge of the metropolis of .Tackson , ~1ississippi,
whichwas then about twenty or twenty-five thousand.
Yes. This is very interesting. Now,let mecheck the tape
to see if we're getting this.
(TapeInterruption)
All right. Now,Robert, you went to Central High School,
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Warren:
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.s
I think, as all of us did.
Graduated in the c.Iass of 1929, went to Ole Miss that fall,
and spent four years at Ole Miss, four goodyears. I didn't
set the woodson fire with grades. I took moneyand banking.
I had workedin a bank in the summertime and I liked banking.
AndwhenI finished Ole Miss, I cameback to Jackson; and the
Depression was in full force, as this was in 1933, and engineers
were running service stations, if they could get a job at a.ll.
I believe Bill Horrison' s father was running a service station.
Hewas an engineer, went to MIT.
That's right. There were two banks - the Deposit Guaranty
Bankand the then Capitol National Bank- were two banks where
I knewsomepeople. So, I went dCMIland asked for a job. Of
course, there was nothing open at that time, and I said,
"Well, I'll be glad to work free if you'll just-put meon as a
runner whenyou have an opening." So, I got a call fromboth
banks about a weeklater - the sameday - and I took the job
at Deposit GuarantyBank, which later becamethe Deposit
GuarantyNational Bank. AndI started off there as a runner,
although in the summertime I had workedin every department
of the bank and I could handle, you know, the normal clerical
work in a bank. But I was glad, to have that fifty dollar a
monthsalary. I was living at homewith mygrandfather and
grandrrother, so I had roomand board free. So that fifty
dollars was a pretty si zeable sumof money. I spent five
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Capers:
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years working for Deposit Guaranty Bank, working in every
department in the bank, Then, one day - I was elected - I had
been very active in the work of the AmericanInstitute of
Banking, which is the education ann of the AmericanBankers
Association. I was elected president of the AmericanInsti-
tute of Banking for the comingyear in 1938 - '37, I believe
it was, and I was approachedby J. C. McGee,whowas the then
managerof Reid-McGeeand Company,which was a rrortgage banking,
real estate and insurance finn.
Excuseme, but wasn't Mr. McGeealso - what was his association
with Simmonsand McGeeDrugStore?
Mr. McGeewas a druggist who, for manyyears, had operated a
drug store on the corner of North State and Capitol Streets,
and----
In what we newcall the Spengler Building?
Yes, that's right, he operated in the Spengler Building. And
then he subsequent to that time, he went with the bank -
Capitol National Bank- was there for several years and
learned a little bit about the rrortgage banking business, and
went out and formeda partnership with E. W. Reid, of !-1agnolia.
Andthis business was about ten years old whenI joined them.
I didn't knewwhat a rrortgage l?an was. I didn't knowwhat a
deed of trust was, I hardly knewwhat a deed was. But he
was a good teacher, and before long, I knewenoughabout it to
get out, and I was called a mortgage loan solicitor.
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I solicited loans. I workedthirty-eight years for t.his
company.
Capers: Let me interrupt you to ask you whenyou got married, whenyou
met AnnieMargaret.
Warren: I met Annie11argaret Brunsonin 1935. ~'Jewere married
November20, 1937. Andwe have two children, age twenty-eight
and age thirty-one, a boy and a girl.
Capers: Names.
Warren: Robert Warren, Jr., whois nowin law school in Los Angeles;
and TI¥ daughter wholives there in Jackson, Barry AnnWarren
Smith, the mother of twowonderful seven and eight year old
children, a boy and a girl. Well, anyway,I liked the mort-
gage banking business, and I grEWwith the company. The
companywas small whenI went there and I grewwith the company,
in that I movedup in the canpany, and bought stock in the
company;and eventually, whenwe finally sold it, I owned
about a fourth of the company. Wesold it to a bank holding
companyin North Carolina, the First UnionNational Bank. And
I retired in 19 - let's see, on January I, 1974; and I built a
house on the Mississippi Gulf Coast and was enjoying life very
much.
Capers: All right, let me interrupt yo~ again to say, were you aware
of all that was going on, or not going on, with the savings
and loan industry and the Bankers Trust in Mississippi?
Warren: I was not aware that there were any problems, except that I
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Capers:
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could see a numberof things being done by the Bankers Trust
Savings and loan, that they were acquiring large tracts of
land, that they were financing a numberof builders that I did
not feel were sound; and I felt like they were going beyond
their capacity I and they were makingloans that we did not
feel that were sound. I had no idea whether they were making
moneyor losing money,but I could see themdoing a lot of
things that our companywouldnot do and others were not
doing. I felt like they were expanding too fast.
Yes. '''Ibenwe say "theyI" we are speaking of the - what was
the correct title, full title of the organization?
Bankers Trust Savings and loan Association. Charlotte, in
order that this history of the Bankers Trust Savings and
loan debacle will be better understood, in case someoneshould
read this in the future, I think I should first- explain the
corporate setup. There was a publicly held corporation by the
nameof the Bankers Trust CompanyI which ownedseveral million
shares of stock sold throughout Mississippi. This company
ownedoutright all of the stock of the Bankers Trust Savings
and loan Association. The savings and loan obtained a lot of
its growthby the Bankers Trust Canpanytaking over small
savings and loans throughout th~ state by issuing to them
stock of their parent company,the Bankers Trust Company, for
the stock of the little savings and loans scattered throughout
Mississippi. This is one of the ways in which they obtained
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a numberof their offices. Theyalso went into other towns
"de nova't r in other words, with newoffices. At the time it
collapsed, they had fifty-three offices scattered throughout
Mississippi. Manyof these were very small with minimum
deposits. Just to give an example, the Greenwcxx3.,YazooCity
and lexington offices had less than twomillion dollars in
deposits. Oneof the big problemswith this companywas its
desire to expandtoo fast, and its building of manynew,
expensive offices around the state. In addition to this, the
other main problemwas the fact that they were running the
savings and loan as if it were a real estate investment trust.
In other words, they had bought large blocks of land for
developmentallover the state; and at the time I took it
over, I found that they ownedtwomotels, two shopping centers,
several office buildings, over six hundredapartment units,
and most of these properties were f.if ty to seventy-five percent
occupied, which, of course, madethem losing propositions to
begin with. In addition to this, they ownedapproximately
five million dollars in mostly vacant land on the Mississippi
Gulf Coast. This, of course, presented a great problemto us
to take thirty million dollars, which is the amountof non-
earning assets they held, whi.chwasnot earning the depositors
but very little, and, of course, in the case of the vacant
land, nothing, and convert it into earning assets. I realized
that this would take a goodbit of time, and of course, it
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did. Wehad two choices whenI took over. Onewas to liqui-
date this association! in which event, I felt that the depositors
would be lucky to get fifty cents on the dollar of their money
back, scattered over a period of manyyears; or, to recap-
i talize it with someof the depositors' money,which plan I
will explain later. This has just merely been an introduction
of the corporate structure and someof the problemswe faced
in order that anyone in the future whomight be interested in
what really caused the problemand what someof the ultimate
solutions were.
Andwhowere the officers at the time?
Charles Carter was Chairmanof the Board and the principal
officer. Hewas really running a one-mancompany. Fromwhat
I could gather from the people with whomI associated during
the conservatorship whohad been active in the oompany,Carter
was the manwhomadeall the decisions and meet.i.nqsof the
Board and Executive Comnittee were almost a forma.lity . The
President of the Bankers Trust Companywas RayJones but it is
my understanding he had very little authority. Mr. c. D.
Shields was President of Bankers Trust Savings and Loan. The
companywas spread all over t..~estate and they only had about
$212,000,000in deposits. Andthe federal officials told me
later that with that manyoffices they should have had several,
maybetwo or three billion dollars in deposits; because they
had too manyoffices and too muchoverhead.
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Theywere overextended.
That is right. They just had expandedso fast that they could
not makerroney.
vlliatwas L~eactual crisis that occurred whenthe citizens of
Mississippi, whoknewnothing about it, who, perhaps had no
interest in the Bankers Trust Savings and Loan, no deposits
there, but what happenedthat madethis a matter of concern to
the whole state of Mississippi?
In the early part of Mayof 1976, a dissident stock-holder,
whohad acqui.red sane stock in the Bankers Trust Savings and
lDan,---
Whatwas his name?
His namewas Garrett, but I don't knowthe first name. I did
not knowthe man. As far as I know, I've never seen him. I'1r.
Garrett was unhappywith his stock in the Bankers Trust
Company,so he called, went to see Mr. Carter, the then chair-
rnanwhowas really running the association, and asked him to
buy this stock back; because he understood that he had a buy
back agreement if he wanted to get his rroneyout. Well, Mr.
Carter didn't understand it that way, and so he said, ''Well, I
have no such agreement, and, therefore, I will not do this."
Mr. Garrett then filed a sui t aqai.nst; the company,stating
that the companywas insolvent, because it had a negative net
worth. Andit did have a negative net worth. It had lost a
good bit of rroneyin the last two years. As a matter of fact,
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they had published a statement to that effect, showingthat
they had. Of course," that had madea few people a little
wary, anyway,particularly someof the people whoownedthe
Bankers Trust stock, whenthey received this statement shcwi.nq
the loss. So, this lawsuit was filed by Garrett in the
chancery court on a Friday afternoon. It stated in substance
that the Bankers Trust Savings and Loanwas actually insolvent.
Andthe judge so ruled that night, on a Friday night, late----
Andwhowas the judge?
The judge was GeorgeHaynes.
Wecan check all these namesif we don't have them at our
fingertips. That's all right. I was just rememberingthat I
had heard someconmentsabout the judge at the time.
Well, the judge realized the next day that he had madea
mistake, and so, he----
Well, let me ask you, did his ruling get into the newspaperor
the media?
His ruling got into the newsmedia, and it was known,and
MondaymorningI even though he had on Saturday morning correc-
ted his mistake and said the institution was not insolvent, by
~londaymorning it was well knownaround the state. Andthese
fifty-three offices began having long lines of people wanting
to withdraw their' money. I don't knowjust howmuchmoney
they lost that first day.
l-vouldthat be a run, would you call that a run?
i' .Ti' t:p ('L "(i,_, •.••
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It was a run.
Comparableto runs th~t we had during the Depression?
That is exactly what happened. Andwhenthis companystarted-
having a run I people began to ask themselves, "\\1ell, nON,
look, whyare they having a run on this institution? It's
insured." But whenthey realized, all of a sudden, that it
was not insured by a federal agency but was insured by a
private insurance company,whichwas ownedforty-five percent
by the Bankers Trust, somepeople began----
Whatwas the private insurance company?
TheAmericanSavings Insurance Company. It was ownedby all
of the savings banks themselves. Theywere paying a premium
to this insurance companyeach monthfor coverageI but the
insurance oompanyonly had a little over ten million dollars
in assets, and this was a $450million dollar industry; so it
could not handle such a situation. ~\Thenpeople realized tllat
this institution, and all these other state-chartered savings
and loans were in the sameshape, that they didn't have federal
insurance I there was a panic. So, not only did +he Bankers
Trust have runs, but the North Mississippi Savings and wan,
which was a $90million dollar institution, and several
others. The one downon the ]\u:,sissippi Gulf Coast in Pasca-
goula I the 'IWinCities Savings and wan had a run on it. Some
of the directors camein and took out their money,and that
really caused a problem. It caused someof the people downr~t' 'i". /~ "D ,'I ; .~
iol. ""!J/'~j
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there to file a suit against those two directors. So, then,
there was just real WIllC.
Panderronium.
That is right. Now,there's a law whichprivides that a
savings and loan maydeclare a thirty day moratorium. If you
carneto get your moneyand they didn't want to pay you, they
could wait for thirty days. Well, the BankersTrust had a run
that ran into six or eight million dollars the first few days.
So1 they began issuing checks that the bank couldn't pay.
Theydidn't have that much- so, a lot of their checks were
returned for insufficient funds, and then, that really did
cause a problem, of course.
Yes.
So, they then took the rnoratorium,and they had people who
madesixty million dollars worth of requests for withdrawals
out of that two hundred ten million dollars in deposits. A
savings and loan always keeps eighty-vive to ninety percent of
its moneyinvested in mortgages, and they can't just go get
moneyright avvay. Now,that is not true of a federally insured
institution, because they have a federal bank that will buy
G'losernortgagesfran themon notice at any time. But these
state associations had no such facilities, so they had no way
to go to get their rnoney.
Well, at this point, this wouldbe - I can remEmberthe panic
and the concern mountingover a period of several weeks----
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Right.
Before any strong act,ion was taken.
It lasted for about,a month, because they had this thirty-day
period in which to cane up with the money,and then it was
headlined in the paper al.Irost every day. The governor went to
Washingtonwhenit becamereal critical, and I understood he
went as high as Mr. (':.eraldFordI the then president I and said,
"Lookhere, we need sane money,we need for you to pour some
moneyinto these Mississippi institutions." Andthe President
said, "Wecan't do that, we're not pouring any moneyinto New
York; and if we started this sort of thing, there'd be no end
to it, so we can't help you there." But he turned him over to
Bill Simon,whowas the then united States Treasurer. Mr.
Simon,a very astute and able man, then assembledofficials of
the Federal HomeLoanBankboard and officials of the Federal
Reserve, and treasury officials, and the governor and sane of
our legislators, our key legislators. The chairmenof the
banks and banking comnittees in the house and the senate from
Mississippi went up there, and they all sat around the tables
to try to figure out the rest way to meet this crisis.
Well, in the meantime,had there not been criticisms in the
press about the state regulatorY,agency?
A great deal of criticism.
Andwhat was the nameof h'1at? It was a political thing.
That was the Mississippi State Savings and LoanBoard. And
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the board was composedof the attorney general, the state
treasurer, the Lnsurancecomnissioner, the secretary of
state and the state auditor.
Capers: Howabout the lieutenant governor?
Warren: Well, the lieutenant governorwas not on the board, although
the lieutenant governor, the present lieutenant governor, Miss
GandyI had been on every one of those boards.
Capers: Ex-officio.
Warren: Yes. She had been - no, she had been a state insurance
comnissioner and a treasurer both, and she had served for
about twelve years, during which time this was building up.
Capers: Yes. So, there was a lot of criticism leveled at that----
Warren: There was a lot of criticism leveled at that group for permit-
ting this institution to get in this kind of shape. They
said, "Look, you've let it get out of hand," which it had
gotten out of hand, but you couldn't really blame it all on
the board. It was a system that was - it was a situation of
"everybody's business I noboer.!'s business." Nobodyhad really
been looking after this. The legislature should have had
stricter I tighter laws. There should have been more restric-
tions on the expansion of this savings and loan. Therewas no
particular restriction. They<?ouldjust go up there to the
board and sayI "Wewant a branch out here in Podunk,"and they
could get it. Andthat's just about what was happening. They
had little branches in Lexington and YazooCity and Greenwood,
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very small. I closed them.
Theyjust really grew-too fast without any st.renqth, like
the branches not being supported by the vine because the
vine was weak. Is that right?
Absolutely. Just tried to do too muchwith a limited amount,
of capital. So, anyway,the federal officials sat around and
discussed this at length, and they said, "Well, the only way,
really, if we don't close all these institutions, what's going
to happenis this lack of confidence is going to filter on
downto all of them. Andeven the good strong savings and
loans in small communitiesthat have, say, five to ten million
dollars, that have been well-managed,people will start running
on themto get their rroneyand they'll go downthe drain. So,
what you need to do is have an act of the legislature to close
themall down."
Now,is that like Roosevelt's bank holiday in 1933?
That's just about what it was like on a smal.Lerscale.
Theyclosed the banks.
As a matter of fact, they met on a Friday afternoon at about
seven o'clock, Friday evening at seven o'clock, and the
governor outlined----
Now,whonet?
The legislature. Thegovernor called the legislature into
session.
The governor was who?
It• (.0 e).
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