Building Home. Eric John Abrahamson
of the paperwork. Howard's one-day turnaround on new policies helped the lender finalize the loan, lock in the customer, and build goodwill for everyone involved.74 H. F. Ahmanson & Co. frequently produced the invoices for the premium payer and recorded the payments. If the premium buyer had a particular issue that required insurance expertise, the lender/agent's secretary called the offices of H. F. Ahmanson & Co. to find out what to do. Howard's lieutenants would often go to an agent's office once a month to add up the receivables and close his books for him. No other insurance company would provide that kind of service, in part because it operated in a gray area of the law, especially regarding the qualifications of the secretaries who were the “agents” of record in the transaction. Because all of these services kept the savings and loan/insurance manager's overhead low, they stuck with Ahmanson.75
Ahmanson cultivated his relationships with the lenders to get their insurance business. When lenders brought him their insurance business, he benefited. But lenders also made him aware of investment opportunities, and at the age of twenty-three, Ahmanson was already a savvy investor.
A TIMELY EXIT
Throughout his career, Howard Ahmanson displayed an uncanny ability to observe the economic landscape and understand how trends were likely to shape opportunities. During his senior year at USC he interviewed a number of workers about their personal finances and then wrote a senior thesis titled “The Coming American Debacle.” He concluded that the average skilled worker was overspending his income by about 22 percent. This trend toward debt was likely to result in trouble for the worker and for the economy.76
After he graduated in 1927, several small events added to Ahmanson's concern. Sometimes when he traveled, for example, he empowered his secretary to trade stocks for him. After one trip he discovered that she had approved the purchase of shares in a new fire insurance company. “Now here was a business I knew a lot about,” Ahmanson later recalled, and he knew that it took several years to begin making money. So he was surprised when his $30 shares rose quickly to $50 even before the company had opened its doors. “If people were acting crazy about a business I knew about,” he thought, “maybe they were acting just as crazy about a business I knew nothing about.”77
The last straw came when an elevator boy stopped the lift midway between two floors to pitch Howard on another insurance stock. If elevator boys were investing in stocks, Howard reasoned, it was time to get out. In the middle of 1929, months before the great crash, he sold all of his holdings except for National American Insurance, netting nearly forty thousand dollars. He had doubled his money in four years and was now “beautifully liquid.”78
After the crash in October 1929, with cash in a depressed market, Howard bought Chrysler shares and searched for other bargains. He became part owner and an officer and director in Victor Oil.79 He acquired property, invested in oil, and continued to grow his insurance business.80 Between 1930 and 1935 he also acquired nearly a half million dollars’ worth of real estate. Many of these properties he later sold for four or five times what he had invested. With his increasing wealth he bought a new home at 203 North Rexford Drive in Beverly Hills.81 Having consolidated his financial position in the world, he was at last ready to formalize another longtime partnership.
A LONG COURTSHIP
Howard and Dorothy Grannis had dated for nearly seven years by 1933. It's unclear why they didn't marry earlier. Certainly it wasn't because of Howard's financial situation. Both of them were smart, headstrong people. Howard's surviving letters evidence his tendency to imperial egotism. She lashed out at him when he neglected her. They were both opportunistic, and perhaps there was a part of each that was waiting for someone more perfect to come along. But in the end, they also needed and loved each other. Howard paid attention to Dottie's feelings and fears and strove to protect her, something she longed for. Dottie supported the part of Howard's workaholic and sometimes reticent personality that embraced the sybaritic lifestyle of L.A.’s beaches, clubs, and night life.
Perhaps Howard wanted to wait until he had become a millionaire ($17.5 million in 2011 dollars). As others throughout the nation struggled to feed their children or keep from losing their homes, Howard approached this financial milestone toward the end of 1932. That Christmas he traveled to Omaha without Dottie, but he made special arrangements. On Christmas morning, a messenger delivered an engagement ring to her home. She accepted.
The subsequent wedding invitation reflected the couple's sense of humor and disdain for formality. Designed to look like a court summons, it was signed by “Dan Cupid, Clerk of the Courts.” Guests were to appear on Saturday, June 24, 1933, at the La Venta Inn at the end of the Palos Verdes Peninsula. The mission-style complex with gardens designed by the Olmstead brothers offered a commanding view of the Pacific. With a black-tie restaurant for Hollywood stars, the place was home to the Los Angeles elite. After the wedding, Howard and Dottie drove to San Pedro. Her parents and his family waved good-bye as the honeymooners stood on the deck of the Grace liner Santa Elena bound for the Caribbean.82
Despite a long and luxurious honeymoon, Howard remained committed to his pursuit of capital. He and Dottie agreed to limit their spending to 10 percent of the income they received from their personal holdings only—in other words, from Howard's side bets in real estate and the stock market. They would leave the earnings and dividends from H. F. Ahmanson & Co. in the business to grow.
With his personal investments, Ahmanson developed a conservative strategy. He put 90 percent of his reserves in cash or cash-equivalent short-term government bonds. “If you've got cash available,” he said, “your gun is always loaded.” He invested the rest “in the wildest cats and dogs. If the beasts are good,” he said, “they'll go up twenty times. If they're sour, they'll go down to two, but I'll still have the cash.”83 With the nation and the world sinking deeper into economic depression, Ahmanson's cash was king.
THREE
Undertaker at a Plague
THE LOS ANGELES TIMES BLAMED home buyers. A “careful study of conditions,” the Times reported in July 1931, revealed that most home owners going through foreclosure had only themselves to blame for “attempting more than they can handle” or for having “overextended themselves in an effort to ‘keep up with the Joneses.’” Most foreclosed homes were “not those of the moderate-priced class, but are the more expensive type residence bought by persons in a ‘flush’ financial period.” In some cases, the Times conceded, the “downright dishonesty” of either the contractor or the lender was also to blame. But Times readers needn't worry. In middle-class and suburban areas, foreclosures were practically unknown.1
Despite the Times’s efforts to downplay the crisis, foreclosures affected many home owners in Los Angeles and the lenders who carried their loans. The president of the Los Angeles real estate board in 1932 called for legislation to protect home owners from rapid foreclosure and eviction. One Hollywood assemblyman asked Governor Rolph to convene a special session of the legislature “to enact laws providing for a year's moratorium on foreclosures to give homeowners a breathing spell in order to readjust themselves to the present economic condition.”2 Rolph refused, asserting that relief was better addressed at the local level.3 Meanwhile, the American Legion and local women's organizations, supported by local realty boards, launched a fund-raising effort to amass a two-million-dollar revolving loan fund to help home owners on the brink of foreclosure.4
Despite these efforts, the pace of foreclosures increased. Each time a lender took a house back and left it empty, H. F. Ahmanson & Co. had an opportunity to write an insurance policy. Sometimes, when even the lender didn't have the cash necessary for the insurance, Ahmanson paid the premium and let the lender run a tab. When these debts grew high enough, the banks gave him properties to settle the debt. While others struggled, Ahmanson amassed a small fortune in cash and property. “It was like being an undertaker at a plague,” Ahmanson said later. “The worse things got, the better I was.”5
FINANCIAL REFORM SHAPES THE MORTGAGE MARKET
While Ahmanson ran his own personal bailout program for lenders with distressed properties on their hands, President Herbert