Arizona: A History, Revised Edition

16. From the Southwest to the Sunbelt

From the Southwest to the Sunbelt 337 16 FROM ThE SOuThwEST TO ThE SuNBELT Before the 1960s the financial world of Arizona was run by local bankers like Frank Brophy, the flamboyant chairman of the board of the Bank of Douglas, and Walter Bimson, the son of a Colorado blacksmith who made the Valley National Bank (vnb) synonymous with Arizona growth. Arizona was a real place to these businessmen, not just a place to make money. Headquartered in Phoenix, they loved the city they were carving out of citrus groves and cotton fields. The old elite began to lose ground that decade. Californian David Murdock was the prototype of the new Arizona financier, diversifying investments, speculating in real estate, pushing regulations to the limit. Murdock’s holding company, the Financial Corporation of Arizona, acquired Union Title and Trust, the Pioneer Bank, Home Savings and Loan, and several other companies , but he never became a community leader like Bimson. Neither did the executives who succeeded Bimson. As Gilbert Bradley, chairman of the board of vnb, confided, “I just can’t do what Bimson was able to do. The bank has gotten too big, and I’m too tied up with it to spend the same kind of time that Walter did on Phoenix matters.” Then the plate tectonics of the financial world shifted for good in the 1980s. With inflation spiraling upward, savings and loans were going broke borrowing money at 15 to 20 percent and loaning it out as low-interest mortgages on single-family homes. So Congress decided to turn the industry loose from the restrictions imposed by the Federal Home Loan Bank Board by passing the Garn–St. Germain Depository Institutions Act, which Ronald Reagan signed into law on October 15, 1982. It turned out to be one of the most expensive signatures in the history of the American taxpayer. The federal government still insured deposits, but now the thrifts were free to raise interest rates and invest in just about any speculative venture under the sun, including junk bonds. Arizona had already acquired a reputation as the latest frontier of land fraud, but deregulation created a money machine of unparalleled avarice 338 arizona and complexity. In 1976, after the murder of investigative reporter Don Bolles, Attorney General Bruce Babbitt talked about Arizona being up for sale. But no one could have predicted the transition from the real estate scams of confidence men like Ned Warren to the financial sleights-of-hand performed by “merchant bankers” like Charles Keating. The result was a bizarre and artificial world that had nothing to do with the production of value or a sense of place. Savings and loans were bought to be plundered. By the end of the decade, thrifts were toppling like dominoes, and developers like Keating were going to jail. Because the collapse of his Lincoln Savings and Loan cost the taxpayers billions, Keating was singled out and demonized, turned into the greedy, arrogant monster who ate the savings of the little people who trusted him. But Keating and the other wheeler-dealers always had plenty of willing accomplices—local businessmen who wanted a piece of the action, politicians who wanted campaign contributions, customers who wanted to live on the water in a valley that averaged less than ten inches of rain a year. The world they collaborated in creating was a world where Arizona was rendered down to its abstract capitalistic essence—grids on the desert ground—and where water, that scarcest of all desert resources, was shot out of a fountain three hundred feet into the air or poured into artificial lakes surrounded by green grass and homes. Society and Politics in the Sunbelt Not surprisingly, Arizona became a strange and schizophrenic place. Between 1960 and 1990, the state’s population grew from 1.3 million to 3.6 million people , an increase of 181 percent. Yet Arizona politics during that period degenerated into comic-opera parody. In 1964, Barry Goldwater accepted the nomination of the Republican Party for president of the United States. He lost by a landslide but won a reputation for integrity and humor. Twenty-four years later, in 1988, a Glendale car dealer named Evan Mecham became the only governor in the history of the republic to be recalled, impeached, and indicted on criminal charges at the same time. Then, in 1991, some of the same Arizona state legislators who had voted for impeachment were themselves indicted for taking bribes in an fbi...