A History of the United States in Five Crashes by Scott Nations

Author:Scott Nations
Language: eng
Format: epub
ISBN: 9780062467294
Publisher: HarperCollins
Published: 2017-05-03T04:00:00+00:00

MELTDOWN

2008

Marion Sandler went to business meetings with her husband and sat knitting quietly. She made him sweaters, which he wore to work, presumably to meetings where she was knitting him other sweaters. Herb Sandler was a Columbia University–trained attorney and co-CEO of a California-based savings and loan, the grandiosely named World Savings, whose nearly exclusive business was savings accounts and home loans for middle-income buyers.

Herb’s co-CEO was his sweater-knitting wife. Despite Marion’s homebody persona, she was a Phi Beta Kappa graduate of Wellesley, with an MBA from New York University. She was the second female professional to work on Wall Street and the first woman to work at the firm of Dominick & Dominick in any capacity other than secretary. While there, most of her time was taken with analyzing publicly traded savings and loans for investment clients. In 1961, she moved to Oppenheimer & Company, where she continued to focus on savings and loans.

The Sandlers met on a Hamptons, Long Island, beach in 1960. They were both living in New York. Herb was doing legal work for the sort of savings and loans Marion spent her days dissecting. As they fell in love, they realized they shared a disdain for the way most savings and loans did business. So, in 1963, just after marrying, they moved to California to see if they couldn’t do better. They got some seed money from Marion’s brother and spent $3.8 million to acquire a small savings and loan in gritty and inexpensive Oakland. When they bought it, Golden West Savings had two offices, twenty-six employees, and just $34 million in deposits.

The Sandlers were no longer backseat drivers, and they put what they’d learned in New York to use. First, they fixated on costs, not only the cost imposed by mortgages that went bad but the cost of running their Golden West branches. They initially refused to offer checking accounts because of the expense. They knew what time of day and what day of the week depositors showed up, so they put part-time workers on those shifts rather than have full-time employees during the entire business day. They refused to install automated teller machines because they couldn’t justify the cost. The business press referred to the entire organization as “penny pinching” because branch managers billed headquarters when visiting executives made phone calls on branch lines. Through that discipline, Marion and Herb built a successful if smallish business, until they merged with World Savings in 1975, keeping the World Savings brand although the corporate entity retained the Golden West name.

The early 1980s were a difficult time for many savings and loans like Golden West. Their business involved borrowing money from depositors overnight and lending it to homebuyers for thirty years. The mismatch in timing was enormous and dangerous. Since deposits could leave at any moment—and would if the savings and loan down the street offered a higher rate of interest—there was always the risk that the interest rate a savings and loan had to pay

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