AU 631OHP 233; OHP 234Interviewee: Robert Walter WarrenInterviewer: Charlotte Capers.

Title: An interview with Robert Walter Warren, April 14, 1978/ interviewed by Charlotte Capers

'I'

/

ht'. COtlIJ)

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).

/

I

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.

/

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----

t)

/

capers: Don't knowit's there!

Warren: Don't knowit's there, never have seen it.

Capers. Andit's very sturming.

Warren:

capers:

Warren:

capers:

Warren:

capers:

Warren:

capers:

Warren:

capers:

Warren:

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.

/

Capers:

Warren:

Capers:

Warren:

Capers:

Warren:

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,

I

Warren:

Capers:

Warren:

.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

/

Capers:

WArren:

Capers:

Warren:

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.

I/

1

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

/

Capers:

Warren:

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

/

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

/

capers:

Warren:

10

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.

I

Capers:

Warren:

capers:

Warren:

Capers:

Warren:

/1

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,

r

/

capers:

Warren:

capers:

Warren:

Capers:

Warren:

capers:

1..1./

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,_, •.••

/

Warren:

Capers:

Warren:

capers:

Warren:

/J

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

I

capers:

Warren:

capers:

Warren:

capers:

I{

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----

Ti

/

Warren:

capers:

Warren:

capers:

Warren:

capers:

Warren:

IS

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

/

1(.,.

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,

l•.wIIl •••• 1 •oJ.

/

Capers:

Warren:

Capers:

Warren:

Capers:

Warren:

Capers:

Warren:

Capers:

•

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).

/