Tom S. King

Duration: 52Mins 44secs
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Uncorrected Transcript

Interview with: Tom S. King
Interviewed by: Unknown Interviewer
Date: November 18, 1975

Archive Number: OH 092

 

I:          00:04  Interview with Tom S. King, November 18, 1975.  Mr. King, where were you born?

TK:      In Hillsboro, Texas.

I:          And what brought you to Houston?

TK:      I was in the savings and loan business in Dallas after World War II, and being a young man out of college, I was offered a job with Southwestern Savings in Houston in 1953, and I came to Houston at that time.

I:          What first got you interested in the savings and loan business?

TK:      I was looking for a job right out of college in 1948.

I:          It seems that you’ve gotten into a good field.  Well, now, when you first came here, Southwestern Savings and Loan was considerably smaller.  Is that correct?

TK:      Yes.  They had started business in 1952 and were approximately $2 million in assets at the time.

I:          One thing I’m very much concerned about getting down on tape is the process of growth in the industry.  Could you describe for us how the association has grown over the years?

TK:      In 1953 when I came here in October, they had assets of approximately $2 million.  In October 31, 1975, we had assets of $235 million.  So that’s 22 years, over $200 million growth in that 22-year period—$220 million growth.

I:          At the heart of this is branching.  There was continual growth of the number of branches during this period.

TK:      That’s right.  We were the first association in Houston to go into branching in 1956.  At the present time we have 16 branch offices in the city of Houston.

I:          Could you describe the process of branching?  From whom do you have to get permission?

TK:      02:13  Yes.  In the early days the savings and loan industry was supervised not only by the Federal Home Loan Bank and the Federal Insurance Corporation out of Washington but by the State Banking Department, who had a gentleman designated as savings and loan supervisor under the banking commissioner.  In those days the rules and regulations were not spelled out as detailed as they are now, and you more or less wrote a letter to the banking commissioner asking to establish a branch.  If he wanted to grant it, he would; if he didn’t want to, he would turn you down.  More than likely he would just put your request in a desk drawer and forget about it.  But then the evolution of the savings and loan business in Texas was beginning to materialize, and in about 1960 the state law was changed that set up a Savings and Loan Department with a savings and loan commissioner apart from the Banking Department.  And rules and regulations were promulgated, and various public hearings have to be had so that when you want a charter or a branch office, you file an application and then the commissioner sets down a hearing date and you have a public hearing.  Anybody can protest or be for you, for that matter.  Then he eventually, after a period of time and after reading the transcript of the hearing, will grant the branch or the charter or deny it.  Then if you don’t like his decisions, you can take it on to the courts for adjudication in the courts.

I:          And this in fact happened in 1960.  I believe that your association had a run-in with a state official named Faulkner.

TK:      That was before 1960.

I:          Oh.  What date was that?

TK:      That was about 1956-57.  We filed for branch offices, and he decided that he would not take notice of our application, put it in his desk drawer, and forgot about it.  After a reasonable time, we opened several branch offices in the city of Houston, and then he brought suit against us to make us close the branch offices.  But in the end he went all the way to the Supreme Court and in the end Southwestern was granted branches and has set the pattern that savings and loans in Texas could have branches, and it more or less forced the rules and regulations to be promulgated as to procedures to go through to get them.

I:          Right.  So actually, your association was instrumental in that change that came about.

TK:      05:18  We had the test case on the matter, yes.

I:          Now, a strategy that banks have adopted is the holding company as a kind of de facto branching.  Have you lost a competitive edge with banks now because they are more or less able to do the same thing?

TK:      No.  There is a constitutional prohibition for commercial banks to have branches in the state of Texas that still exists today.  And so they’ve used the holding company as a way to not only have several banks in one market but to have banks statewide where they can have a statewide operation.  But in the savings and loan business we are still the family oriented financial centers, and our branch offices basically are in the community out where the people live, and we don’t have to have the extra capital base that the commercial banks do, and we can put more offices closer to the people where they need the services and do it more profitably and at less expense.

I:          But still, you offer many of the services that a bank would offer.

TK:      Yes.  The only thing that we do not have is the checking account.  We have the day-to-day passbook account where they can put the family monthly grocery money in and draw interest on it, and when they need it, they can withdraw it in the neighborhood where they live and go buy their groceries and thereby earn interest on their household money.

I:          This is a trend I’d like to pursue a bit further.  How long has this merging of functions been going on?  Was this as pronounced when you first came into the savings and loan business?

TK:      No.  In 1948 when I got in the savings and loan business, it was a very simple business.  We had a passbook account and a fully paid certificate.  Both paid the same rate of dividend.  And home loans were generally 20% or 30% down payment, and the longest term you could get were 15 years—very simple business.  Not many people had really heard of savings and loans and what they had done.  In the early ‘30s the savings and loan business also originated the direct monthly payment, even payment deal, which was adopted by the federal government in their FHA home loans where you have a set monthly payment for a period of time that didn’t change.  And so from that standpoint, it was a very simple business of accumulating the people’s savings and passbooks and loaning it to people to buy their homes on a monthly payment arrangement.

I:          But now you’re into things like real estate development and management, and credit, life insurance, management of real estate investment, trust, and even data processing systems.

TK:      That’s correct, the whole gamut of financial services to the family.

cue point

I:          Is the reason for this diversification because these things just lent themselves to the basic function of the institution?  That is to say, if you were in mortgages, why not get into real estate development as well?

TK:      09:11  That’s right.  Someone had to put on subdivisions so houses could be built, and it was just a natural event for savings and loans to get into the business of developing the subdivisions, seeing that the houses were built properly, and then financing them for the people.  Of course when you’re financing their home, which is the one major purchase that most families have in their whole lifetime, other things came up.  They needed to buy furniture for their home, so savings and loans now can make loans on furniture that goes into the home.  As homes get older, they need to be remodeled or a fence needs to be put around the backyard, so these home improvement loans are made by savings and loans.  Also the family needs a car to get around in, so we could finance their car.  What’s evolved in the last 20 years is from strictly a savings and loan operation of financing a home, we have evolved into the family financial center.  We don’t finance businesses per se like commercial banks do, but the American family, the Houstonian family, can get all of their financial needs in the way of borrowing or savings for the future for anything dealing with the family and the home at a savings and loan association.

I:          It’s certainly a very convenient package you offer a person.  But now in your position as an administrator, what are some of the liabilities of this complexity, if any?

TK:      (chuckles)  Liabilities?  Well, first off—

I:          Is it getting out of hand?

TK:      No, fortunately because of the advance in the electronic communications and computers, it makes it much easier to manage from a manager’s standpoint because you can get the information so quickly at your fingertips through the computers to let you know basically what’s going on in your community and in all of your branch offices.  They’re all tied into a central computer, so at any minute you can know exactly what’s happening all over the city in your business from all your branches.  The basic problem in management of a savings and loan is that people save money and it’s basically only short-term arrangement or a passbook they can withdraw any day they want to.  Certificates of deposit basically have terms, but they can go from six months to four years, and if they need the money before the term of the certificate is up, they can get it by paying penalties, but they can get the money.  So the job of a manager of a savings and loan basically is to have a steady flow of funds coming in, even though it’s short-term, because 80% or 90% of our investments are for 25 and 30 years.  So it’s trying to balance the short-term money that you have available to loan that you’ve already got out in long-term loans that you can’t call back in if the time is needed.  So the main liability in all these services, if it’s a liability, is a management problem, and that is strictly a cash management, cash flow, being sure the repayments on loans and new savings coming in is matched by the lending side; that you don’t make commitments to make more loans than you have money coming in.

I:          There’s one other data processing angle I’m going to talk about, and that is sometimes I hear conversation about the checkless society is coming.  In fact, people will write less checks, and there will be direct electronic transfers from one account to another.  Do you look for that in your own association?

TK:      13:47  Yes.  We hope to have it in 1976.

I:          Isn’t there a problem insofar as people like to see their paycheck?  They’re a little bit ambivalent about money being transferred directly and electronically.

TK:      You must have read the Wall Street Journal this morning.

I:          No, I didn’t, as a matter of fact.

TK:      In fact, there’s an article in the Wall Street Journal this morning which indicates that some people are reluctant to make their deposit electronically because they like to get their paycheck in their hand and have concrete evidence of the labor that they put forth the period before.

I:          I sympathize with that.

TK:      Well, yeah, but—

I:          But it is a problem.

TK:      Basically, I think—and I may be a little facetious when I make this remark, but I think a person that takes that attitude basically maybe is going to a bank or a savings and loan, cashing that payroll check, and then telling his wife that he got a different figure maybe, huh?

I:          Oh.

TK:      (chuckles)

I:          That hadn’t occurred to me at all.

TK:      14:59  You see, a normal man, it makes no difference whether he’s got a check which he has to either mail to his bank for deposit or he has to go somewhere and get it cashed; there’s no difference than in seeing the benefit of his labor than having it electronically transferred from his employer to his account at a savings and loan or at a commercial bank.  He still gets at the end of each month a statement which shows how much money was deposited to his account, which is evidence of the love of his labor.  And so anyway, people’s habits are ethnic, I think, more than anything.  One ethnic group may like to get that paycheck every Friday afternoon, and he’s been doing it for 40 years, and it may be difficult for him to understand.  And I’m sure there’s some hiding of how much a man actually makes from his family—probably not too much, but there’s probably some of that—who would not like to have his total paycheck transferred electronically from the employer to a bank or a savings and loan because basically, each individual, I think, is somewhat secretive, especially in his own personal financial matters, and they don’t want it generally spread everywhere else how much I make or how much I spend or how much money I have on deposit or whatnot.  They may feel that the check they get in their hand, nobody but the teller where they deposit it really knows.  Well, when you look at it from an electronic standpoint, nobody really knows.  One computer is telling another computer, and nobody really knows what—  There’s even more secrecy from that standpoint because no individual has to handle that check.  Nobody can read a tape.  A computer can read a tape but a person can’t, so in the matter of secrecy or not letting anybody else know what he personally is being paid, it is a myth and in time, the advantages of it will far outweigh the disadvantages of getting an actual payroll check in hand.

I:          Right.  There are substantial savings that you could then pass on as a result of a more efficient system.

TK:      I wouldn’t say—  I don’t know in the way of savings to the customer.

I:          At least in terms of time.

TK:      17:54  In time.  That’s right.  He doesn’t have to mail his paycheck for deposit.  He doesn’t have to use gasoline to go somewhere to make the deposit because on the checkless society or the electronic funds transfer systems or whatever comes out in the future, it’s all done automatically so that if it’s payday today and his wife wants to go to a store and buy groceries and she can’t wait for him to get home to bring the money, if it’s automatically deposited to a savings account at a savings and loan association, she can go to that savings and loan association in the neighborhood, close to where she lives, and make a withdrawal that day for enough money to go buy the groceries that night without having to wait for him to bring the paycheck home or wait for the check to get to the bank.  Basically, there are so many reasons for doing it in the way of convenience and time savings for the customer.  But there is one distinct disadvantage to it, and that is that you can’t write a check today knowing that your deposit is not going to get there until tomorrow, and your deposit will get to the bank or the savings and loan before your check gets there.  So you’re riding the float a little bit.  In a checkless society, there will be no float.

I:          Right.  That would seem to be more of a problem with banks and checking accounts per se rather than savings accounts unless you’re liable to withdraw from your account quickly.

TK:      On a day-to-day savings account, you can make a deposit the day and withdraw the day—

I:          That’s something that—

TK:      —and get one day’s interest.

I:          —I hadn’t really realized.  Do people use savings accounts as checking accounts?

TK:      In many cases, yes.

I:          Hmm.  But is there any incentive to do that?  Is it cheaper to do it?

TK:      It pays interest, whereas a checking account does not.

cue point

I:          Aren’t there certain penalties incurred if a person makes X number of withdrawals?

TK:      No.  No.  Savings and loans cannot charge activity fees.  We have accounts that have two or three transactions a day on them.  We have many small businesses.  Each day the small business deposits his day’s receipts in a day-to-day savings account and earns interest on it.

I:          Do you seek to discourage that?

TK:      20:34  No.  We encourage it.  We want to be the small man family financial center.

I:          But discourage it in the sense that this creates a headache for you in having to keep track of cash flow?

TK:      Well, that’s true.  But again I say with the electronic computers we have, it is really no problem.  Of course one of the ways that we can judge more reliably the cash flow coming in the front door is with this daily activity; every month the paycheck being put to a day-to-day savings account, even though there is some money going out to pay bills and groceries and so forth, you still have a regular, steady amount of money coming in every day into these savings accounts.  It flattens out the ups and downs of intermediation or disintermediation.

I:          So you think that after people try this for a while and see the advantages, that the transition will be a little smoother and more people will be willing to—

TK:      Yes, and I think the real impact of the checkless society will only be realized in the next few years when point of sale terminals are available in the major grocery stores, department stores, or whatnot where all you have to take with you is the little plastic card and you can go to your store where you normally do business and not have to worry about cash or a check, just your plastic card, and buy what you want by inserting your card in the point of sale terminals.  When enough of those are out, I think that’s when most people will realize the full benefit of the checkless society.

I:          I’d like to talk about housing now.  You must find yourself in a bit of an unusual situation insofar as that there is a large influx of people coming into Houston, hence the demand for housing probably is greater than other places in the nation.  Have you been able to keep up with the intense demand for both construction loans and mortgages?

TK:      We are in a little dilemma.  Houston is averaging about 50,000 a year increase in population.  Translated into 3½ people per family, that would be about 14,000 to 15,000 families a year increase in the population here that have to be housed somewhere.  Up until the 1972 money crunch or ’73 money crunch, Houston did not feel too much adverse effects and was able to maintain a good inventory of apartments and single family residences.  At the present time, the increase has still maintained in the number of families moving into town, but because of the high interest rates occasioned by the tight money situation in 1974, housing starts have not kept pace with the increase in the demand for housing in the local market.  Unless things change in the very near future, there could be a housing shortage in early ’76 through maybe the middle of the year ’76.  But the homebuilding industry in Houston has been basically the small builders, and they have been pretty well able to maintain an inventory of housing to take care of the demand for housing.

            25:11  The other problem occasioned by the high interest rates has been that the cost of a house has gotten so great in Houston that it has cut out a number of the people who qualify for a loan.  And unless interest rates come down, which is not foreseen through the rest of the ‘70s, then it could preclude many people owning a home that want to, and therefore, they’re going to have to find rental housing or older housing and spend a little money fixing it up and maybe having some sweat equity by doing the fit-up work themselves so that they can afford some of the housing in the older neighborhoods.  With new housing, the expense of it has just gotten so great that it has cut out a large number of the people who normally would buy a home or who want to buy a home but they can’t qualify.

I:          I know someone remarked to me the other day that they felt sorry for me because they do not think that my generation will be able to own our own homes, that it was getting that bad.

TK:      It’s getting pretty bad.  Now, I still think, though, that America has been built on innovation.  And new materials and new ways to do things will be found to get housing costs down to where the younger generation, the masses of the younger generation, will be able to own a home.  It may not be the type home you go out and look at today in Houston.  It may be a plastic house or it may be a concrete house.  It may be something else different than what we’re used to.  But if there is a need, the American people have always found a way to fit that need, and somebody will come up with a new method or a new way to build homes that will fill the need.

I:          Concerning some of the—

TK:      On the other hand, though, I will say this:  I believe the figures in Houston are about 65% of the population own their own homes in Houston, so we’re looking at a small percentage of the population that do not own their own homes.  It’s our aim, and one of the main purposes for a savings and loan charter is to foster home ownership, and the builders and the developers and the financial institutions will find a way in the future to house the people and let them own their own homes.

I:          Concerning some of the newer developments, did the increase in the price of gasoline really hurt some of the new developments like The Woodlands?

TK:      28:20  No, I don’t think so, mainly because the price of homes in The Woodlands are such that if they can afford one of those homes, they could pay a dollar a gallon for gasoline and not be hurt.

I:          Let me put the question in a slightly different form.  Does the fact that gasoline is high and going higher make you hesitate on construction loans to far out suburban areas?

TK:      No.  Again, we have a problem with energy, so we’re told, yet here in Houston even at the height of the energy crisis in 1973, we didn’t have long lines at service stations for gas.  People who live in the southwestern part of the United States who go anywhere have to go long distances anyway, and we’re used to traveling long distances within the state.  The other thing is that if it does become a problem, either mass transit or some form of carpooling or other things will still get the people in to their jobs, even though they live 20-30 miles out of town, 40 miles out of town.  And in Houston with no zoning, with many of the businesses you don’t have to come to the central core.  Many people that live in the suburb work in the suburb also.  There are office buildings all over the suburbs.  And so many of the people, even though they live way out of the central core, still live very close to where they work, and those that prefer to live in the suburbs and still have to come to the central business core to work will find methods to get there because they like the living of the single family detached homes in the suburbs.

I:          There is one other area I’d like to discuss.  I know it will be sensitive, but I would be remiss if I did not ask about it, and that is redlining, or I should say the recent controversy about redlining.  Do you consider the location of a home when you’re looking at a prospective mortgage?

TK:      No.  We look at two things when we make a mortgage:  the value of the house at the time we make the mortgage and the person’s ability to repay the loan.  As far as I know, I didn’t even know what the word redlining meant until I read it in the newspaper this year because some congressmen were concerned about redlining.  At Southwestern Savings, at least since 1953 when I came here, we have made home loans to nearly every ethnic group in the city of Houston in every section of the county of Houston.  We made minority people loans in the ‘50s when it was not even popular to do so.  But we only look at it from the standpoint of is the house worth what they’re paying for it and they have a family income to make the monthly payments.

cue point

I:          So there is no formal redlining going on in Houston.

TK:      32:04  None that I’ve heard of.  I never even heard of the word until this year.  And I think that again the question comes up in Houston.  Over 60% of the people in Houston own their own homes, and I think our community has about 35% Negro and about 15% or maybe 20% Latin American.  That alone accounts for 50% of the population—not quite 50% of the population are in those two minorities, and yet 60% of the people own their own home.

I:          I have had this matter explained to me in a slightly different way.  I’d like also to try it out on you.  Basically, the argument goes something like this:  There’s a certain amount of disintermediation that takes place, which means that you have a finite amount of money that you can give out as a mortgage, and you have to establish priorities for giving out that money, and you give it out to the best risk.  That’s just natural; that’s good business.  And as a result of that, because you have a finite amount of money, some minorities in some bad neighborhoods end up on the short end of the stick and then do not get the mortgages.

TK:      The only answer I have to that question is that—

I:          Now, I’m not challenging you.  I’m just—

TK:      I understand.  I’m just explaining a situation as I would see it.  If we were having disintermediation; in other words, not having any money to loan, and it really goes back before that, we have to work kind of in the future.  That is, we have to assure that we have loans.  We are interviewing people every day who want to make home loans, some of which are ready for occupancy, some of which will be ready in four or six months, so that we have commitments in the future and if all of a sudden we have disintermediation and we’re not getting the funds or our funds are actually flowing out—we’re having withdrawals from a savings account, we’re having a net withdrawal of deposits—then management has a problem of we already have commitments to make loans, and we have to fulfill those commitments.  So what many institutions do when that happens is they just don’t make any new commitments regardless of who comes in until those prior commitments, the loans, have been closed.  And then if we have any money left over, then is when we start looking for any new business, and by that is we just take applications from the next people that come in regardless of where they are or who they are, and we make the loans for the funds that we have available.  Now, in times like today, money is flowing in, we’re taking loan applications like mad regardless of where they are or who they are.

I:          In other words, when money is tight, everybody gets hurt.

TK:      35:16  Everybody gets hurt.  That’s right, because if an institution has—  I’ll give you an example.  In July 1974 when we had disintermediation, we had approximately $35 million in loan commitments to close in the last six months of 1974.  Repayments on mortgage loans amounted to about $2 million a month, so we had repayments on loans of about $12 million, so we were cash short about—what’s the difference?—$25 million?  We had told people we would make them loans.  That was a hectic day.  We borrowed money from banks, from our home loan bank system, but we closed all the loans.  We didn’t take any more loan applications from anybody for about six months.  Then in January of this year, money started coming back in, and we were able to pay back our borrowed money, and then we started making applications again.  So everybody got hurt because we just did not make any new home loan applications from July the 25th, 1974, until almost the end of the year.  So we didn’t have money for anybody, regardless of whether they were the wealthiest person in town or the poorest person in town.

I:          Was that the worst period in memory?

TK:      That’s the worst period in memory, yes.

I:          Just as a matter of economic history, when were some other particularly bad periods for your company?

TK:      Gee.  Every tight money period, and it’s pretty well documented, but each seems to get worse as they go along.  But fortunately, even though they get worse, they become shorter periods.  So hopefully if we have another one, it may be real bad, but it may be even a shorter period of time.  But you just don’t walk in and buy a house today and close a house today.  If it was that quick, you could manage a little better.  But when a couple decides to buy a house, then they have to go make an application, you have to verify their employment, everything they’ve told you, check their credit and the whole bit, go out and appraise the house, so this is a process of several weeks.  And then you decide you can make the loan, and maybe the person that is selling the house is not ready to get out, so there is so much time lag between the day a couple decides to buy a house until they close their loan and move in that in our fast economic world a lot of things can happen in between to get these things out of kilter.  But most savings and loans that I know about have two primary purposes in mind, and that’s to promote thrift—teach people to save money—and to promote home ownership.  In the area of home ownership, if the house is worth what they’re paying for it and their family income is such that they can repay it, those are basically the two criteria that most savings and loans have.  We do have responsibility to our supervisors to make good loans, and we have responsibility to our stockholders to make a profit, and I think the savings and loan business in the United States and certainly in Houston has proven that had it not been for the savings and loan, we would not have the high incidence of home ownership in this country that we do.  I think we’ve done an excellent job of taking care of all classes of people.

cue point

I:          The economy of Houston certainly is thriving and insofar as the housing situation has not become too bad yet, you certainly have done a good job.  But it’s scary the number of people that are coming into the city.  You have to wonder sometimes if we can handle it.

TK:      39:28  We don’t want to get like New York.

I:          No, right.  That’s something I think about sometimes is the optimal size of the city.  Do you seriously worry about Houston becoming too large, too much like New York City?

TK:      No, for one basic reason:  New York City itself has some natural barriers.  It has a small island, and it’s clustered around inlets, and so it was forced to grow up in a very small area.  Fortunately, in Houston we have no natural barriers except 50 miles south is the Gulf of Mexico, and there’s nothing to the north, east, or west that’s a natural barrier, so land that’s here can be utilized horizontally rather than vertically, and you don’t have the terrific mass of people in such a small area.  That’s one of the reasons the high-rise condominiums and high-rise apartment projects in Houston have not been very successful.  There are not that many.  Today there are maybe seven or eight high-rise apartments and condominiums in the city of Houston; nothing compared—in New York you’d have that many on one block.  And so Houston can grow to the same size New York is now, but it would be so spread out that there would be smaller communities all around rather than one mass population in a small district that get on each other’s nerves and cause a lot of problems.

I:          You don’t have any New York City bonds in your portfolio, I guess.

TK:      None.  No New York City bonds.

I:          Speaking of your portfolio, there’s another trend I think I should mention, and that is the trend toward increased portfolio diversification.  Now, is that something that you have observed since you’ve been with the association?

TK:      In what way?

I:          Well, are you seeking out a variety of securities, or do you pretty much put your eggs in one basket and if you have something good, you stay with it?

TK:      41:50  All of our assets are diversified.  We basically have the majority of our assets in single family residences or residential home mortgage loans.  Outside of that, you don’t get overcommitted in any one particular area.  We don’t have too many apartment projects; we don’t have too many commercial loans.  Most of those are small, individual proprietor owned businesses, the buildings that house the few small office buildings, and a few small residential subdivisions.  It is not good management to have all your eggs in one basket.  When it comes to our liquidity investments, securities, and things like that, mainly we stick with government agencies, government bonds, treasury bonds—let me see—fed funds.  We mainly keep it fairly liquid in government obligations because when we need cash, we need it quickly, and we can’t go out and hope to sell things such as New York City bonds when there is no market.  We stay pretty well—  Except for the home loans and mortgage loans and first mortgage loans on real estate, which can’t vanish, most of the other investments are in government securities.

I:          Since you compete in a fairly tight money market, you have to come up with ways of tracking the investment dollar, and one thing that has kind of come to be associated with the savings and loans are the giveaways, and this is something which is also then controversial.  In 1974 they were declared to be illegal, but today we see things like clubs that have come about to kind of take the place of the outright gift.  Have these in turn been criticized?

TK:      No.  I haven’t heard any criticism of them.  In the way of marketing, which is really what we’re talking about, marketing, getting people interested in saving money with a particular institution, it was quite popular from about the mid ‘50s until ’74 for savings and loans to offer small, inexpensive gifts to a customer who would open up a savings account of various sizes.  Now, at first it was felt to be necessary because even though savings and loans have federal insurance just like commercial banks have federal insurance—exactly the same for the same dollar amounts—most people grew up and went to college or went to school, and the textbooks always talked about commercial banks; no mention of a savings and loan association.  So when savings and loans really started growing after World War II, we had to use that marketing tool of offering something to get people to find out who we are.  Once they found out who we were, that we were a financial institution insured just like their deposits in a commercial bank were insured, then it was no longer necessary.  But unfortunately, many people used it as a competitive tool, and it continued until finally in 1974 several of us were successful in Texas in convincing the savings and loan commissioner to pass a regulation outlawing giving away gifts.  I don’t feel it’s necessary to have gifts to entice people in to do business with you because we have now reached the maturity where most people know what a savings and loan is.  That was not true in the late ‘40s and early ‘50s.

I:          And so you felt that it had escalated out of hand.

TK:      46:24  It had gotten out of hand.  That’s correct.  It was no longer necessary to educate the people, but it was being used then of who could give—  And we found if they like my gift this quarter, we get the money.  The next three months if they like the gift of a competitor, they withdraw from me and take it to them just to get the gift.  So we weren’t really creating savings; we were just shifting savings around.  And that was the main reason for that restrictive rule and regulation.  Now with the advent of having no giveaways, some associations use saver’s clubs of various kinds to not entice new accounts but offer a little something more—a place to meet, a picture show every now and then free, a seminar on savings, and group travel clubs and things like that—mainly using the clubs to tie the customer to the institution so that he would not move somewhere else for an eighth of a point or a little better interest here or go here or something else.  It kind of ties them to the family, so to speak, with a club where they can meet together and feel a part of the institution, not just coming in and transacting business and leaving.  It makes them feel a little more homey, part of the home, they’re part of the family, and less inclined to withdraw their money and take it to some other institution.  They’re basically designed to keep the money rather than attract it.

I:          So the strategy now is to offer services instead of tangible gifts.

TK:      That’s right.

I:          Mr. King, I have gone through my prepared questions, but always at this point in the interview I’d like to ask if there’s anything else you’d like to set down on tape, something I’ve missed, some other aspect of the savings and loan in Houston you think is important.  Feel free.

TK:      48:51  When I came here in 1953, there were four associations operating in Houston—I’m sorry, five.  Today there are approximately 31 or 32 associations that actually have offices in the city of Houston.  The actual number of offices available in the city of Houston now approaches something like—you can’t keep up with it.  It seems like somebody is opening a new office every day.  But there’s probably something like 150 to 200, in that range, offices available all over the county of savings and loan associations that offer their services and facilities to people in Houston.  As a result of that, we have a very good rapport, I think, with the citizens of Houston.  They understand what savings and loans do now and are more inclined to keep their savings and their various savings programs.  Whereas 22 years ago we just had a passbook and a fully paid certificate is what we called them in those days, now savings and loans can fit a savings program to most anybody’s personal needs.  We’ve got long-term savings, intermediate savings, short-term savings, and day-to-day savings so that a person who wants a program of savings can maximize their earnings, letting their money work for them.  We in turn use that money to build the community, to lend money to people who want to own their home, to beautify their city, their surroundings, and raise their families in a setting that we all think of as a traditional American way of living.  And in the future, sometimes the government gets involved in regulating our economy, and some people see the doom of the savings and loan business as a specialized business for home ownership.  There are some of us who believe as long as there is an America, the dream of the American is to own his own home, and as long as those two dreams exist, there will always be a place for a financial institution that is dedicated to helping the American public own their home.  And regardless of economic conditions and what the government may say, we feel that there will always be a place for a specialized home lending institution such as savings and loans.  As long as there is America, we’ll find some way to build houses to let the American own his own home and finance it for him.

            Other than that, I don’t know of anything else.  I just wish I was around in the year 2000 to see what does happen.  I hope I’m still here then.

I:          We all have that desire.  I’d like to thank you for your time.  It’s been a very good interview.  And on behalf of Houston Metropolitan Archives and Research Center, I’d also like to thank you.

TK:      Okay.  Thank you very much.  [end of 092]  52:44