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Building Home

Howard F. Ahmanson and the Politics of the American Dream

Eric John Abrahamson (Author)

Available worldwide
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Hardcover, 368 pages
ISBN: 9780520273757
February 2013
$34.95, £24.95
Building Home is an innovative biography that weaves together three engrossing stories. It is one part corporate and industrial history, using the evolution of mortgage finance as a way to understand larger dynamics in the nation‘s political economy. It is another part urban history, since the extraordinary success of the savings and loan business in Los Angeles reflects much of the cultural and economic history of Southern California. Finally, it is a personal story, a biography of one of the nation‘s most successful entrepreneurs of the managed economy —Howard Fieldstad Ahmanson. Eric John Abrahamson deftly connects these three strands as he chronicles Ahmanson’s rise against the background of the postwar housing boom and the growth of L.A. during the same period.

As a sun-tanned yachtsman and a cigar-smoking financier, the Omaha-born Ahmanson was both unique and representative of many of the business leaders of his era. He did not control a vast infrastructure like a railroad or an electrical utility. Nor did he build his wealth by pulling the financial levers that made possible these great corporate endeavors. Instead, he made a fortune by enabling the middle-class American dream. With his great wealth, he contributed substantially to the expansion of the cultural institutions in L.A. As we struggle to understand the current mortgage-led financial crisis, Ahmanson’s life offers powerful insights into an era when the widespread hope of homeownership was just beginning to take shape.
Acknowledgments
Introduction
1. Father as Mentor
2. Among the Lotus Eaters
3. Undertaker at a Plague
4. The Common Experience
5. Building Home
6. Scaling Up
7. Home and the State
8. Political Economy
9. Big Business
10. The Crest of a New Wave
11. Southland Patrician
12. Influence
13. Short of Domestic Bliss
14. Breakdown of Consensus
15. Crisis of the Managed Economy
16. A New Way of Life
17. A Personal Epic
Conclusion
Abbreviations Used in Notes
Notes
Index
Eric John Abrahamson is co-author of Anytime, Anywhere: Entrepreneurship and the Creation of a Wireless World and founder and principal of Vantage Point History, a consulting firm that focuses on history, public policy and communications.
“Howard Ahmanson Sr., who in less than a decade after World War II built the largest savings-and-loan association in the country, is far from a household name outside Southern California, where he built his empire. Even there he may be best known for the buildings named after him. Yet in an impressive biography, ‘Building Home,’ Eric John Abrahamson is able to make Ahmanson's life an ideal lens through which to view some of the most momentous developments in America following the war.”—Robert Bruegmann Wall Street Journal
“It’s very easy to highly recommend Building Home . . . an interesting and uplifting read.”—John Tamny Forbes
“Abrahamson maps changing patterns of trust in government as economic steward, and mid-century regulatory approaches of mutual protection for consumers and lenders, onto the life of Howard Ahmanson, a savings and loan magnate who profited by homeownership. The kaleidoscopic approach succeeds; its subject is as complicated as his milieu. . . . At heart, this is about a son surpassing his goal to earn back a family company lost when his father died, but Abrahamson's dense analyses make this study relevant to today's debates about how to fairly regulate the financial marketplace.”—Publishers Weekly
“Despite the nation’s now-reluctant familiarity with mortgage finance, it can be a hard topic to warm up to. Reading Building Home, one not only warms to the subject, but also to the argument that big businesses and the government can work together for the public benefit.”—Kim Velsey New York Observer
“Enjoyable storytelling.”—Martin Brower’s Oc Report
“Ahmanson (who died in 1968) is remembered—if at all—through the cultural institutions he supported: the Los Angeles County Museum of Art and the Music Center. Abrahamson makes a compelling case that Ahmanson ought to be better remembered—positively and negatively—as a man who made much of Los Angeles.”—D. J. Waldie KCET/SoCal Focus blog
"[Abrahamson] does an impressive job under difficult circumstances of documenting Ahmanson's life--warts and all. . . . Fascinating reading."—William G. Hamm ABA Banking Journal
"In this blockbuster biography, Abrahamson brings the business history of Southern California--and the national postwar housing boom!--to new levels of scholarly presentation. Building Home offers readers the opportunity to examine the federally managed housing economy, now in disarray, at its highpoint of efficiency, as seen through the flamboyant figure of one of its most successful Mad Men practitioners!"—Kevin Starr, University of Southern California

"Eric John Abrahamson has accomplished a great feat: Using interviews and detective work in the archives, he chronicles the personality and vision of Howard Ahmanson, a man as elusive in the written records as he was imposing in the memory of those who knew him. Abrahamson tells an impressive history of Ahmanson’s innovations in the savings-and-loan business, revealing how the man and his company left a long-lasting influence on the cultural as well as business landscape of southern California."—Adam Arenson, author of The Great Heart of the Republic: St. Louis and the Cultural Civil War

“Eric Abrahamson takes us back to an earlier era for America and Southern California when dreams were realized not only for a few but literally for millions. The optimism and nerve of howard ahmanson's times are displayed with balance and critical insight. But it's clear that we have lost much of our focus on home and family. The question for us is can we somehow restore the American dream before it devolves into the mists of history?”—Joel Kotkin, the author of The Next Hundred Million: America in 2050, The City: A Global History

"Howard Ahmanson's gifts to culture in Los Angeles were enormous. As the sole owner of Home Savings, the nation's largest savings and loan, Ahmanson became one of the richest men in California by catering to middle-class dreams of home ownership. During his lifetime, he played a key role in funding the Los Angeles County Museum of Art, Music Center, the Otis Art Institute and other civic organizations. With his endowment of the Ahmanson Foundation, he created an institution that provides $40 million a year in grants to benefit education, social services, healthcare and the arts in Los Angeles. Yet to most Angelenos, Ahmanson was and remains a mystery. Eric John Abrahamson's biography reveals the man and places him within the broader economic, political and cultural streams of mid-century America and Southern California."—Stephen D. Rountree, President and Chief Executive Officer, The Music Center

One

Father as Mentor

The minister of the North Presbyterian Church in Omaha undoubtedly reminded the worshippers on Easter Sunday morning in 1913 that they were in the house of the Lord-and what a house it was. Inspired by the neoclassical architecture of the 1898 Trans-Mississippi and International Exposition, which celebrated Omaha's heroic role in the opening of the American West, the new church reflected both the hope of the Resurrection and the republican ideals of ancient Greece and Rome. Despite the glory of the space, the reverend often cautioned his congregation against hubris. God's will would be done despite all worldly precautions.

These sermons touched the faith of one man in the congregation who came frequently with his wife and two sons. William "Will" Ahmanson understood that ultimately the world and the afterlife were in God's hands, but he believed that in this world men should not tempt their maker. For the sake of their families, business partners, and creditors, men had a responsibility to insure their property and persons against the risks of fire, flood, and sudden death.

Ahmanson thought he knew how to manage those risks. An insurance man since he was a teenager, he had studied the laws of statistics and probability. He learned to pay attention to the details of circumstances and conditions. Like all actuaries, he had developed a godlike ability to know in the aggregate what would be lost and who would be saved in the event of a fire. Yet like all insurance men, he lived in fear of a great disaster that would overwhelm the predictable cycle of fires and minor floods.

After the service on Easter morning in 1913, the overcast skies began to clear. The dry brown front lawns and shrubs just beginning to bud after the winter smelled of earth and rain. Within the eight blocks between the church and the Ahmansons' modest home at 2516 North Nineteenth Street a diversity of architectural styles reflected the heritage of Omaha's first streetcar suburb. Most of the neighborhood's residents were native born, but there were also Scandinavian, Scottish, German, and English immigrants. The men had white-collar jobs. They were shop owners, postal and city clerks, a streetcar conductor, an orchestra musician, and a pharmacist. Like Will Ahmanson, they were all hoping to get ahead in the world.

Like most of these middle-class proprietors and salary men, Will and his wife Florence had great hopes for their two sons, Hayden and Howard. At age fifteen, Hayden was away from home that Sunday attending the Kemper Military School in Missouri. So Will doted on Howard. At six years old, the boy exhibited a confidence and intellect that ignited Will's pride. He often brought the boy along when he went to meetings or to see customers.

By late afternoon, the day was bright and warm. Then shortly before six o'clock, the wind began to blow. At the Diamond Moving Picture Theater, in a neighborhood not far away that had become home to Omaha's growing African American population, a crowd of sixty people gathered to see the black-and-white silent film Twister. Those who were still outside noticed the sky to the southwest turn luminous, "a lurid brass-yellow" color. A black funnel cloud appeared. As it swirled and twisted toward the city, the tornado slammed to earth and then bounced back into the air. One man said, "It came like a rushing and roaring torrent of water." As the sound increased and the air pressure dropped, the Ahmansons' dog grew nervous and bolted from the house. Howard wanted to run after him, but his parents hurried him into the cellar.

Then suddenly the tornado was on them. The swirling dust and debris blocked the waning daylight. The fierce wind ripped homes from their foundations and lifted them into the air. It tore roofs off homes and trees from the earth and smashed brick buildings. As the walls of the Diamond Motion Picture Theater crumbled, the roof fell in. Then the tornado roared east, crossing the Missouri River and slashing its way toward Council Bluffs.

In the eerie silence that greeted them when they emerged from the cellar, the Ahmansons discovered their house still standing. They could hear shouts, sparks, and explosions as broken gas lines and severed electrical wires ignited fires that danced in the particulated evening air. The bells of horse-drawn fire trucks followed as they raced through the debris-laden streets. Fortunately, a heavy rain began that lasted for almost an hour, making the firemen's jobs easier.

The path of devastation, two to six blocks wide, was so narrow and intermittent that people wondered if it had been inscribed by God. Some believers said that he had sent the deadliest tornado in American history on Easter Sunday to punish Omaha for the drinking, gambling, and prostitution that were legendary in this western city. Others pointed out that among the 135 killed in the city were innocent children as well as aging sinners. Plenty of God-fearing people had inhabited the more than two thousand homes destroyed by the whirlwind. The victims had simply succumbed to bad luck.

Making Your Own Luck

Will Ahmanson's family believed that luck could be shaped by hard work. Will's Swedish father, John, had converted to the Church of Jesus Christ of Latter Day Saints as a young man and had been jailed in Norway in 1852 for preaching the Mormon faith. He helped organize a group of Scandinavians, including his Norwegian wife, Grete Fieldstad, to come to America in 1856. They joined the Fourth Handcart Company, and John was chosen to lead the 162 Scandinavian members to Utah.

Following a series of setbacks en route and a miserable winter in Utah, John grew dissatisfied with the Mormon hierarchy. The following year, he and Grete and their first child left the church and joined a wagon train returning east. When John tried to retrieve his belongings stashed at the Mormon outpost of Devil's Gate, however, church leaders wouldn't return them to him. Frustrated, John and his family continued on to Omaha, where they settled in 1859. John became a hardware merchant and then a grocer. He also sued Brigham Young and the Mormon Church.

John was rewarded for his temerity and persistence. The jury ordered Young to pay him $1,297.50. Young tried to force a new trial but ultimately agreed to pay Ahmanson $1,000. With this payment, John moved his family to Chicago so he could study medicine. After completing his studies, he remained in the Windy City for nearly a decade. In 1879, he returned to Omaha and began practicing as a homeopath.

Of John and Grete Ahmanson's three children, Will was the youngest. Born in 1872, three years after the completion of the transcontinental railroad, he grew up with Omaha as it developed from a wide-open frontier town into an agricultural shipping center and one of the Midwest's major cities. When he left high school at the age of fifteen, one friend advised him to become a preacher; another suggested he go into insurance. He chose insurance.

A handsome and elegant man, Will had a strong, square face with a cleft chin. Keeping with the style of the times, he parted his hair loosely in the center. His soft eyes communicated patience and understanding. He wore a starched white collar, a silk necktie, and expensive suits. Undoubtedly, his good looks helped to charm Florence Mae Hayden, a slight, strong-willed woman. Born in Pennsylvania, she had grown up in the Sandhills of western Nebraska. Her Scotch-Irish family had been in the United States since the Revolutionary War. She married Will in 1897 and gave birth to Hayden a year later. A daughter died as an infant. Several years passed and then Howard was born on July 1, 1906. After Howard there were no more children.

Father as Mentor

Will Ahmanson loved both of his sons, but he showered pride and attention on Howard, whom he called a genius. "Father and Bud were extremely close," Hayden once said, betraying more wonder than jealousy. "They couldn't seem to get to see enough of each other." While Howard was still in elementary school, Will took the boy aside every evening after dinner. "While he smoked a cigar he'd talk over with me the events of the day-business affairs and finances-as if I had the maturity and judgment of a man of 50." When Will played cards or shot pool with his friends, Howard tagged along and listened to the talk of business and politics. Meanwhile, Florence set high expectations. She was smart and competitive, with a strong sense of right and wrong.

Howard received an enormous amount of attention from both his parents. In the second grade, his report card carried A's in every subject except deportment. Rather than let this single instance of imperfection slide, his parents took him to the University of Omaha to be part of a special study. The staff told the Ahmansons that Howard didn't have enough to do. Will and Florence decided Howard needed lessons in German and piano.

On another occasion, when Howard came home from elementary school his father asked if his grades were the best in the class. Howard confessed they were not. A girl in his class was number one; he was number two. His father responded, "Hmm, how in the world did that happen?" This was typical of the way Will approached the issue of setting standards, said Howard. "He never criticized me. He led me by sheer devotion."

Will also believed in giving his son extraordinary responsibilities. When Howard was twelve or thirteen years old, Will opened a brokerage account for Howard, bankrolled it, and told his stockbroker to let the young man decide his own trades. Howard bought Bethlehem Steel while his father bought U.S. Steel. "When my stock went up twice as much as his, he was the happiest man in Nebraska," Howard remembered. Father and son also collaborated on research and sometimes invested in the same company.

An automobile enthusiast in the earliest days of the Model T, Will let his fourteen-year-old son drive. Howard fixed the license plate to a hinge and ran a wire to the driver's seat so that if he saw a policeman he could raise the plate so it was horizontal to the ground and harder to read. "I shouldn't even have been allowed to drive for another two years," Howard recalled years later, "but nothing was too good for me."

Howard skipped a grade and entered high school in 1919 at the age of thirteen. He entertained his friends by playing the banjo, the piano, and the organ, but he showed no interest in the school's music groups. A popular junior, he became increasingly distracted by girls. When his grades fell, his teachers sent home warnings. "We called them flunk notices," Howard remembered. One day, his mother confronted him with the notices and tucked them under Will's plate at supper with the rest of the mail. Howard waited for his father to say something. When he was done eating, Howard excused himself, saying he had a date. Will followed him out the door.

Unable to stand the suspense, Howard asked, "Did you read your mail?"

"You mean those flunk notices?" his father asked.

"Yes."

Will guided him to the car. As Howard slid into the driver's seat, Will closed the door and spoke through the open window. "You're going to make it, aren't you?"

"Oh sure," Howard responded.

"Well-Good night," his father answered.

According to Howard, "that was all that was ever said about it." It seemed to be enough. Howard brought his grades up. "After all," he said later, "what would you do with a father like that? You had to do what he expected you to do."

Under Florence's influence, Howard became a member of the Presbyterian Church. He was active in the YMCA, passing his Bible study course with high marks. But religion never became an important part of his life. Fifty years later, when he had a son of his own, he told a reporter that he was taking his son to a different church every weekend "to find one that fit," as if religion were simply one more accessory to the good life.

Throughout his childhood, Howard's relationship with Hayden was somewhat distant. Eight years older, Hayden left home to attend the Kemper Military Academy just as Howard was starting school. By the time Howard was in his teenage years, Hayden was in college at the University of Nebraska. When Howard was in high school, Hayden was working for his father's company as an assistant underwriter. After Hayden began dating Aimee Elizabeth Tolbod, she joined the family for dinner every Sunday night, introducing another subtle distance between the two brothers.

Later in life, Howard would idealize his childhood in Omaha. He remembered twenty maple trees for climbing in the yard of his parents' house. He played with the neighbor kids. In the summer, the family vacationed at Lake Okoboji in Iowa. Yet Omaha, like the rest of America, was a complicated and sometimes troubled place in the first two decades of the twentieth century.

An Unsettled City

The fourth-largest city in the trans-Mississippi West, Omaha lagged only San Francisco, Denver, and Kansas City. On the streetcars, Howard overheard the thick accents of Germans, Swedes, Hungarians, Danes, and Italians who had come to work for the railroad, the packinghouses, the distilleries, and a host of other industries that depended on the shipment and processing of agricultural products.

In this era, the entrepreneurs of the frontier age gave way to business leaders who collaborated to promote the city and resist unionization. The city became a regional center for banking and insurance. Between 1916 and 1918, Omaha rose from sixteenth to fourteenth on the list of cities leading the nation in bank clearings. Nebraska led the nation in the number of banks per capita-with one for every 1,207 people, compared to the national average of one for every 4,032. In Nebraska, and Omaha particularly, managing and protecting capital was big business.

Despite its importance as a financial center, Omaha also had a dark side. As in many American cities, political control rested in the hands of a shadowy political boss. Gambling and saloons flourished even after national prohibition was adopted in 1919. By one estimate, Omaha had twenty-six hundred prostitutes in 1910. Providing sex and liquor to cowboys, railroad workers and other men, the city's houses of ill repute netted $17.5 million a year. In addition to crime, liquor, and prostitution, Omaha also experienced interethnic and racial violence. A mob of a thousand men attacked the Greek section of town in 1909, looting, burning buildings, and attacking residents. Ten years later, as race riots flared in midwestern cities, a black packinghouse worker was arrested and accused of assaulting a nineteen-year-old white woman and her companion. A mob stormed the courthouse, nearly lynched the mayor, and then seized the defendant. He was hanged, mutilated, and dragged through the streets with a rope around his neck. His bullet-riddled body was burned as the crowd cheered and posed for photographers.

If he didn't witness the murder, thirteen-year-old Howard Ahmanson certainly heard about it. His neighbor and high school classmate, actor Henry Fonda, was so seared by what he saw that he became a lifelong advocate of racial equality and social justice. The chamber of commerce decried the violence and the breakdown in civil order. But the lesson that Howard seems to have taken from this event was far more practical: in investing or taking risks, avoid the fault lines of society-the boundaries between races-where friction could lead to cataclysm.

Selling Fire Insurance in a Volatile Community

Howard frequently discussed the stock market, grain prices, land deals, the insurance industry, and politics with his father. These conversations undoubtedly influenced Howard's thinking about risk, management, and regulation.

In the 1920s, the American economy was in the midst of a critical transition that had begun well before World War I. New technologies and organizational strategies enabled a great merger movement that concentrated economic power. Giant corporations like Standard Oil, United States Steel, American Telephone Telegraph, and American Tobacco-known to many as "the trusts"-employed thousands of workers and made millions of dollars in profits. Populists resisted this economic power and called for trust-busting and regulation. Under Presidents Theodore Roosevelt, William Howard Taft, and Woodrow Wilson, the federal government's role in the economy grew significantly. In various state capitals, new regulatory commissions and agencies proliferated to protect consumers and stabilize chaotic markets. Fire insurance, like virtually every other industry, was affected by the increasing scope and scale of business activity and government's growing role in managing the economy.

Fire insurance companies started as mutual or cooperative organizations, and this heritage was important to the way they operated and were regulated. It would also be important to the first fortune that Howard Ahmanson would make in the insurance industry and to the second fortune he earned in savings and loans. The first associations were created after the Great Fire in London in 1666, when property owners banded together to provide financial protection to one another in case of fire. Their "mutual" property insurance concept was replicated in the American colonies by Benjamin Franklin, who organized the first association in 1735.

With a mutual, risk was managed by familiarity. Members knew one another and the properties they were covering. Excess profits were returned to the members, so the insured was less inclined to worry that shareholders or owners were exploiting the policyholder. These associations-along with savings banks and building and loan associations-were part of a fabric of cooperative community institutions that proliferated in the United States in the eighteenth and nineteenth centuries.

The success of the mutuals attracted entrepreneurs who understood that insurance companies amassed enormous quantities of capital that could be invested. Earnings on this capital that exceeded the costs of paying policyholders' claims could be pocketed by shareholders. Success depended on making smart investments and limiting risk-especially catastrophic risks like the Chicago fire of 1871 and the San Francisco earthquake and fire of 1906.

Large insurance companies enjoyed a competitive advantage in insurance. With greater numbers of policyholders and accurate statistics, the number of claims was much more predictable. By developing networks of agents and offices in the age of the telegraph, some insurance companies enjoyed the kind of economies of scope and scale associated with large industrial companies like railroads and telegraph companies at the end of the nineteenth century.

Boom Times in America

Will Ahmanson's career developed in tandem with the insurance industry in the United States. Omaha became a major insurance center-a kind of Hartford of the Midwest. Most of the fire insurance companies were stock companies. By 1913, these for-profit enterprises covered nearly 93 percent of the $790 million in fire and property insurance written in the state. These were profitable businesses. The combined income of all Omaha insurance companies topped $23.5 million in 1917.

In a regional center like Omaha, leading insurance men often worked as agents or managers for several companies. Will Ahmanson's various affiliations between 1906 and 1919 reflected the fluidity of the business. Between 1906 and 1914, he was the assistant secretary of the Nebraska Underwriters Insurance Company, worked for the State Insurance Company of Nebraska (which was acquired by the National Fire Insurance Company of Hartford in 1912), and then joined Columbia Fire Underwriters in 1913. He was also the assistant manager of the German Fire Underwriters of Omaha. All of this movement reflected the still-unsettled state of the industry as consumers, companies, and politicians sought to use government to strengthen their respective positions in the marketplace, ensure "fair" treatment for everyone involved, and forge a political consensus.

Regulating Fire Insurance

Like businessmen in many industries, fire insurance agents tested their relationship with government on many fronts. On the one hand, they resisted proposed laws that were at odds with the fundamental economics of their industry. On the other hand, they turned to government to stabilize their business environment. Thus insurance leaders exhibited the same conflicted perspective on regulation that characterized many industries at the beginning of the twentieth century.

Reckless competition posed the biggest threat to the stability of the fire insurance business. Upstanding companies were often undersold by naive or fraudulent firms that didn't have the means to pay claims if disaster struck. These "wildcatters" sparked rate wars. Although established insurance companies promoted their stability and trustworthiness to counter the wildcatters' price competition, customers had little ability to discern what fair rates for fire insurance should be and often selected companies on the basis of the price of their premiums rather than their reliability.

Incumbent insurance companies responded to this market competition by lobbying for limited regulation. They urged state governments to require new companies to post bonds, but these efforts to create state-sanctioned barriers to entry were largely unsuccessful in the late nineteenth century. Insurers also tried self-regulation or cartelization. In various states and nationally, they created underwriting boards to collect data and assess the level of risk associated with different kinds of buildings and uses. They then established systems of uniform rates. The best-known of these organizations, the National Board of Fire Underwriters, was launched after the Civil War by seventy-five companies from the East and the Midwest.

Cooperative rate setting, however, prompted an outcry from customers. Some states accused the underwriting boards of violating state and national antitrust laws. In Nebraska, the legislature passed a law in 1897 barring insurance companies from combining to set rates or commissions paid to agents. Although these efforts to apply antitrust laws to insurance were generally unsuccessful in the courts, state legislators introduced bills banning insurance compacts in thirty-three states between 1885 and 1900, and in sixteen states these bills were adopted into law.

Frustrated, some customers turned to government. In 1909, Kansas adopted a law giving the state superintendent of insurance the power to approve rates. Insurers challenged the law, but in 1914, in German Alliance Ins v. Lewis, the U.S. Supreme Court upheld the state's authority. Many other states followed Kansas. In Nebraska, the legislature passed a "New Insurance Code" in 1913 to establish comprehensive insurance regulation. The new structure withstood both judicial and electoral challenges in part because of an emerging consensus that regulation was a reasonable means to avoid various scenarios that would put the government in control of the marketplace as an agent of either labor or corporate interests.

Even as they resisted efforts to bar them from collaborating and fought state rate regulation, fire insurance companies saw how they could benefit by working with government. Research developed by the fire insurance underwriting boards led to the development of model building standards and codes that lowered the risk of fire. Insurers pressured communities to adopt these standards and to develop and maintain fire departments. Where cities fell behind on their investments in fire departments, the industry raised rates or threatened to withdraw altogether. Will Ahmanson served on the Nebraska State Committee in 1918 as a volunteer building inspector looking for potential fire hazards. Altogether, these efforts to prevent fires represented the epitome of Progressive reform: collecting data, addressing underlying causes, marshaling citizen volunteers, often soliciting compliance and sometimes compelling it through state-enforced regulation.

A Local Company to Take the Place of Eastern Capital

Will Ahmanson watched all of these developments with an eye to his own opportunities and a growing frustration that his hometown was so dependent on East Coast insurance interests. In April 1919, he saw an opportunity to launch his own local company. But the effort nearly cost him his reputation.

In the securities markets of the 1910s and 1920s, stock scams were common and often targeted rural investors. Will Ahmanson must have known this, but for some reason he trusted the two stock promoters who came to him with the idea of creating National American Fire Insurance. They appealed to his personal and civic aspirations and convinced him and other investors that they could create "the largest insurance company west of the Mississippi." To reassure investors, they wanted Will to serve as president and become a major owner. Will agreed and recruited a friend and colleague, James Foster, from Columbia Fire Underwriters, to serve as secretary-treasurer.

The stock promoters traveled throughout Nebraska and Iowa selling shares to farmers and small-town merchants and bankers. They bought full-page ads in the Omaha World-Herald promising profits and security. "No more attractive investment ever has been offered the public of the west," the ads exclaimed. "Sound, substantial, and certain of profit." The writers explained, "The state sees that the company's capital, which you helped to furnish, is kept intact."

The promoters offered liberal terms to investors-half of the money down, with the rest due in six months at 6 percent interest. Patriotic farmers and citizens were allowed to exchange their deflated Liberty Bonds, purchased during World War I, at full par value for National American stock. Some buyers were even offered seats on the board. Using all of these tactics, in six months the promoters sold $1.115 million worth of stock to bankers, merchants, and farmers in towns and cities scattered across Nebraska.

Will Ahmanson apparently didn't realize that the promoters were more interested in extracting capital than launching an insurance business. He was dismayed when an insurance examiner for the State of Nebraska found that nearly $142,840 had to be written off for "organization expense." This was money the promoters had skimmed for themselves.

Ahmanson worked hard to redeem the investors' trust and protect his own good name. National American Fire Insurance leased an entire floor in downtown Omaha and recruited nearly three hundred agents in the surrounding territory. In its first year, the company wrote policies for fire, tornado, automobile, hail, and marine insurance; it had gross premium income of more than $26,000 and net losses of only $1,210. It turned a small profit. The chamber of commerce gushed that the company's success was yet another sign of Omaha's growing maturity and place among the nation's great cities. "At the end of its second year [National American] shows a remarkable growth which proves that Western men are beginning to have confidence in Western institutions."

With this success, Will Ahmanson imagined his boys becoming executives with the company. He suggested to Howard that after college he might become National American's vice president and treasurer. He moved his family to a new home in a part of town that would both reflect his position and epitomize all that he and Florence prized-family, community, responsibility, and stability. The neighborhood they chose was full of like-minded families in pursuit of the American dream.

The Midwestern Ideal

The neighborhood of Dundee epitomized the suburban ideal at the beginning of the 1920s, and it would play an important part in Howard Ahmanson's vision of the relationship of home, community, and the economy in his later career. Established as an autonomous community just west of Omaha, it was served by a streetcar that carried businessmen like Will Ahmanson from home to office and back every day.

Advertisements for the development in its early years noted the "high dry pure and clean air," in contrast to the stench of the stockyards and factories on the city's south side. Covenants precluded commercial development and barred all immoral and illegal businesses, including the sale of spirits or malt liquors. In short, Dundee offered a refuge from the crowds and corruptions of urban life.

Unlike the suburban tracts that Ahmanson would finance in California, Dundee proudly proclaimed that it had been built "one house at a time." Prairie-style architecture featuring big porches and hipped roofs rose alongside Colonial, Georgian, Craftsman, Tudor, and Italian Renaissance-style homes. Covenants brought some uniformity to the look and feel of the community, however. The homes had twenty-five-foot setbacks to allow for tree-shaded front lawns. Garages were located at the rear of the lots. Alleys provided service access for trash collection and ice and grocery deliveries. Large municipal parks maintained a sense of nature in the neighborhood and served as community gathering places for picnics, concerts, and church revivals.

The house that Will and Florence chose, at 5106 California, was a two-story bungalow with a portico front porch and a dormer window that commanded a view of the street. Only a narrow driveway separated the home from the neighbors'. It was more house and a finer neighborhood than many families could afford, but the ranks of home owners in Omaha were growing.

Streetcars, low-priced land, and an adequate supply of mortgage credit helped make Omaha a city of home owners by 1920. As a building boom increased the number of dwellings in Omaha by 70 percent between 1900 and 1920, the percentage of owner-occupied residences rose from 27.7 to 47.2. Only a handful of other midwestern cities had higher rates.

Home owners in Omaha depended on a variety of formal and informal sources for mortgage capital. Many people borrowed from family members or local merchants. The more affluent turned to commercial banks and mortgage brokers who loaned from their available pools of deposits or acted as agents of large eastern life insurance companies looking for investment opportunities. For the salaried and wage-earning classes, however, the greatest source of mortgage capital was the building and loan, a cooperative institution whose members pooled their savings and invested these funds in mortgages on one another's homes.

As the president of a fire insurance company, Will Ahmanson kept in close contact with the mortgage lenders in Omaha. They were an important source of business and information. Insurance risks and credit risks were often interrelated, and the more Will knew about the trustworthiness of a potential customer, the more he could measure the potential insurance risk.

Attending chamber of commerce meetings as a teenager with his father, Howard Ahmanson met many of these leaders of Omaha's financial sector. From his father he understood that Omaha's high rate of home ownership reflected a well-functioning commercial system, and he aspired to become a part of this system.

Seeking a Professional Education in Business

Howard already had a sense of himself as a business professional by 1923. He had learned from his father and from his apprenticeship in the offices of National American after school and during the summers. Graduating from Omaha's Central High School on the eve of his seventeenth birthday, he wanted to go east to Yale for college. But his father was not in good health, and Howard was uneasy about the idea of going so far away. Instead, he enrolled at the University of Nebraska to study business.

Business administration was a relatively new academic discipline, and the University of Nebraska was quite proud of its school. As a "Bizad" major, Ahmanson joined the University Commercial Club. He flirted with journalism and worked on the Cornhusker yearbook. But he was already a student of entrepreneurship.

He and his friends frequented a short-order restaurant called the White Spot, where crowds of college students and town folk lined up to buy hamburgers. Ahmanson admired the owner's success, especially after he opened six or seven additional White Spot restaurants around town. But Ahmanson also noticed that shortly after the owner added steaks, lobster, and other fancy dishes to the menu, he went broke. "Had he stuck with his original idea of making the best hamburger in town," Ahmanson would later point out, "he'd probably have been quite successful."

A Progressive Business Culture

Howard began his college career during a critical transition in the history of business-government relations in the United States. Through the end of the nineteenth century and into the early decades of the twentieth, myriad industries in the American economy became increasingly concentrated as entrepreneurs took advantage of the growing national transportation system to increase the scope and scale of manufacturing and to ship products throughout the country. This economic integration fed the growth of cities, as factories swelled with workers fresh off the farm or the boat from Europe. A loose coalition of social reformers and business leaders known as Progressives sought to rationalize government's management of the infrastructure of society and the economy. In cities like Omaha, Progressives campaigned to end machine politics and put decision making in the hands of nonpartisan "experts" and committees. At the national level, a series of Republican administrations focused on cooperation with big business rather than regulation.

Among the leaders of this Republican movement, none was more important than the Iowa-born Herbert Hoover. A mining engineer and successful businessman by World War I, he earned worldwide respect and admiration when he oversaw an international effort to provide food to Belgium's starving people during World War I. Appointed U.S. secretary of commerce in 1921, he made his philosophy clear: "The Department of Commerce should be in the widest sense a department of service to the commerce and industry of the country. It is not a department for the regulation of trade and industry. In order to do service to great advantage, I wish to establish a wider and better organized co-operation with the trades and commercial associations."

Hoover transformed his agency in an effort to establish a new model for the ways in which government could support private efforts to strengthen the economy and society. He created bureaus to deal with new industries, including aeronautics and radio. He restructured the Bureau of the Census to aid business by publishing more data. He expanded the government's role as convener and coordinator, urging business leaders to join trade associations to address public policy issues in a coordinated manner. "We are passing from a period of extreme individualistic action," he said in 1924, "into a period of associational activities." Hoover envisioned a system in which public policy would be made by experts, technicians, and professionals deeply immersed in their subjects, who would collaborate voluntarily for the greater good of society, leaving traditional patronage politics to the history books. Under this framework, the federal government would become more "elaborate and permissive," serving as "a clearinghouse for business compromise" and widening the dialogue among communities of interest.

As a business student at the state university in 1925, Howard was exposed to the ideology of Hoover-style Progressivism. He read Warren G. Harding's Our Common Country: Mutual Good Will in America, noting the late president's call for a better understanding between business and government. Ranked in the top ten in his class, Ahmanson seemed destined to become one of Hoover's professional managers, but the greatest loss of his life would lead to an entirely different future.

A Personal Crisis

Will Ahmanson suffered from goiter, an enlargement of the thyroid. In many patients, the condition created a swelling in the throat that made it hard to talk or swallow. Sometimes it was associated with an increased heart rate or an irregular heartbeat and muscle weakness. Researchers suspected that goiter resulted from an iodine deficiency. In the 1920s, however, popular culture blamed a variety of factors ranging from the stresses of modern life to jazz music. In regions far from the ocean like the Great Lakes, the Missouri River valley, and the upper Midwest, the malady was so common that these areas were called "goiter belts."

Will's health had already affected the lives of both of his children. Hayden had proposed to Aimee on the eve of his graduation from law school. They had planned to marry in the spring of 1924, but Will was so often bedridden that they postponed the ceremony. Instead of launching his career as a lawyer, Hayden returned to National American as an underwriter so he could monitor his father's interest in the business.

In the fall of 1924, Will seemed to be getting better. Aimee and Hayden married in a simple ceremony at the house officiated by the minister from Dundee Presbyterian Church. Then Will and Florence left to spend the winter in California. In Los Angeles they visited many former Nebraskans who had moved to the Golden State. Under the California sun, and perhaps with more seafood in his diet, Will's health improved.

While his parents were gone, Howard spent his weekends and vacations with Hayden and Aimee. They talked about the situation at National American. In 1924, Will and a couple of partners had launched another business, making loans on automobiles. This new company, like National American, was growing as the economy in Omaha and around the country enjoyed good times. But with Will away, the company needed leadership. James Foster was well qualified for the job, but Will may have hoped that one of his sons would succeed him, and the brothers apparently expected this as well.

After Will and Florence returned to Omaha, a rare heat wave struck in the middle of May. Will lay in bed struggling to breathe, while Florence tried to keep him cool. When it was clear that there was no other option, he was admitted to the hospital to have his thyroid removed. The surgery was not successful. On the evening of May 22, Howard's father died.

Legacy Taken Away

Will's death unraveled the family's control of the businesses that he had helped to build. "Everything he was into, somebody took a swipe at," Howard told a reporter many years later. On the morning of the funeral, the directors of National American Fire Insurance met without the family and chose Foster to succeed Will as president. Meanwhile, the banks cut off credit to the auto loan company and forced the Ahmansons to sell their interest in the business to the surviving partners.

The family was hardly destitute. The Omaha World Herald reported that Ahmanson's estate was worth $75,000 (nearly $932,000 in 2010 dollars). Florence was left with a substantial sum of money and fifteen hundred shares in National American Fire Insurance. Each of her sons received one hundred shares. Howard also had the investments in his own brokerage account, which were worth nearly $20,000 in 1925 (nearly $258,000 in 2011 dollars)-a fortune for a teenager.

Howard returned to the University of Nebraska to begin his junior year, but shortly after the term started Florence became ill. Howard raced back to Omaha. With memories of Southern California still fresh in her mind and the doctor's recommendation that she move to a gentler climate, Florence and Howard decided to move to California. Howard loaded his roadster with his belongings and left that night for Los Angeles to find a place for them to live and make arrangements for Florence to join him.

Deeply affected by his father's death, Howard confessed that it "made me do funny things for a long time." He swore that one day he would regain control of National American. "I am a worshipper of my father," he told a reporter. "He used to tell me the world's your oyster. Nothing's impossible to you." Witnessing his father's betrayal led him to "the crazy idea that anything I got into, I was going to control.... Having seen my father's dreams all shot to pieces because he was so trusting, I decided that the worst thing in the world was partners, and that being liquid was the best.

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