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Power and money in Houston This is the first in a series of investigative articles on the cozy relationships, both official and unofficial, that bind the members of Houston’s monied establishment. Ed. By Tony Castro Houston The names of James A. Elkins, Jr., Ben F. Love, and A. G. McNeese, Jr., are not household words, but they and maybe a dozen other men influence people’s lives in Houston more pervasively than any other men in the city. They are the chairmen of the three largest banks in Houston First City National, Texas Commerce Bank, and Bank of the Southwest and they also head those institutions’ bank holding companies with more than $9.6 billion in assets. Along with a few of the law firms and a handful of developers, those three banks and a strengthening web of interlocking directorships with some of the largest corporations and companies in the city and nation hold the power and wealth in Houston. They are Houston’s quintessential Establishment. In recent years, the changes which that power structure has undergone have been interpreted as a slippage of clout. Politically, maybe some of the overt power is gone. But today that very same establishment is financially stronger than it ever has been in Houston’s history, casting a lengthening shadow over the economics and politics of the city. IN THE Seventies the big banks, always the fulcrum of the monied establishment, have gotten bigger. They are now Texas bank holding companies First City Bancorporation of Texas, Texas Commerce Bancshares, and Southwest Bancshares. Those big banks and holding companies with their growing list of member banks have become financial conglomerates similar to the corporate giants that emerged during the conglomerate frenzy of the Sixties. Put simply, the growth of holding companies means more economic power. One Houston leader close to the power structure observed: “As you aggregate financial resources, you aggregate power. You can make deals with a bigger financial base that you couldn’t make with a smaller base.” This means the $20 million single Tony Castro is a reporter for The Houston Post and author of Chicano Power: The Emergence of Mexican America bank that could lend one customer a maximum of $200,000 has become part of a holding company that can lend $10 million. The concentration of economic resources of this magnitude would be a phenomenon in itself, but the situation is even more ominous when one considers the multiple functions and powers of commercial banks. Today, banks have become quasi-monopolies. Their basic product, credit, is the lifeblood of commerce. Their power to grant or withhold this commodity is a source of built-in intimidation that hangs over all areas of the economy. But credit is only part of the story. Commercial banks have also developed muscle through the accumulation of wealth in their trust departments and through the control of banks by the bank holding companies. These three sources of control credit, trust departments, and holding companies are tied to the industrial giants of the country by the interlocking directorates. The country’s 49 largest banks, which include the three super banks in Houston, have interlocking directorships with more than 6,500 companies. More than 750 of these interlocks are with 286 of the 500 largest industrial companies in the United States. The House Banking and Currency Committee has found the same pattern of interlocking relationships between each of the 49 banks and 50 largest merchandising, transportation, utility and life insurance companies. In 1973, Rep. Wright Patman, D-Tex., then chairman of the House Banking and Currency Committee, wrote: “It is absurd to think that banks ignore the holdings of their trust departments when they face major loan decisions. It is equally absurd to think that a bank will ignore the needs of its holding company subsidiaries.” THE ULTIMATE responsibility for the banks’ major loan decisions rests with the directors of those banks, who themselves provide an indication of the concentration of economic power. In Houston, First City National Bank is the largest of the banks and on its board sit representatives from the following companies: Exxon, Texas Eastern Transmission, Brown & Root, El Paso Natural Gas, The Halliburton Co., Cameron Iron Works, Entex, Armco Steel, American General Insurance Co., American National Insurance Co., Great Southern Life Insurance Co., Southwestern Pipe Co., Eastern Airlines, Southwestern Bell, Superior Oil July 4, 1975 3 Hustlers and gators Sharp businessmen ruled Houston’s destiny from the beginning. The city was founded by two real estate hustlers from New York. They chose a less than idyllic spot for their city, but they had the smarts to name it after Texas’ foremost hero, Sam Houston, and they knew how to sell, sell, sell. According to Texas \(Hastings House, copyrighted in 1940 by the WPA Texas experienced promoters than the Aliens some hesitation. There were two perennial problems, mud and mosquitoes. Indians roamed the woods; alligators infested the bayous; yellow fever was an ever-impending menace.” Nevertheless, John K. and Augustus C. Allen placed Houston on the market on Aug. 30, 1836. “The mapped town site embraced 62 blocks, and to put settlers on them the Allens turned to high-pressure publicity. Advertisements lauding Houston to the skies appeared in newspapers throughout the United States,” according to the WPA writers. “Land speculators, banking on the acumen of the Aliens, hastened to the valiant little upstart metropolis, paddling up the root-tangled bayou in flatboats. “Despite the publicity campaign and the steady immigration of pioneers, the `Town of Houston’ was still so insignificant in January, 1837, that the skipper of the stern-wheel steamboat Laura M, went three miles past the stakes marking the trail from river to town, and had to back up. It had taken him three days to navigate the 16 miles between Harrisburg and Houston, backing his way through overhanging vegetation, yet the only mishap on the journey was the loss of the ship’s cook, who went overboard at a sudden lurch.”