ustxtxb_obs_1988_09_02_50_00014-00000_000.pdf

METROPOLITAN RESEARCH CENTER, HOUSTON PUBLIC LIBRARY Houston’s Power Elite The Rise of the ‘Suite 8-F Crowd’ BY JOE FEAGIN HOUSTON’S BUSINESS ELITE has often been misperceived. For several decades members of the news media outside of Houston have focused on certain local oil entrepreneurs when considering the dominant families in the city. Two of the most famous media stars were Glen H. McCarthy and Hugh R. Cullen. Glen H. McCarthy began oil wildcatting in the 1930s and 1940s. Flush with wealth from his successful oil and gas ventures, he built the famous Shamrock Hotel in an undeveloped area several miles south of the center of Houston. At the time, the $21million hotel was one of the most opulent in the United States, with mahogany paneling, televisions in rooms, its own tailor, and a unique swimming pool. Painted in many shades of green in honor of McCarthy’s Irish heritage, the hotel was opened in 1949 with a champagne party attended by 50,000 people, including Hollywood stars. The hotel was widely viewed in the national media as the symbol of “nouveau riche” Houston. But it was Jesse Jones who was the dominant figure among the Houston business elite in the first half of the century. Perhaps the most significant business activities conducted by Jones were in the area of finance capitalism; he was active in the private banking sphere locally and in running the federal government’s banking system for more than a decade. To finance his real estate projects Jones borrowed from Houston, Dallas, New York, and Chicago banks, which gave him a vested interest in developing more accessible banking facilities. By 1905 Jesse Jones was moving into banking; in that year he became a major stockholder in the Union Bank and Trust Company. In 1908 Jones played a key role Joe Feagin is a professor of sociology at the University of Texas. This edited excerpt of his forthcoming book Free Enterprise City: Houston in Political and Economic Perspective, scheduled to be released in September, is published with the permission of Rutgers University Press. The first half of Chapter Five, “Who Runs Houston” appeared in the August 19 issue of the Observer. Major sources cited in the chapter include The Houston Business Journal; But Also Good Business by Walter L. Buenger and Joseph A. Pratt; Red Scare by Don Carleton, City Building in the New South by Harold L. Platt, and Texas Monthly. in bailing out troubled local banks and by 1915 Jones was a major owner of the National Bank of Commerce, where he became president in 1922. In 1929 the National Bank of Commerce, forerunner of the Texas Bank of Commerce, moved into Jones’s Gulf Building. From that year to 1956 Jones served as that bank’s chair of the board. Two Houston banks were in major trouble in the early 1930s, but Jones and his associates rescued them. In 1931 Jones called a group of Houston’s banking and other business leaders into his office. In two days a strategy was worked out for healthy banks to bail out those in trouble. The bailout meeting included executives such as W. L. Clayton of Anderson, Clayton and W. S. Farish and H. C. Weiss of Humble Oil. The arrangement was complicated: Humble Oil agreed to purchase an oil terminal company from Ross Sterling, which enabled Sterling to reduce his problem loans to Houston National, one of the troubled banks; Jones’s National Bank of Commerce acquired the other troubled bank. Not surprisingly, in 1932 President Herbert Hoover appointed Jones to his new an agency which for the next decade spent billions of federal dollars to bail out many banks, farms, and other businesses in bankruptcy. In 1933 Jones became RFC chair. He has been credited with restoring the health of the U.S. banking system. Jones, later Secretary of Commerce, was a key figure in the extraordinarily powerful Business Council in the 1930s and 1940s. He provides a clear example of the importance of powerful capitalistic actors at both the economic and state levels. A trio of other business leaders Herman and George Brown and Judge James A. Elkins, Sr. was second only to Jones in dominating Houston and Texas affairs in this period. Coming to Houston in 1917, Elkins was one of the founders of the law firm Vinson and Elkins; in the 1980s it was one of the nation’s largest. In 1924 Elkins founded what became Houston’s largest bank, the First City Bancorporation in the 1980s. \(This bank was the first leading Houston bank with serious financial difficulty in the late part of this decade, to the extent of being bailed out instrumental in the creation of American General Insurance Co., the South’s largest insurance firm. Elkins’s law firm and bank grew in tandem; the clients of the one were often referred to the other. Elkins’s firm, specializing in petroleum law, serviced local oil entrepreneurs who did not like eastern law firms. By the early 1950s Judge Elkins served on the boards of four affiliate banks, thus unofficially creating a Texas banking 14 SEPTEMBER 2, 1988