Congratulations to Raymond Vickers, who received the Silver award in the Independent Publishers Book Awards (Finance/Investment/Economics category) for his book, Panic in the Loop: Chicago’s Banking Crisis of 1932.

Learn more about this award winning book here.

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The real estate market decline and the subprime mortgage meltdown have claimed victims big and small, from the mammoth Citigroup and Bradenton’s Coast Bank to families’ equity in their homes.

It all has a familiar ring to a Tallahassee lawyer and historian named Raymond Vickers.

Vickers studied the Florida land boom and bust of the 1920s, and came up with a different story from the one told for decades by historians.

“Fraud and abuse” by banking insiders wrecked the economy then, he says, and he suspects that the same thing happened during the recent rise and
fall of real estate, as well as during the savings and loan debacle in the 1980s.

Greed is the common denominator in the standard 1920s boom histories and Vickers’ revision, but he says the problem was much deeper than that. It was a violation of trust on the part of bankers and developers that often was criminal in scope, he wrote in “Panic in Paradise” (University of Alabama Press, 1994), which Florida Southern College history professor James M. Denham hails as one of the five best books written on Florida history in the past two decades.

After analyzing previously secret bank-examination records, Vickers wrote that unscrupulous bankers created a financial climate in which the South Florida boom could flourish. Specifically, bankers were in bed with real estate developers, while bank regulators, including Florida comptroller Ernest Amos, were kept quiet with unsecured personal loans. Amos, who was later indicted, actually trumpeted the health of the banks when he knew they were in deep trouble.

“It was the reason for the real estate collapse,” said Vickers, a banking attorney who was Florida’s top appointed bank and securities regulator in the 1970s, and who earned his doctorate in history from Florida State University in 1990. “Fraud and insider abuse was the reason, and the reason for the current collapse is fraud and insider abuse. I don’t think anyone has focused on that.”

In the historical community, Vickers has his supporters and detractors. One of the detractors, University of Dayton economics historian Larry Schweikart, says Vickers’ premise is wrong because business ethics were different in the 1920s than they are today, and that it was common for businessmen to start banks to fund their ventures. “Insider deals were the lifeblood of banks well into the post-depression era, when it was then considered to be a bad thing,” Schweikart said.

But in claiming that the bankers “looted” the banks for personal gain, Vickers scoffs at Schweikart’s argument. “Thou shalt not steal,” he reminds, is not a new concept.

What history books say

Maybe you’ve read about the 1920s Florida boom, in the many picture books by popular Sarasota author Jeff LaHurd, or the 1984 classic “Fifty Feet in Paradise,” by David Nolan. Vickers wouldn’t dispute much of their accounts.

Yes, Florida real estate soared in value after World War I as Americans became wealthier and more mobile than ever, and marketers and advertisers became more adept at selling slices of “paradise.” “It’s June in Miami!” proclaimed the billboard that Miami Beach developer Carl Fisher hung in New York’s Times Square in the winter of 1920.

In the profit-mad America of the Roaring Twenties, millions came to explore and invest. Hundreds of thousands stayed, as the boom, which started in Dade County, spread up both coasts and even caused the creation of new subdivisions in the state’s interior.

“Florida became Florida in the 1920s,” said Gary Mormino, a professor of Florida studies at the University of South Florida’s St. Petersburg campus. “That is, the Florida that we recognize today and despise or love, the fast-paced Florida, the romantic, exotic Florida, symbolized by the tempo of Miami Beach and the decadence of Palm Beach and the architectural wonders of Sarasota — that’s all a ’20s phenomenon.”

Easy credit and stories of fast profits by everyday people brought an influx of investors and speculators to Florida. They traded binders (documents that reserved for 30 days a piece of property for a small deposit and were easily resold) and deeds for building lots, many of them underwater or undeveloped, it turned out. But it was a house of cards, a “classic speculative bubble,” leveled by deadly hurricanes in 1926 and ’28, negative publicity back North, and a transportation crisis in the winter of 1925-26 that kept building materials out of the state when they were needed the most.

“It was the parable of the eternal sucker … who makes all booms and is always caught in them,” wrote Burton Rascoe in the foreword to the 1932 book “Boom in Florida” — a remarkably candid account because its Miami-based author, T.H. Weigall, lived through it.

But most histories of the boom were written before “Panic in Paradise.” These texts don’t mention banking and banks, except as victims of the real estate crash, because Florida bank records were sealed by Amos after his indictment, and kept secret until Vickers fought to get access to them. Now, records of solvent banks are kept secret in perpetuity, said Vickers, who has represented more than a hundred banks in his legal career, while the records of banks that fail are locked away for 50 years. Vickers had a hard time getting access, six decades after the fact, to the records of Florida banks that failed in ’26 (he succeeded by threatening to sue and marshaling support among historians and the media), and could not get Georgia’s
records at all.

Armed with the secret bank records, Vickers wrote, “Heretofore, the banking calamity (of 1926) has been blamed on the collapse of the Florida land boom. It was believed that a precipitate drop in real estate values created a regional recession that caused the unprecedented number of bank failures. Previous studies have not analyzed the cause of each bank failure, and thus bankers and their regulators have not been regarded as the primary problem. …

“Using government documents, which stayed secret for sixty-three years, I have determined why so many banks failed in Florida during the 1920s. The sad story told by these records is that insiders looted the banks they pledged to protect. They tried to get rich by wildly speculating with depositors’ money, and when their schemes failed, so did their banks.”

Vickers shows that from early in the 1920s, bankers were in control, particularly J.R. Anthony and W.D. Manley, who headed a chain of banks in Florida and Georgia; they were key figures in the wheeling and dealing. Bank officials partnered with developers, such as Coral Gables founder George Merrick. Meanwhile, bank regulators were given unsecured personal loans by the bankers in an attempt to keep them talking up the health of the economy and looking the other way when examiners’ reports showed shady dealings, Vickers wrote. And political support was plentiful. At one time, all five Miami city commissioners were bankers.

“This linkage between bankers, promoters and politics led to a reckless expansion of the economy, which inflated real estate values to irrational levels,” Vickers wrote.

Formula for deception

In a review of Vickers’ book for the Business Library Review, Auburn University Prof. David Whitten, now retired, summed up the scheme:

“The developer and his partners secured a charter for a state (and sometimes federal) bank. Obstacles to chartering were overcome by bringing powerful politicians into the company. Once established, the developers drew off depositors’ money in unsecured personal loans for themselves, supporting politicians, and bank regulators. These loans were rarely repaid.

“Bank officials raised funds for the development project by selling their bank shares in the project, then repurchasing the shares at original price if the market value had increased, but otherwise leaving the shares with the institution. It was not unusual to leave the bank with paper that represented nothing, for the funds were invested in an ancillary company that either had no assets or had liabilities vastly outweighing its assets.

“When a bank or development company faced receivership, the bandit operators diverted anything of value to another bank or company they owned, leaving in its place worthless paper. Bank examiners reported insolvent banks to their superiors (regulators) without effect. Insolvent banks operated for years, financial time bombs waiting to detonate.”

At the middle of much of it, Vickers wrote, was Addison Mizner, who created the Mediterranean Revival style of architecture that is still popular in Sarasota and elsewhere in the state, but also floated his Boca Raton dream development on a sea of “worthless paper.” When he went bankrupt, his creditors received a tenth of a cent on the dollar (an engineering firm that was owed $30,764 walked out of court with $30.76).

Mizner’s personal culpability is refuted in the biography “Boca Rococo,” written by Caroline Seebohm and published in 2001. She says Mizner may have known about wrongdoings, but he was the artist and creative spirit of the Mizner Development Corp. and couldn’t tell one side of a ledger from the other. But could the same be said of his swindling brother Wilson? (See sidebar.)

Sarasota’s banks

Vickers’ book, which apparently had a limited impact among historians when it came out, is subtitled “Florida’s Banking Crash of 1926.” It is no secret that many banks crashed as the real estate boom went bust, but it was believed that they failed because of it. In fact, they were the cause, wrote Vickers.

Although Vickers said he did not see a single case of bank failure that was not linked to fraud and abuse by the bankers, it cannot be said that all banks were crooked in Florida. And, not all of them failed in 1926. Three of Sarasota’s banks didn’t fail until 1928, with depositors recovering from 18 to 42 cents on the dollar. In 1933, the Ringling Bank and Trust Co. went into voluntary liquidation, with Edith Ringling, widow of the founder, Charles Ringling, nobly reimbursing depositors in full ($250,000) out of her own funds.

But such virtue was rare among the bankers Vickers studied.

Next week: Raymond Vickers calls for an end to bank secrecy.

You can’t change history. But can you change the story?

That is what I have learned in researching a three-part series that continues tomorrow in the Sunday Real Estate section. “Florida Boom and Bust” focuses on the Florida land boom/bust in the 1920s, and draws a parallel to the current property market woes.

Using previously secret bank examination reports as his primary sources, attorney-historian-author Raymond Vickers wrote in his 1994 book “Panic in Paradise” that “fraud and insider abuse” on the part of bankers, developers and state banking regulators created a climate in which the boom could flourish. The bankers and developers siphoned off depositors’ funds for grandiose development schemes and their own personal use, he wrote, while manic speculators flocked to the state to feed at the trough of greed. When the market collapsed and banks started to fail in the summer of 1926, depositors were told by the state’s chief banking regulator at the time, Ernest Amos, that their money was safe. But Amos accepted unsecured personal loans from the bankers.

Who knew? Textbooks contain the time-honored story of Roaring ’20s speculation and profit-seeking that was derailed by shipping problems, hurricanes and the evaporation of buyer demand.

Historians I’ve interviewed taught me that this is common. David Whitten, a retired Auburn University history professor, offered some examples of historical myths with staying power.

“If you asked a fifth-grader who invented the sewing machine,” wrote Whitten in an e-mail, “he would, machine-like, say, ‘Elias Howe!’ I would say, Isaac Singer, because I know that Howe’s machine was an unreliable device, but Singer’s changed the way fabrics, leather, etc. are joined. By popular standards, the fifth-grader would be correct, and I would be wrong.

“We hosted a symposium on the 200th anniversary of the cotton gin in 1993. A substantial part of the … crowd argued that Eli Whitney did not invent the cotton gin. Nevertheless, the fifth-grader would say Eli Whitney was the inventor, and I don’t think that will ever be shaken.

“Did Watt invent the steam engine? The more a person knows about the steam engine, the less likely he’s is to say it was invented by Watt. But Watt will always get the credit.”

Will those unsavory bankers and developers of the 1920s ever get their credit?

Raymond Vickers knows banks. Unlike many historians, he has practical experience in his field of expertise, earned from years as Florida’s assistant state comptroller in the mid-1970s and a career as a banking attorney who has counseled more than 100 banks and helped charter 60.

“I know where the bones are,” said Vickers.

A lot of those bones lost their flesh in the 1980s, during the savings and loan crisis. It was then that Vickers was inspired to write “Panic in Paradise” (University of Alabama Press, 1994), which placed the blame for Florida’s 1920s land boom/bust squarely at the feet of unscrupulous bankers, developers and real estate promoters, who hid behind the secrecy of bank-examination records when dozens of banks failed — and put Florida into the Great Depression years ahead of the rest of the country.

After eight years of work, the book was published, but by then the S&L crisis had eased and the real estate market was starting to come back from a falloff in the early ’90s. Perhaps those factors limited the book’s impact, or, it may have been criticism from established historians who were slow to accept the work of a revisionist — and not a career historian, to boot.

But with the exhaustively researched and footnoted book now out in paperback, Vickers hopes it gets renewed attention because of what is happening in lending and real estate today.

“Fraud and insider abuse was the reason (for the 1920s real estate bust),” he said in a recent telephone interview from his Tallahassee office, “and the reason for the current collapse is fraud and insider abuse. I don’t think anyone has focused on that.”

Vickers agrees that relaxed lending standards led to the current subprime mortgage crisis, and that, as in the 1920s, a lot of innocent bystanders are being hurt as the speculators fall and their properties go into foreclosure.

“Think of the honest people out there today who own homes, who can’t sell them because the market has collapsed,” he said. “Now, they didn’t do anything wrong. They just bought a house and paid mortgage payments on it, and maybe had two or three kids, and now it’s time to move to a new house, and they can’t move to a new house because they can’t sell the old house.

“You are having to pay for the fraud and insider abuse that occurred on Wall Street and in the rarified air of these bank board rooms.”

But that cannot be proven because of “secrecy,” Vickers said in an interview last fall. “You probably have more access to bank records at the Kremlin that you do in the United States. You will have to wait until 2057 to write the story of the real estate bust” of today.

In “Panic in Paradise,” as well as in his forthcoming book about bank failures in 1930s Chicago, “Panic in the Loop,” he takes the controversial view that bank-examination records should be open for public inspection. Instead, they are exempt from the Freedom of Information Act (see box on page 5-I). One reason often cited is that the government fears depositors would panic if they knew the true financial condition of their banks. They would “run” for the tellers’ windows to retrieve their savings — a phenomenon that was common in Florida in 1926 and ’27, and later during the Depression in the rest of the country.

A second reason: The lack of secrecy would hinder “cooperation and communication” among bank employees and examiners.

In Florida, bank-examination reports are held in secret forever except in the cases of banks that fail. Records of those banks are locked away for 50 years. Many other states restrict access to all records, and have destroyed records from the past — making the job of economic historians much more difficult.

Vickers differentiates examiners’ records with the “call reports” that financial institutions are required to file with the Federal Deposit Insurance Corp., and can be viewed online. He says call reports were “manipulated by bankers in the 1920s and 1930s, and by S&L operators in the 1980s. Indeed, the call-report information issued to the public was fraudulent in many cases involving problem banks that subsequently failed.”

In “Panic in the Loop,” he writes of the 42 Chicago banks that failed in the early 1930s: “What is clear from the available public records is that … the top officials of Chicago’s three largest banks in the Loop (the downtown business district), verified, under oath, reports of conditions that were false,
and then published them in local newspapers. Fraudulent call reports listed the nonperforming and worthless loans at their full book values, thus avoiding the appearance of devastating decreases in the banks’ capital. Hence, the depositors were deceived into leaving their savings in the custody of reckless and dishonest bankers.”

He also blamed regulators for failing to force the resignations of “rogue officials.” In an interview, Vickers said, “I’m not quite sure how anyone can defend secrecy at this point. After the savings-and-loan fiasco, we’ve had Enron and now the subprime crisis, all of which was buried in confidential bank examination reports. … Until the disclosure rules are changed, this is going to happen over and over again. It all gets back to the same thing, and that is, a handful of bankers … were more interested in their their incomes than their fiduciary responsibilities.”

Two sides of the issue

William Becker, a professor of business history at Georgetown University, presents two sides of the bank-secrecy issue.

“Let me give you the less-cynical argument” in favor of secrecy, said Becker. “You don’t want to unnerve the public about a bank, or any kind of investment, if, in fact, what the goal of regulation is, is not punitive, but corrective. What’s the point of casting doubt about most of these institutions when most of them are on the up-and-up and are doing what they are supposed to do?”

Perhaps the proper analogy is the regulator as coach rather than cop.

“If the regulator is doing his job,” said Becker, “he would help work out whatever the problems might be, then come back, like a health inspector.”

The cynical view, Becker said, is that bank secrecy is used to “cover up chicanery.” The truth “is probably somewhere in between,” he said.

“I’m with Vick on this for sure: The United States promotes transparency in financial and banking systems all over the world, and then we don’t have transparency here. The fact of the matter is, especially with FDIC insurance, most depositors are protected. A little sunlight on some of these banks might be very useful to protect the public, who might end up bailing out depositors when a bank fails.”

Banker Lynne Pierson Doti, who is also a professor at Chapman University in Orange County, Calif., and who reviewed Vickers’ book in the mid-1990s, defends bank secrecy. She also said Vickers has a point. “As a banker, I can understand (secrecy) because it allows the regulator to be more critical of us without worrying about what bankers call the ‘contagion effect’ — that if people think there’s something wrong about a bank, it scares them not only about that bank, but banks in general,” said Doti. “That’s the source of the secrecy. When they rate banks, that is legally required to be kept a secret. … I understand the theory, but if everyone got their ratings out there and no one had perfect ratings, perhaps the public could judge for themselves what the situation is.”

As for the 50-year time requirement on the records of banks that have failed, she said, “There would be no point in that secrecy.”

“You have to wonder why it takes 50 years after a bank fails to gain access to its records,” said Vickers. “There was never a threat of a bank run occurring because the bank failed.”

Sunshine is good, to a point

Taking a moderate view is Christine Jennings, who sold her Sarasota Bank in 2003 before running unsuccessfully for Congress in 2006.

“In Florida we are proud that we have sunshine laws. More transparency is always a good thing,” said Jennings in a telephone interview. “There are certainly some parts of the (examiner’s) report that could be available, but some of it could be misunderstood. … You wouldn’t want to cause alarm over something that is not serious, and then something that is serious, the public would misunderstand. When people don’t understand something, they will take it and interpret it wrongly and cause some damage.”

The question for today: Have we repeated the mistakes of the 1920s in the 2000s? Vickers suspects so, and said, “Sunlight is the only way to stop the madness.”

Next week: Sparks can fly when it comes to writing history. Online at heraldtribune.com/realestate: Read Part I of the series and hear more from Christine Jennings.

Harold Bubil interviews Raymond Vickers, author of “Panic in Paradise,” about what he found in the bank-examination reports he used as primary sources for his book on the 1926 banking crash. (In Florida, such reports are kept secret forever unless a bank fails, in which case they may be made public after 50 years.)

Q: What is on a bank-examination report?

A: The vast majority of loans don’t appear on bank-examination reports. It’s the problem loans. For instance, loans that are in default end up in the banking-examination reports. You would see the name of the borrower; there would be a discussion of why the examiner considers the loan a bad loan. There would be a record of nonpayment; there would be a discussion of the collateral. It’s much different than the statistical information you might find in a call report, which is skewed many times because there could (be) bad loans (listed) at full value in call reports.

The bank-examination report is a narrative, a description of the business; why the examiner believes the loan is a bad loan. All of this information appears publicly once the bank takes action against the borrower to foreclose on the property, whether it’s real estate or any other kind of asset that is pledged on a business loan. If the bank files a lawsuit to collect money from a business, that is public. If the bank forecloses on a house, that is public. If a business files bankruptcy, that is public.

The problem is that all of those things are after the fact. We knew a lot about Enron after the fact because of the bankruptcy filings. That’s way too little and way too late.

Q: Let me guess: Back in the 1920s, the Palm Beach National Bank was not about to foreclose on developer-architect Addison Mizner or go after Florida Comptroller Ernest Amos for not paying back his unsecured loans.

A: (Laughing) Amos’ disguised bribe in the form of a loan — they would be blowing the whistle on themselves. Amos would say, “You told me I didn’t have to pay it back.” (And he didn’t.)

Because all of this is confidential, then the bank many times will not file to collect the loan. A lot of these loans are written off in secret; there was a lot of favoritism on the writeoffs. The board of directors, for instance, could walk out of there scot-free, but on the other hand, the borrower who is sitting in a small house that is foreclosed on, they are thrown out into the street. The person whose house represents their life savings, they are treated far different than an insider, a bank officer or a bank director.

Q: That money went somewhere. So once they write off that loan, who pays for it?

A: If the bank fails, and back in the ’20s and early ’30s, before the FDIC was created, it would be the depositors left holding the bag. Of course, the stockholders, too, if the bank fails. The stockholders represent today a small percentage of bank assets — 10 percent, tops. If it’s a $100 million bank, the other $90 million would be depositors’ money.

There’s nothing that honest bankers need to fear about disclosing their problem loans. First of all, if a business goes bankrupt, then everybody is going to read about it in the paper anyway. It’s a public filing. That whole argument about depositors panicking because they had information about problem loans at the bank went away in the 1930s when the FDIC was created. Now, there are quiet runs, when you have people that had more than $100,000 in a bank, and you can have people pulling their money out in that situation, but normally at that level, people know to keep their deposits below $100,000 (splitting the money up among a number of accounts or banks).

We didn’t see lines of depositors standing in line in front of savings and loans during the S&L crisis. People didn’t run to get their money because they knew it was insured by the federal government. That’s another reason to make the reports public, because banking enjoys a subsidy from the federal government. So taxpayers are subsidizing banks; the examination reports are prepared by public employees (bank examiners) — it’s just a very antiquated system, and after the savings and loan fiasco, Enron, and now the subprime loans, I think the depositors and taxpayers have paid enough and are entitled to know which banks are good banks and which banks are bad banks.

Not all banks are bad banks; not all banks failed, even during the Great Depression. But the good banks, the prudent bankers, they would benefit the most by this. You might see a shift of deposits to prudent banks, and that’s a good thing. It would end up costing the government less, and it rewards prudent behavior. And it penalizes people who would engage in insider abuse and people who would treat a bank as if it were their own piggy bank, or like they are in Vegas at the roulette table. It would have a chilling effect on bankers who become involved in mismanagement, irresponsibility, and, of course, corruption.

Q: In the 1920s, were the reports handwritten or typewritten?

A: They were typewritten. People act like in the 1920s, human beings acted differently than they act today, that they speak differently than they speak today. Or their ethics are somehow different than today. People acted the same way in the 1920s and ’30s as they act today. Nothing has changed. That’s the fallacy. People think that the ethical standards have changed.

That’s a good point about the typewriter. There are written comments on these reports, and sometimes the written comments in the margins are more important than the typed information, because you could get a sense of what the examiner or his supervisor felt was important.

It’s a treasure trove of information. The problem of writing economic history without using examination reports is that you don’t get a clear understanding by reading the newspaper what was going on inside the banks, and you don’t understand the local economy, or even the national economy. They are very detailed about the problems. They’ll say things like “too much concentration,” and then they will list all the loans
and all the collateral of the classified loans.

But these are just bad loans. The person that pays his loans back on time, they don’t appear in the examination reports. It’s only the bad loans that appear.

Q: Could the public be trusted to understand these complex reports?

A: Thomas Jefferson wrote of informed consent. The concept of American democracy is informed consent. And you cannot have informed consent when you have a system of pervasive secrecy. If we trust our citizens with the power to vote, then we have to trust them with the power of having the information necessary to make that decision, especially in an industry that is subsidized by taxpayer money.

Banks are quasi-public institutions. They are fiduciary institutions. But now they are even more so because of deposit insurance and the bailouts that take place when we have a problem. We are talking about bailing out the banking industry because of the subprime fiasco. It was something like $300 billion to $500 billion during the S&L crisis (in the late 1980s). We have no idea of what we are talking about now. It’s much bigger than that. This could cost a trillion dollars.

Q: But who remembers the S&L crisis? That $500 billion just got soaked up by the economy and is sloshing around in the national debt. It doesn’t really hit people every day unless they invested in a bad thrift and lost everything.

A: That’s right. But today it’s different because of the economy, the real estate market. But the idea that citizens today are not smart enough or rational enough to deal with information about bad loans is to say that Thomas Jefferson and the Declaration of Independence was wrong, that we don’t believe in informed consent. And then you get into the manipulations that you would find in the Soviet Union. The people who withdrew their money (in the 1920s) weren’t acting imprudently.

It’s just time to open up these records. It’s been time for a long time.

LAST OF THREE PARTS
Historian and banking attorney Raymond “Vic” Vickers expected that his book exposing fraud and insider abuse by Florida bankers in the 1920s would garner criticism.

He didn’t have to wait long. A year after “Panic in Paradise” was published in 1994, two college professors wrote “The Florida Land Boom,” which refuted many of Vickers’ assertions. Some of the reviews in historical journals also were critical.

Vickers’ book, which calls for ending the secrecy of bank-examination records, placed the blame for the 1926 bank panics, which accompanied the crash of the real estate market, not on skittish depositors who wanted to clean out their bank accounts and stuff their cash into their mattresses, but on fraud and insider abuse by bankers, developers and real estate promoters. They often were one and the same, Vickers’ research showed, or sat on each other’s boards of directors. Loans to these insiders often exceeded the banks’ reserves and frequently were not paid back.

He came to these conclusions after spending years studying bank records that had been held secret by the state for 63 years. (His footnotes and bibliography also include hundreds of other published sources.) In Florida, the examination reports of banks are held in secret forever, except in the case of banks that fail, when they are public record after 50 years — thanks to Vickers’ dogged campaign to make them so.

The central argument of his book is that the nation’s bank regulatory system needs a “drastic overhaul with disclosure, not secrecy, as its basis.” He was labeled by one historian as “the new Brandeis,” a reference to Louis Brandeis, who called for the end of bank secrecy after the Panic of 1907 and later became a U.S. Supreme Court justice.

But Vickers’ assertions were refuted by the 1995 book “The Florida Land Boom,” by former University of Florida economics professor William Frazer and former Daytona Beach Community College history professor John Guthrie Jr. (Both men are deceased.)

Frazer and Guthrie, in their book, said the 1920s boom had nothing to do with bank fraud, but instead was caused by Florida’s 1923 repeal of its state income and inheritance taxes, tourism, climate, and a flood of money from rumrunning during Prohibition.

“Raymond B. Vickers erred in his effort to blame bank fraud, insider abuse, greed, bank secrecy and inadequate bank supervision for bringing an end to the boom,” they wrote. “Indeed, it is primarily after the peak of the boom that cases may be made for fraud and inadequate supervision. …

“Vickers failed to distinguish causation from symptoms,” they wrote. “He got it all wrong,” Frazer and Guthrie concluded. “We see no universal conspiracy of evil men … out to loot society.”

Guthrie also was critical of Vickers’ book in a review published by the Florida Historical Quarterly. But Vickers got the last word. Given the opportunity to review the Frazer-Guthrie book for that same quarterly, he blasted their work as an unsubstantiated effort to promote their own banking theories. All they had to do, he wrote, is check the bank records that Vickers fought hard to make public.

“It’s an attack piece,” said Vickers, 58, who has both a law degree and a doctorate in economic history from Florida State University. “That’s the book that (said) the rumrunners quit running as much between the Bahamas and Florida, and that’s why the banks failed. Of course, they had no documentation for anything they said — except other books and articles they had written. I love when historians and economists quote themselves to back up what they are saying.”

Businessmen as bankers

Another critic of “Panic in Paradise” was Larry Schweikart, professor of history at the University of Dayton and an expert in U.S. banking history. He took the Vickers book to task on several points in the Business History Review (see sidebar).

In a recent telephone interview, Schweikart said Vickers was judging 1920s banking with a 1990s perspective. Insider deals, Schweikart said, were common after World War I, before falling out of favor after the Great Depression. (But Vickers scoffs at the notion that personal and business ethics have improved since the 1920s.)

Schweikart also said it was common for businessmen to become bankers. “The only reason anyone started a bank was to fund their business activities, because most of the bankers started in another business — textiles, cotton, railroads. Many times the bank would have the name of the
other business.”

He also said the bank regulators of the 1920s were struggling to find their way.

“Bank regulation was fairly new,” Schweikart said. “Most states had only created an office of banking review between 1900 and 1915, most of them were one or two people. Occasionally you had four or five. In a state with hundreds of banks, sometimes they would only get around once a year. They had only a few hours to go over a bank’s books and make a decision on what had happened. If there was a bank they thought was in trouble, but they couldn’t validate it in any other way, they would just say, ‘It’s probably insider lending.’ It was an easy catch-all.

“I’m not saying that insider lending did not occur or that there was no fraud or speculation; I’m just saying that can’t be, de facto, taken as the reason why most of these banks failed.”

In support of Vickers

David Whitten takes a different view. Now retired, he was a history professor at Auburn University and during his career edited the Business Library Review.

“I thought it (“Panic in Paradise”) was well written and well researched,” he said in an e-mail interview. Acknowledging that the book has not changed the standard version of the boom story, Whitten said, “Vic’s thesis was no surprise to me or to the many economic historians because we knew bankers played a role in that collapse, but we lacked the supporting evidence that Vic provided. I had always considered the collapse of the Florida market and the collapse of many banks intertwined events.”

More support comes from James M. Denham, Ph.D., director of the Center for Florida History at Florida Southern College in Lakeland.

The 1920s boom “was all fueled by the banking shenanigans, which fueled the hysterical investments,” said Denham. “There was all this cash, people were falling all over each other trying to loan each other money. It was a Ponzi scheme — (Charles) Ponzi was actually mixed up in Florida.”

Vickers, said Denham, tells “a story that has never been told before … using sources that nobody had even begun to look at before, and even now. Historians typically do not do a lot with economics and are not trained … in those difficult-to-understand subjects. But Vic had a great background because he was a banking attorney. Legal training, banking background, doctorate in history: He brought to that project skills that very few people possess.

“It’s a book that any politician and public policy makers should read. It’s a seminal event. Vic tells it in a way that is just breathtaking. It does everything that a good historical work should do — it’s local, state, and also links the national trends to the specific activities here in the state of Florida.”

Being a historian is not a profession for the weak of heart.

After you’ve gotten a doctoral degree (or are killing yourself trying to get one), you bury yourself in libraries, studying old books word by word and driving yourself dizzy reading newspapers on microfilm. You scour the Internet, visit historical sites, and interview elderly eyewitnesses or the grandchildren of eyewitnesses, for years on end.

After more years of writing and rewriting, your book gets published.

Then your peers at rival institutions get to take shots at it in the scholarly journals, perhaps destroying your reputation — which, basically, is all you have, because you probably are not getting rich writing history books on fairly obscure events. And, if you defend yourself in a letter to the journal’s editor pointing out the flaws of the reviewer/critic, you look like “a spoiled child,” in the words of one historian.

Or, you present your findings at a convention of historians, and the moderator shoots holes in your thesis.

This is what historian Raymond “Vic” Vickers endured after he wrote “Panic in Paradise,” about bank failures in 1920s Florida, in 1994. And he can expect more of the same when his next book, “Panic in the Loop,” about banking in 1930s Chicago, comes out after 13 years of work. It is now sitting on a publisher’s desk.

Reviews to follow. And they are sure to show once again that although history is constantly undergoing revision, revising it is a monumental challenge fraught with risk and rejection.

BANK FRAUD AND THE BOOM

“Panic in Paradise” puts the story of the 1920s Florida land boom, and the catastrophic bust that followed, within a new frame, basically contending that fraud and insider abuse by key bankers and developers in South Florida created a climate in which the real estate bubble could occur. Many other accounts, though, do not mention bank fraud in the debacle.

One reason is that most of the histories on library shelves were written before the publication of banking attorney/historian Vickers’ book, which is based on bank-examination records that previously were held secret. Another is that history is slow to change.

“It speaks to the paucity of studies on Florida,” said Gary Mormino, Ph.D., professor of Florida Studies at the University of South Florida’s St. Petersburg campus. “To be a Florida historian is sometimes to be very lonely.

“It’s not that people are ignoring Vickers or don’t accept his argument, it is that there’s not that much (writing) going on.”

At Florida Southern College, in Lakeland, the director of the Center for Florida Studies points out several reasons why Vickers’ story is not widely accepted.

“One is that it was published by the University of Alabama Press, which does not market very well,” said Dr. James Denham in an interview. “At the time Vic’s book came out, University Press of Florida was on the skids and let a lot of good books go.

“Plus, it’s a complicated story. Banking doesn’t really turn people on too much.”

Insularity and conservatism also play a role, said Denham, noting that Vickers was a career attorney before earning his Ph.D. in history in an effort to become more credible as an author.

“The so-called ‘head monkeys’ in history, the established professors at various Florida institutions, not only do they not like Florida history very much, but also they are very suspicious … of someone like Vic. That’s just the nature of the profession.”

Both Vickers and Denham were mentored by William Rogers at Florida State University.

“Gradually, even in general textbooks, what had been accepted as gospel is undergoing a revision, and that takes time,” said Rogers, professor of Southern History emeritus at FSU. “Vic’s interpretation … was revolutionary. When the book came out in 1994, it really set them all back.”

Vickers’ book is full of jaw-dropping details about how South Florida retailer-turned-banker J.R. Anthony and Georgian W.D. Manley developed a corrupt chain of banks across the two states that created a financial environment in which real estate could boom. They routinely bought the favor of Florida’s banking regulators with unsecured personal loans that often weren’t paid back; “excessive” personal loans also
were taken out by them and their business associates.

After the boom went bust and the indictments came, Manley later claimed insanity as a defense in court (Vickers calls him “the Mad Banker”); his partner, James R. Smith, killed himself with a shotgun as he sat at his desk, which was covered with checks drawn on an account at a failed bank.

“It is a major contribution Vic made,” said Rogers. “It caused a new interpretation of the panic. It turns out the bankers are the real villains … and they got off unscathed. The records had been closed,” by Florida Comptroller Ernest Amos, whom, Vickers reports, was heavily influenced through unsecured loans made by the bankers.

Rogers reviewed Vickers’ doctoral dissertation at Florida State and says Vickers is a good friend.

“I think he (Vickers) was the only one who could have written this book, because he himself was a banker,” Rogers said. “He forced the records open. By doing that, he got into them, and only he could understand them … like a banker would.” (Vickers has been a director at a Miami bank.)

“Panic in Paradise” said Rogers, “set off a huge controversy, and the reviewers of his book, some of them played the usual line that it was all wrong … and they went to great efforts to defend the bankers. But the bankers were responsible. That’s a massive shift in interpreting the 1920s in Florida.”

THE LEADING CRITIC

One of those reviewers was Larry Schweikart, professor of history at the University of Dayton. Writing for the Business History Review, Schweikart was blunt.

As for Vickers’ assertions regarding insider abuse and the looting of banks by bankers and developers while regulators kept quiet, Schweikart wrote, “At best, this is a weak interpretation of the documents, and at worst it is conspiracy theory run wild.”

The Dayton professor wrote that “Panic in Paradise” has two major flaws:

“First, the term ‘insider abuse’ or ‘insider lending’ was common in virtually all examiners’ reports because the examiners lacked the time, energy and sophistication to figure out what really caused each bank to fail,” wrote Schweikart. “Vickers forgets that the very reason businessmen started banks was to use depositors’ funds for their own projects. … Depositors clearly endorsed this activity and willingly put their funds in such banks. …

“An examiner’s assertion that loans were bad does not mean that the banker ‘looted’ the bank by making the loan.”

Schweikart wrote that the second major problem “is the recurring view that, if depositors knew about weaknesses earlier, they would not have raced for their deposits in a panic. Does logic not suggest that as soon as depositors get word of a weakness in a bank, they will panic? Thus, Vickers’ recommendations that weaknesses be made public sooner would lead to panics earlier in a bank’s life, not later.”

In an interview, Vickers fired back. “This is coming from a guy who hasn’t looked at the documents,” said Vickers. “Look at my footnotes and you can see I’ve looked at these bank-examination reports, which is a lot more than I can say for him.”

The reports showed that, in many cases, the bad loans were made to bank insiders, developer-bankers and banking regulators. Vickers called the latter “bribes disguised as loans.”

As for depositors endorsing the activity of banker-businessmen: “Good luck on that. How did they do that? They didn’t endorse it. They withdrew their money once they caught wind of something wrong at the bank.”

Something was wrong at the bank, in this case the Palm Beach National Bank, because something was wrong with Mizner Development Corp., which, Vickers wrote, controlled the bank and ran it virtually as a subsidiary.

Schweikart also wrote, “Does Vickers really think that these bankers had a short-term view in which they preferred a few profits today in place of much greater profits tomorrow?”

To that question, Vickers said, “Yes — that was an easy one. It was a get-rich-quick scheme. It was one of the biggest booms in the history of the world, and the promoters — there’s always real estate connected to all of this — what they were doing is borrowing as much money as they could from the bank they had formed, the ones that failed, and they were buying real estate that was rapidly increasing in value.” That is, until investors stopped buying and it began rapidly decreasing in value.

“But they were, in fact, looting — that is the word, looting — the banks that they controlled, and they were using those banks as their own piggy banks. There was absolutely no concern about fiduciary obligations to depositors. They were just trying to get rich as fast as they could. And it just became a feeding frenzy. That was what pumped up the boom, and that is what made the boom collapse.”

CONFERENCE CONTROVERSY

Oh, but there is more to this war of words. In May 1995, Vickers presented a paper on the Florida banking crash before the Economic & Business Historical Society. The moderator was … Larry Schweikart, who the previous year had co-written a history of the California Bankers Association that was funded by the bankers. As Vickers tells it, Schweikart went on the offensive: “He was attacking me.”

In the audience that day was Dr. David Whitten, professor of history, now retired, at Auburn University. “The exchange between Vic Vickers and Larry Schweikart was emotionally charged, but only on Larry’s part,” said Whitten in an e-mail interview. “Vic is a searcher for truth and he will fight and claw his way to it, if he must. … He (Schweikart) attacked Vic at the EBHS meeting because Vic put the blame for the
Florida real estate debacle on the bankers and not the public.”

In a recent telephone interview, Schweikart had a different recollection of that day.

“Very seldom do I get emotional over land and banking deals. I can’t imagine it was contentious, like I’ve seen at some meetings,” he said. “But I could be wrong — if he has a different recollection, go with his version.

“I can never remember a single session of the Economic & Business Historical Society being enough to keep you awake, let alone fight over. To some people, criticism is attacking. But I thought as a moderator I had to say a few things negative as well as positive. That’s what moderators do.”

CIVIL DISCOURSE

Denham at Florida Southern says controversial issues often come up at conferences of historians, when papers are presented and discussed.

“If the discussions can stay civil … we move the knowledge forward,” he said.

Can it become uncivil? “Oh, gosh, yes, are you kidding? People’s credibility is at stake, their career is at stake, their honor is at stake, their promotions and stature in the profession are at stake … which is to say not much is at stake (in the view) of the American people,” said Denham.

“It’s more personal that it is anything else. And a lot of this is essential to the historical craft. And that is, what interpretation do you make out of primary sources. We always try to shoot for objectivity.”

Denham uses the example of two historians analyzing the same material: “If we both get the same stack of stuff and both pore over it, we ought to basically come to the same conclusions, theoretically. But she has her perspective on things, and I have my perspective on things, and she and I would write different books. On the other hand, it seems as though we should come to the same basic thesis.

“People have to understand their own biases.”

For his part, Vickers says historians have to be strong enough to take the heat.

“I was astonished by reading Schweikart’s comments, but the one thing about going through this process is you do develop a pretty thick hide. Criticism is fine. I am delighted by it. If you work by yourself for years writing a book, you are delighted that anyone would read it outside your family members — you’re not quite sure they read it,” he said.

Whitten, the retired Auburn professor, agrees that Vickers’ book has not changed the standard history of the boom.

“It is nearly impossible to shake out a commonly accepted notion” for the boom and bust, he writes. “I don’t think most who stay with the standard story regard it with the passion I saw in Larry (Schweikart). They are comfortable with the old story and they have not, in most cases, even heard about Vickers’ revision.

“The more into the history the observer is, the less likely he is to accept the standard approach, anyway.”

Florida’s real estate boom, by any measure one of the biggest speculative investment bubbles in history, peaked in October 1925, and banks started failing in the summer of 1926. The bubble burst because of:

Bank fraud and insider abuse, aggravated by unsecured personal loans made to bank regulators, including state Comptroller Ernest Amos, who misled the public about the health of Florida’s banks, according to historian Raymond Vickers.

National hostility against the “excesses” of Florida. This was orchestrated by northern bankers who were tired of seeing their deposits flow to Florida banks. To counteract bad publicity in the northern states, Gov. Martin and several developers held a press conference in New York City in early 1926 to tell “the truth about Florida.” The press saw this as a sign that the boom was over.

Bad loans.

The public defection of Sen. T. Coleman du Pont from Mizner Development Corp.’s board, when he realized the company’s marketing department was making guarantees to buyers that could not be kept. One advertisement for Addison Mizner’s dream development, Boca Raton, promised grandeur and said: “Attach this advertisement to your contract for deed. It becomes a part thereof.” Fearing personal liability, du Pont quit, and within a week, several other board members followed. This put Boca in a coma and the boom on life support.

Prices that soared beyond anyone’s ability to pay. “We just ran out of suckers,” said one developer.

A rail strike, in October 1925, which led to a rail embargo that kept needed building supplies out of the state when demand was the highest.

The January 1926 capsizing of the Prinz Valdemar, a four-masted ship that was to be used as a floating hotel, in the mouth of Miami’s harbor. That blocked the import of building materials by ship for weeks.

Bad publicity following a hurricane in September 1926 that killed 400 people and left 50,000 homeless in Dade County.

Excessive optimism was replaced by excessive pessimism.

To be a real estate developer in the 1920s was to be a dreamer and a financial daredevil. Simply the appearance of success made you a celebrity, a hero at a time when business was the new religion. But just as likely, your dreams ended in bankruptcy.

Addison Mizner was doubly courageous. He was an architect, of sorts, who dreamed of developing the perfect city, Boca Raton. And yes, he wound up bankrupt. When he faintly smiled for a photograph at the February 1926 gala opening of his Cloister Inn in Boca Raton, the boom was going bust, and he knew it.

But in the course of his brief decade as Florida’s architect to the social elite, his “resort architecture” changed the way Florida looked. And his influence is still felt, from Palm Beach’s exclusive Worth Avenue shopping district to the new subdivisions of Naples and Sarasota.

He perfected the Mediterranean revival style that was interpreted so well by transplanted Sarasota architects Dwight James Baum and Thomas Reed Martin, as well as Mizner’s Palm Beach rivals, Maurice Fatio and Marion Sims Wyeth.

But behind the pretty facades, the towers, the arches, the pastel stucco, the money side of the Mizner Development Corp. was pretty messy. Addison Mizner, the more artistic of the two Mizner brothers who made their money by playing up to the rich, was at the heart of the bank fraud, interlocking directorates and insider abuse that fueled the 1920s Florida boom, and then blew it up, wrote Raymond Vickers in his 1994 book “Panic in Paradise.”

University of South Florida history professor Gary Mormino offered that the story of Mizner and the 1920s Florida boom/bust would “make a great movie.”

“What a life! Mizner … they don’t make them like that anymore,” said Mormino, head of USF’s Florida Studies program. Referring to Mizner, Coral Gables’ George Merrick and others as developers “almost cheapens the name, if that’s possible these days.”

Indeed, the story, as Vickers tells in it his book, is rife with at least three of the seven deadly sins, greed being No. 1, closely followed by envy and pride. And, one of the bankers kills himself when his bank fails.

The book focuses on the boom in Miami, Tampa and Palm Beach County, but it applies to other Florida boom-time communities, including Sarasota, where the banks didn’t fail until 1928. Doesn’t matter, said Vickers: In almost every case he studied, banks failed because of fraud and insider abuse.

Casting call

If a “Panic in Paradise” movie were to be made, Addison Mizner, all 300 pounds of him, would have a starring role fit for Brian Dennehy. (Alec Baldwin would make an appropriately sleazy Ernest Amos, the Florida comptroller whose complicity was bought through unsecured loans from bankers); Donald Trump could cameo as D.P. “Doc” Davis, developer of Tampa’s Davis Islands, even though Davis was much smaller than Trump, but had an equally keen eye for beautiful women and was often hailed as a real estate genius. As noted in “Fifty Feet in Paradise,” a 1984 book by David Nolan, Davis ended up dead when, after his real estate ventures went bust, he “fell” overboard as he sailed for Europe; the ship’s captain ruled it a suicide. Tom Hanks could play George Merrick, the visionary creator of Coral Gables (the “Miami Riviera”), who ended up broke and working in a post office.

But the role of Wilson Mizner, Addison’s rough but witty and charming, in a raw kind of way, brother, would only be fit for a tall, slender, sneaky-looking fellow, perhaps Jim Carrey. Imagine him uttering Wilson’s famous lines: “Be nice to people on the way up because you’ll see the same people on the way down,” or, “If you copy from one author, it’s plagiarism; if you copy from two, it’s research.”

In their younger years, the California-born brothers gallivanted across the continent, bilking Alaskan gold miners and picking up a felony conviction in the Yukon (Wilson), entering a prize fight in Australia (Addison), and marrying a rich 80-year-old widow in New York (Wilson, then 29) before being chased off by her attorneys when they were told of his shady past. Wilson was to go on to be a movie screenwriter in
Hollywood during the early talkie era, describing his time there as “a trip through a sewer in a glass-bottomed boat.”

Addison, hampered throughout his life by a leg injury he suffered as a teenager, came to Florida in 1918, prepared to die. Instead, he met a similarly morbid Paris Singer, heir to the sewing-machine fortune. Instead of dying, they started dreaming. Singer bankrolled a convalescent hospital of Mizner’s design at the west end of Worth Avenue, to serve returning World War I soldiers. But the war ended and a hospital wasn’t needed, so they converted it to the Everglades Club, still one of Florida’s most exclusive retreats.

Mizner’s career as resort architect was on. Soon, Mrs. Edward Stotesbury, wife of the Philadelphia moneyman, had hired him, and her rich friends followed. They all loved the affable Addison, and that was to come in handy a few years later when the architect was broke and dependent upon their generosity for his survival.

They were happy to provide it; such was the affection Mizner inspired from his clients.

“He was just completely outgoing and basically a really good guy,” said Donald Curl, a retired professor of history at Florida Atlantic University in Boca Raton. “One of the things he was noted for was the kindness toward the people who worked for him and the courtesy he showed them. Some of the other architects of this era were almost the reverse; they saw the other architects as their employees, and they should have nothing to do with the design other than putting it on paper. Mizner was not that way. When the bust began in Florida, he actually helped some of the young architects get established elsewhere.”

Lasting influence

Florida architects today, even modernists, hold Mizner in high esteem because his architecture has a certain scale and dignity that is often misinterpreted by the designers of today’s Med Rev mini-mansions. Mizner’s delicate sense of scale is often lost in the translation. One who understands it is Sarasota architect Thorning Little.

“Sensitivity to proportion and tuning,” said Little of Mizner’s design strength. “Some people get it — they have an ear for music. They have an eye for color. Or they have a sense for proportion. Mizner had it. He had a sense of those environments that few individuals have.

“He was a self-built, promoter-opportunist,” said Little. “He was lucky, in the right place at the right time with the right chemistry. He had the sizzle, and that sense of theatrics, to make a room like a stage.”

Perhaps Mizner’s admirers today are unaware that Mizner did not have an architecture license and couldn’t draw a blueprint. He was good at sketching, though, and had an eye for architectural details from other cultures, details he was not shy about borrowing for his own work.

But in Vickers’ book, Mizner’s architecture and his development finances are skewered as ethically bankrupt.

“Addison Mizner participated in a bank fraud conspiracy that financed his extravaganza with depositors’ money,” wrote Vickers of the Boca Raton development effort. “His partners acquired control of the Palm Beach National Bank, an affiliate of the Manley-Anthony banking system, and ran it as a criminal enterprise. Mizner looted the bank by using worthless promissory notes to procure loans.”

As for Mizner’s Med Rev architecture, it was described in “The Legendary Mizners,” written by Alva Johnston, as “Bastard-Spanish-Moorish-Romanesque-Gothic-Renaissance-Bull-Market-Damn-the-E xpense Style.” Johnston’s book was written in 1933, the same year that both Addison, 62, and Wilson, 57, died. When informed of Addison’s failing health, Wilson cabled back to Palm Beach, “STOP DYING. AM TRYING TO WRITE A COMEDY.” A few months later, the joke was on him.

In his book “Florida, A Short History,” Michael Gannon, Distinguished Service Professor of History at the University of Florida, writes that when Addison Mizner built El Mirasol, a 37-room mansion for the Stotesburys, Mizner “ad libbed the design as he went.” Gannon adds, “By the mid-twenties, Mizner had created a pink-walled, red-tiled, wrought iron-gated world of unreal luxury.”

Developers loved the Mizner style because it gave their brand-new developments an air of established, Old World elegance. It was imitated in new developments up and down the Florida peninsula, including many in Sarasota.

“It is style,” said Donald Curl, the retired Florida Atlantic historian, when asked about Addison Mizner’s impact. “As an architect, he introduced Mediterranean revival, or Spanish revival, or whatever you wanted to call it. He made it not only popular but fashionable.

“Mizner was someone who was willing to take a lot of liberties and design buildings that were good for the climate and the lifestyle of the people who were his clients,” Curl said in a telephone interview.

Poor imitations

But the flower was soon to wilt. “The problem is that it became so fashionable that every little development and group of houses that were put up by builders had to be in some type of Spanish-Mediterranean style, and they just didn’t have the qualities that Mizner’s architecture had,” Curl said. “And very quickly, it was a style for the ’20s. Not that it didn’t come back, but by the 1930s, people were saying that it was very old-fashioned, and it wasn’t because of Mizner, it was because of the other things that were done.

“When he designed the building, the building looked good. It had an aesthetic quality.”

But he also designed a massive financial charade, wrote Vickers, particularly for bankrolling Boca Raton, 26 miles south of Palm Beach, where most of Mizner’s millionaire clients wintered.

“Addison’s clients gave him the credibility to set up what Wilson called ‘a platinum sucker trap,’ in Boca Raton,” wrote Vickers. “Though little work had been completed … during the first six months of the project, the Palm Beach Post declared that Mizner had really ‘put it over!’ The newspaper could speak with authority because its publisher, Donald Herbert Conkling, was involved in the deal.”

The downfall

“Panic in Paradise” is full of detail that will make your jaw drop in disbelief. For example, real estate advertising, which swelled to such a degree that Miami’s newspapers were publishing 500-page editions at the peak of the boom in October 1925, was used to lure in new investors (suckers?) with outright lies.

This caused one of Mizner’s key backers, Sen. T. Coleman duPont, to resign as chairman of Mizner Development Corp., when a Mizner advertising man made a critical mistake by inserting a misleading phrase into an ad for Boca Raton.

“When the cost of construction created a cash shortage, Mizner crossed the line,” wrote Vickers. “The Mizner Development Corporation surpassed its other promotional gimmicks by guaranteeing that the extravagant improvements would be built: ‘Attach this advertisement to your contract for deed. It becomes a part thereof.’ …

“Mizner’s advertising strategy exposed Senator duPont and the other wealthy directors to tremendous personal liability. Recognizing his exposure and sensing an end to the boom, du Pont tried to salvage his investment and distance himself from Mizner.” (But du Pont was sued anyway.)

Many of Boca Raton’s investors then started defaulting on their $21 million in lot-purchase contracts. They immediately lost confidence in Mizner’s project and other boom-time real estate ventures, so they put their money into what they thought was a safe haven, the banks. What they didn’t know, because of the secrecy of bank regulators’ records, is that “to finance paradise, bankers became promoters and promoters
became bankers. Operating under a spell of greed, these bankers corrupted Florida’s economic and regulatory systems,” Vickers wrote.

And when the banks failed, the depositors were left with pennies on the dollar.

In Mizner’s defense

In her 2001 book, “Boca Rococo: How Addison Mizner Invented Florida’s Gold Coast” (Clarkson Potter, $35), author Caroline Seebohm acknowledges Vickers. “A vast bank fraud conspiracy across Florida and Georgia had financed the real estate extravaganza with depositors’ money,” she wrote, “and the partners of the Palm Beach National Bank, who were also on the board of the Mizner Development Corporation,
consistently and criminally embezzled customers’ money to finance the failing land deals.”

But she says Vickers’ statement that Mizner “provoked a banking crash of historic proportions” is ridiculous. “Mizner certainly went along with the bankers and their speculative borrowing and lending schemes,” wrote Seebohm, “but to accuse him personally of provoking the crash is absurd.

“Addison was interested in the money only insofar as it allowed him license to build his architectural utopia. His history of precarious solvency proves that business acumen had never been his strong point. … The fact that the activities of the Mizner Development Corporation executives and their banking confreres were illegal would have horrified him. He was drawing up blueprints, not promissory notes.”

Seebohm wrote her book after gaining access to a trove of Mizner documents that had been held in private by the family of Mizner’s secretary in the last years of his life, Madena Galloway.

“By the time I finished the book, I had such a sense of his character and personality; I just don’t think he was the kind of person who would have intentionally gone into something that he knew was fraudulent,” she said in a telephone interview from her New Jersey home.

“All of his adventures … come from a man who was basically rather sort of naive. He charged into things … little thinking about the consequences. I don’t think there was an intentional aspect of his behavior. That’s from having lived with him, so to speak, for so long.”

Still, she admires Vickers work, particularly his ability to decipher the banking records.

“That’s what makes his book such a valuable addition to the story,” she said. “Plus, I don’t know that even if I had been able to see them, I would have understood them as well as he did. I’m not the banking type. That was a very useful contribution from him.”

Lasting impact

The Mizner legacy lives on throughout Florida, with Addison’s restaurant and the upscale subdivisions Addison Reserve and Mizner Reserve on the Palm Beach map. There’s even a school named for him. But few of his impressive mansions remain: El Mirasol, for example, was torn down in 1959.

“In the 1950s, people were looking for an easier lifestyle and wanted to air-conditioned their houses,” said Curl. “They felt the Mizners were too big and took too big a staff. It was easier to tear down a house and subdivide the ocean lot into six or seven lots and make money.”

It also became more difficult to pay taxes on the large estates of the 1920s.

“Certainly it was a problem,” said Curl. “Also, there was a changing lifestyle. We talk about the barefoot era; Mizner’s houses would work going barefoot, but also they were very formal in many ways.”

So is Mizner a villain or a visionary?

Curl says visionary, and discounts Vickers’ story.

“I think he’s basically wrong,” Curl said. “Mizner was the architect, and, in fact, that’s the major problem. He didn’t get that much involved in the business aspects. Vickers wanted to make Mizner the fall guy. Vickers has a law degree, and he was going after things from that point of view.

“What today you can look at and say, ‘Oh, my, wasn’t that an abuse?’ — I’m not so sure it was seen in quite the same terms in the 1920s real estate boom. Looking for financing and willing to keep things alive and thinking you were doing it for the good of the industry and the state — there’s no question the boom was full of abuses. I would say it would be a matter of degree.”

Vickers’ trump card, he says, is that he’s the only historian to have seen the bank records, and he’s done his homework on Mizner, too.

“I traveled all the way to Dawson City following the trail of Addison and Wilson Mizner during the Klondike Gold Rush in 1898,” said Vickers. “They were up there doing the same kind of promoting as they did in Florida 25 years later. They were not there to dig for gold; they were there to try to make money in the saloons.

“When you start looking at Mizner, you are immediately confronted by his legacy and all this myth that surrounds him.

“But I don’t think that anyone other than me has looked into his financial dealings. What you find is massive fraud and insider abuse on his part. “

History has ignored Charles Dawes, vice president of the United States under President Calvin Coolidge.
Sometimes, obscurity is a kindness.

Dawes was not merely Silent Cal’s second banana. In 1925, he won the Nobel Peace Prize for helping devise a plan
to ease the burden of the reparations Germany had to pay after World War I. The reparations are widely credited
with leading to World War II, creating such hardships that the German people turned to Hitler.

The banker-politician moved on to more dubious achievements. As vice president, he figured in the collapse of the
Great Florida Land Boom and the Florida banking crash.

Most who jumped into the boom lost. A lot lost big.

But Dawes made out like a bandit, historian Raymond Vickers of Tallahassee has discovered. His new book, Panic
in Paradise, published by the University of Alabama Press, shows Dawes did it by being a bandit.

“All of America’s gold rushes, all her oil booms and all her free-land stampedes dwindled by comparison” with the
manic Florida land boom of 1925, according to writer Mark Sullivan’s account in the 1930s.

“Florida’s boom was the greatest speculative frenzy in history,” Vickers wrote. “Not since the days of the
carpetbaggers had so many opportunists and swindlers migrated south.”

The boom spawned extravagant, exotic developments like Coral Gables. The bust stymied the state’s growth for
decades, leaving the joke about “buying a little swamp land in Florida” as a permanent metaphor for fraud and
gullibility.

Economists have long been fascinated by the boom and bust. The Roaring Twenties became a monster in Florida
three years before they turned on the whole nation. In hindsight, the Florida panic set off a sort of Great Depression
in miniature, fueled by the same cycle of wild speculation on credit.

Vickers, though, is the first scholar to get at state and federal regulators’ reports on the 150 Florida and Georgia
banks that failed in 1926, tumbling like dominoes once the Florida boom burst. Congress and all 50 state
governments have made bank regulator records secret. Sixty-three years after the crash, Vickers, a lawyer and
former state bank regulator, sued to study the records for his doctoral dissertation at Florida State University.

The conventional cause-and-effect explanation — that the sudden collapse of the land boom triggered the bank
crash, leaving banks stuck with worthless land — has it backward, Vickers said.

The boom of booms couldn’t have happened without massive banking fraud and manipulation of banks, Vickers
concluded. Vice President Dawes was the highest ranking of hundreds of bankers, politicians, developers,
promoters, newspapermen and regulators that formed great speculating machines around the state.

Fraud was the No. 1 industry in Florida, Vickers reports. Nearly everyone but the soon-to-be-poor suckers who
trusted the banks with their money seemed to be involved.
Years before the boom, looting of banks yielded seed money for land acquisition, construction, promotion and graft,
he found.

Dawes tapped into the most audacious, fantastical Florida land scheme of them all — New York society architect
Addison Mizner’s 16,000-acre resort development at Boca Raton.

It was to have been a combination of Rio de Janeiro in Brazil and Venice in Italy. The Cloisters hotel, a mere trinket
in Mizner’s great scheme, was the only grandeur that actually came to be.

Dawes first entered the scheme early in a cameo role, as an affiliate of Palm Beach National Bank, which helped
finance Mizner’s folly, Vickers said. Dawes’ brother, U.S. Comptroller of the Currency Henry Dawes, chartered the
bank in 1924.

By 1926, Mizner’s big Boca Raton development company had completely annexed Palm Beach National Bank.
When the Boca project went belly up, so did the bank. The vice president and his cronies stepped into the ruins,
preventing Mizner company assets from going to Palm Beach National Bank’s defrauded depositors, Vickers
discovered. Dawes and his brothers wound up with the assets, which included some of Florida’s most valuable real
estate.

The long-ago machinations are not simply ancient history, Vickers said. What he saw in the old reports is much like
the few details of the 1980s savings-and-loan failures that became public through congressional and criminal
investigations, Vickers said.

Mizner’s vast scheme employed virtually every variation of bank fraud, Vickers discovered, but the basic premise
was simple. Besides starting a development company, a land promoter bought or opened a bank or two, usually
chartered by the state. The really connected pulled strings to get a national bank charter from the U.S. comptroller of
the currency.

Development company officers doubled as bank officers, funneling depositors’ money into development schemes,
Vickers said. They made bad loans to themselves and to buddies at other banks, who would make bad loans to
them in return. They shifted bad debts among the banks they operated.

When banks folded, state and federal regulators publicly attested to the integrity of bankers. They attributed failures
to “unforeseen economic conditions” or specifics like land losing value due to the 1926 hurricane, a ship sinking in a
Miami harbor and the Mediterranean fruit fly damaging crops. Vickers found that large, never-collected loans to the
regulators were common.

By 1926, a longtime Dawes crony was the new comptroller of the currency. Palm Beach National Bank was in
trouble, but Washington repeatedly ignored field investigators’ reports about connections between the bank and
Mizner and mounting bad loans, Vickers found.

When both companies went down, the Dawes brothers temporarily bailed out the Mizner company, taking control
just long enough to strip the assets, Vickers said. Washington intervention allowed them to remove stocks and other
securities from the bank and stash them in a company in which the Dawes brothers were stockholders.

Caption: color photo: Charles DAWES
Edition: FINAL
Section: BUSINESS
Page: 1K
Index Terms: HISTORY DAWES FRAUD
Record Number: 9501260919
Copyright (c) 1995 The Miami Herald