There’s a grim little joke they’re telling in Texas these days: “Things are pickin’ up in Houston…. Yeah, they’re pickin’ up the car…And they’re pickin’ up the house, too.” The joke, of course, is no mere one-liner, but a fun-house mirror held up to misery. Texas is in trouble. For decades it has tied its fortunes to oil, but lately the black gold has looked more like fool’s lucre. There’s simply too much cheap oil in the world. As a result the price of Texas crude has plummeted from a high of $40 a barrel in 1981 to this year’s bottom-of-the-barrel $10. Consider that with each $1 drop in the price of crude the state loses 25,000 jobs and $100 million in revenue and you begin to understand the crippling impact on the once robust Lone Star economy.
The layoffs began in the oil fields themselves: First the roughnecks were let go, then the geologists and engineers and on up the ranks, until the shiver of unemployment reached the executive level. Next the service companies began to fold—and not just the assorted oil tool companies, but motels, restaurants, groceries and clothing stores. By the end of September some 743,300 Texans were out of work. In Houston 10.5 percent of the population is currently unemployed.
The once proud—some may say “insufferable”—Texans have had to pull in their (long) horns. Where only a few years ago oil-patch workers’ bumper stickers said, “$85 [a barrel] in ’85,” the new slogan is “Chapter 11 in ’87.” Bankruptcy, once an embarrassing if not shameful condition, is now commonplace—and not just among the small fry. Major 10-gallon personalities on the Texas scene, men such as the Hunt ” brothers and Clint Murchison Jr., have filed for protection from their creditors. Former Gov. John Connally and his partner Ben Barnes are reported to have had 35 lawsuits filed against them from claimants seeking more than $40 million because of failure to meet contractual obligations and nonpayment of debts in energy and real estate ventures.
Banks have closed—20 of them in the past year across the state. Texas billionaires have been reduced to millionaires. The legislature has produced a new budget of unaccustomed austerity. But the people who have really suffered have been the little guys, the ones who bought the American dream in its Lone Star incarnation, who arrived during the mid-’70s exodus from the so-called “Frost” and “Rust” belts to the glittering “Sun Belt.” These families have been leaving the state the same way they arrived, with their possessions strapped to the roofs of their cars, or trailing behind them in overloaded U-Hauls. Some unfortunates even lose the wheels they need to make their getaway. Car repossessions are way up: Houston repo ace Jerry Wilson boasts that he’s averaging 240 vehicles a month.
And then there are the foreclosures. In Harris County alone (Houston) 31,324 families have lost their homes so far this year. Several neighborhoods in the area are virtual ghost towns. In Houston itself 73 office buildings stand completely empty, including a 31-story tower.
Predictably the malaise has streaked to the heart of this week’s gubernatorial race between incumbent Democrat Mark White and Republican former Gov. William Clements Jr. Each has blamed the other for the state’s problems, and each insists that he, and only he, can turn things around. In a stroke of what may prove to be political genius, Clements claims to have a “secret plan” to restore the economy. He’s not telling what that plan is, however, until after he’s been elected. Most of the people wonder where Clements was half a dozen years ago when the economy started its slide into despair.
Geologist Don Bollwinkle had worked at Mobil Oil in Houston for 20-plus years when he was “terminated” in 1983. Bollwinkle, who was making $62,000, hasn’t worked since, and it is obvious, though he projects a certain cheerfulness, that he has been devastated by the loss of his job. His wife, Lynn, earns about $20,000 a year as a checker at a grocery store and their three children are grown, so he has fewer money woes than some. But it’s not only the loss of income that hurts; it’s also the blow to his pride. He spends his time “washing the dishes, pushing the vacuum and trying to find a job.”
That job may well remain elusive, for Don is 52 and worries about age discrimination. “I suspect my age is a factor in finding a new job,” he concedes, “but I’m convinced there is someone out there who realizes that you can transfer your skills from one arena to another.”
Bollwinkle says he has coped with the three years of unemployment by “doing research at the library. Whenever I felt like I had to get out of the house for a while, I went and read self-improvement and career literature in the library. I have learned about myself, assessed my strengths and weaknesses.” It’s not surprising that Don, who has subjected himself to a battery of aptitude and personality tests, thinks he would be “well suited for the training field.” Which is to say, helping other people just like himself find work.
When Ken Burchardt migrated from Enid, Okla. in 1979, blue-collar Odessa was among Texas’ proudest boom towns. Situated in the heart of one of the country’s richest oil-producing regions, it was a raw and vital place, dominated by hulking refineries, manufacturing plants and clangorous shipping yards. Each year workers poured in by the thousands to feast on the oil fever, swelling the population at the peak to 120,000 (from 1970’s 90,000). Odessa could scarcely contain them.
With lending capital flowing as generously as Texas crude, Ken (who had worked for an uncle in the carpet-cleaning business before leaving Oklahoma) had no trouble borrowing startup money for his own service. At the height of the boom, his “Carpet Doctor” was drawing $18,000 a month, and his future looked as solid as Odessa’s. At 27, he owned an $82,000 house, two company vans, a pickup and a 1983 Ford Fairmont, as well as a $1,800 pool table that symbolized his comfortable prosperity.
All of it—the pool table, the microwave oven, even his wife Ellen’s diamond earrings—went on the market last month when the Burchardts joined the exodus from Odessa. In 10 months “Carpet Doctor” went under, leaving Ken $50,000 in debt. As people browsed through the piles of clothes and housewares arrayed in Burchardt’s garage, Ken, now 29, could barely hide his bitterness: “I’m selling what I can and letting the bank take the rest,” he said. “Then I’m taking off for parts unknown. I’m gonna get out of here so I can make a living. You can’t do it here anymore.”
With boom-era migrants like the Burchardts setting off to start anew elsewhere, the older residents are settling down to wait out the siege. Some in the Permian Basin cling to the dream of another black-gold rush, but it is a forlorn dream indeed. Odessa’s unemployment rate has reached 17.3 percent, the second highest in the state. Rows of honky-tonks and motels along Highway 80 are shuttered, and more than 400 bankruptcies have been filed in the district since last January. A sign on the bulletin board of a diner sums up the Texans’ hope:
“Oilfield prayer: Lord, let there be one more Boom. And don’t let us screw it up.”
Nancy Snyder, like many people in the middle-class Houston suburb of Mill’s Walk, believed that tax-paying homeowners could never fall victim to catastrophes. If one held fast to the American dream, the house would always be there. But that was before hard times drove Snyder’s neighbors away—and the market value of her four-bedroom dream home plunged from $117,000 to $79,000.
On a recent afternoon Snyder, 30, sat on her lawn, watching her three children play among the For Sale signs in front of five nearby homes. “Shoot!” she said. “A couple of months ago it was worse—almost every house in the street was for sale.”
Snyder’s neighborhood is hardly unique: There have been 31,324 fore-closures in Harris County this year, and residential real estate values are down 26 percent from 1982. The subdivision of Harvest Bend stands partially empty, and Houston homeowners with creditors at their heels are abandoning their houses. Speculators are out in force; in one suburb, a $57,000 house was knocked down for $29,500—and resold soon after for $49,000.
With “Warning: U.S. Government Property” notices blossoming throughout Mill’s Walk, Snyder knows that she is lucky. Still she and husband Jim, a business-forms salesman, have “lost almost $30,000,” as she figures it, and life no longer seems straightforward. Says Snyder, “This isn’t how things are supposed to work out.”
While the oil-market slump has wrought havoc in the lives of many Texans, risk-takers like John Cassidy are capitalizing on the economy’s collapse. An Oklahoma-based businessman who owns an equipment company called Contractors’ Exchange, Cassidy, 61, has been buying up foreclosed oil-field machinery, paying as little as 1½¢ on the dollar of its actual value. Cassidy is an optimist. “I’m either the smartest man in the world or the biggest fool,” he says, laughing. “If I had a boss, he’d fire me; if I had a banker, he’d quit me, and if I had a wife, she’d divorce me…[but] I’m betting oil will be back.”
Three or four days each week, Cassidy flies to Texas auctions in his private plane. In the last year he has brought in more than 1,000 truckloads of derricks and mud pumps, storing it all on 160 acres in Stroud, Okla. He won’t say how much the castoffs have cost him, but he allows that the initial investment is often less than the tab for trucking the heavy equipment to his stockpile.
Cassidy—who has been in the oil business since he earned a petroleum engineering degree in 1947—calls himself an “opportunist—[not] a gambler.” He thinks the current oil surplus will be depleted by 1990, and the resulting mini-crisis will make it profitable to retool the domestic industry. Says Cassidy: “We can’t continue to buy overseas. The price of oil will skyrocket in four years.”
Some analysts figure that he can make as much as $50 million from his hoard of drilling equipment. “I expect to lose a little on one-third of what I buy, break even on another third, and on the last third,” Cassidy says happily, “I’ll make a killing.”
Houstonians who pawn their valuables at Jean Davis’ Diamond Liquidators are not the usual down-on-their-luck crowd: Often ferried to the sleek shop in one of his stretch limos, they offer up Rolex watches and LeRoy Neiman paintings to make payments on their Southfork-size estates. “Most of my big-ticket customers were formerly in oil or real estate. The first thing they tell me is they’ve never been in a pawn shop before. They’re embarrassed,” says Davis.
A Corpus Christi native, Davis, 42, opened his first Houston pawn shop in 1980, when “most of my customers [were] from Michigan who brought in junk.” After the oil slump, he opened a carriage-trade business on the city’s affluent West Side and tailored it to his patron’s delicate sensibilities: Beveled mirrors and marble display stands make it seem less common, and a drive-thru window bought from a failed bank helps shield those who can’t risk being spotted in the shop. Customers in truly dire circumstances can summon Davis to their mansions.
“People had a lot of money a few years ago, and then overextended themselves—bought big homes, big cars, big jewelry. Now they can’t keep up with the life-style,” says Davis. “The busiest time is right after the first of the month, when the house notes and car notes fall due.”
Davis has witnessed a fair number of heart-tugging scenes. One former real estate man hocked his watch before taking his sick daughter to the hospital. A pregnant woman recently pawned her wedding rings to raise money for hospital admission. Another woman sold Davis her $25,000 Piaget watch.
Davis’ thriving business has netted such exotica as ivory tusks, bronze busts and a stuffed tiger, as well as Mercedeses and Ferraris. “When you start talking about people going broke, the last thing to go is the wife’s jewelry,” he observes. “One man told me, ‘If I sell that, it will also cost me a divorce.’ ”
With Houston’s downward spiral gaining momentum, Davis is on a roll: He is planning to open as many as five new pawn shops for the needy elite.
Aaron Giebel, 58, a Midland oilman, couldn’t have picked a worse time to try running his millions into a billion. By 1982 the canny Texan, an engineer-geologist and son of a laborer, had turned a $1,700 partnership stake into an oil-and-gas fortune of $100 million. And then, as Giebel freely admits, something snapped: “I stepped out of character,” he remembers. “Greed took over, and I leveraged myself assuming that the price of oil would go from $40 to $70 a barrel.”
By the time it was all over, Giebel’s net worth had plunged to a paper value of $20 million, and his petroleum company had to be reorganized under Chapter 11. Gone now are his four airplanes; so too are $2 million worth of prize cattle, part of his Western art collection and his $2.4 million home, above, that he was forced to sell at half the price.
Far from being poverty-stricken, he still has a Mercedes and his family. But he also harbors a few regrets: “I feel a lot of guilt,” he says. “I had to let a lot of real good people go, and I feel like a failure for squandering all those bucks.”
In the last year the psychic strain of the oil bust has left its mark on Giebel’s colleagues too: A friend and former partner died of a heart attack after going broke, and an acquaintance threatened suicide after losing both his money and his wife.
Giebel himself is prey to sleepless nights—and occasional fantasies about becoming a cab driver—but a characteristically Texas optimism has kept him in business. “Now,” he says, “I gotta buckle down and heal up. And I’ll be back up there someday if the creek don’t rise.”
The streets of Odessa, which used to bustle in the boom days, are empty of traffic. In an alley behind the Big Tex Furniture store, soon to go out of business, Elbert Shellenberger, 47, is picking through the garbage bins with his sister, Irene, 33. They are looking for aluminum cans, which they will salvage and sell for 23¢ a pound. A craggy-faced, leather-skinned roughneck who worked the derricks, Elbert has been out of work more than two years. “You never think this kind of thing could happen to you,” he says, sadly, reaching into a barrel. He snags the mouth of the can with a wire coat hanger and pops his catch into a large plastic bag.