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Companies that had thrived by borrowing and expanding recklessly simply collapsed. Several franchising chains took a clobbering, including International Industries' House of Pancakes, Joe Namath's Broadway Joe's and Minnie Pearl's Chicken System. So did computer software firms and rickety conglomerates. Flamboyant, fast-talking entrepreneurs toppled like dominoes. Among them was Bernard Cornfeld, the expatriate supersalesman who had built Investors Overseas Services into the largest mutual fund organization selling shares to foreigners. Denver's John King, whose King Resources sold interests in oil wells and other holes in the ground, tried to come to Cornfeld's rescue with a loan. Instead, King himself was caught in a money bind and ousted by his board. Keith Barish, 26, a financial whiz who had made Nassau's Gramco Management Ltd. the second-ranking offshore mutual fund complex, was also hit by a wave of fund redemptions that forced him to suspend some operations. Several big-thinking Texans were deflated. James Ling, whose merger magic had expanded a tiny electrical firm into a $3.75 billion conglomerate, Ling-Temco-Vought Inc., was deposed by nervous bankers. Oil Millionaire John Mecom petitioned for bankruptcy.
Ripples from the Rates. Much of the financial distress has been alleviated since the Federal Reserve Board again began expanding the money supply. Since Arthur Burns took over as chairman in February, the board has fairly consistently increased the money supply at an annual rate of 5% or 6%. Because it usually takes six to nine months for changes in money policy to turn the economy around, the effects of ease have only recently been felt.
Since November, long-term interest rates have declined more swiftly than at any time in the last century. Rates on average-grade corporate bonds, for example, have fallen from 9.05% to 7.80%. A smaller drop in mortgage interest rates, which now average 8.45%, has helped builders to increase the annual rate of housing starts by 59% from January to November. The main force behind the housing rebound, however, has been an astonishing rise in federal subsidies and loans. About one-third of the houses and apartments built this year received some federal subsidy, and next year close to half of them will get aid from Washington.
Jumping Through Hoops. The year 1970 was also notable because, more than ever before, the talk about consumer protection turned into action. Many businessmen had long scoffed at consumerism: Campbell Soup President W.B. Murphy once called the movement "a fad, of the same order as the hula hoop." Through gutsy persistence—and with help from the ecological activists—consumer protectors have forced Government and business to change. This year businessmen had to jump through the hoops of federal regulations, frequently issued by agencies long considered too impotent to act.