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UNITED STATES
JULY 12, 1999 VOL. 153 NO. 27


1986 Boom and Bust

When George W. showed up in Midland in 1975, not yet 30 years old, he was a curious amalgam of West Texas and East Coast--a Midland childhood mixed with schooling at Phillips Academy and Yale, then a succession of jobs, parties and girlfriends in Houston, none of which fired his imagination. After being rejected by the University of Texas law school in 1973, he applied to Harvard Business School--without telling his family he was doing so--and was accepted. Master's degree in hand, he headed for a buddy's ranch in Tucson, Arizona and stopped to visit friends in Midland. There he met one old pal after another who was getting into oil, and "it occurred to me that Midland was the place. I needed to go," he says. "There was excitement in the air. People were beginning to get the scent."

His friend O'Neill told him he should learn the oil business by working for an established company. George was too impatient for that. He hired himself out for $100 a day as a landman, searching mineral-rights titles in county courthouses around West Texas. "I basically taught myself," he says. Bush's move to Midland is at the heart of his official myth. Driving out in a battered Oldsmobile Cutlass with $20,000 and a dream, scraping by in tatty chinos and beat-up shoes--it's as close as the son of a president can get to calling himself a self-made man. The details may be true, but the message is bogus, because it ignores Bush's extraordinary family connections. He tried hard to be a regular guy but wasn't; he was famously frugal--"so tight he damn near squeaked," says a colleague--but didn't really need money. Rich friends of his father backed his business ventures.

They also backed him when he decided to run for Congress in 1977, after only two years in town. The decision to plunge into politics violated a basic family tenet: First make your mark and your fortune, then run for office. Only those who knew him well had seen it coming. "He wasn't obsessed with politics, but it was always there," says Charles Younger, a Midland surgeon and longtime Bush jogging partner. A famously eligible bachelor, Bush had also surprised friends by courting and marrying--in just three months--a librarian named Laura Welch, who was as reserved and knowing as he was brash and noisy. She made him promise that she would never have to give a speech. (So much for that vow.) "We campaigned the whole first year of our marriage," she says.

Like his dad, Bush had no patience running for small-time local offices; no one gave him much chance of winning his race. But he was handsome, "not the smartest guy in the world but smart enough," as Younger says, and blessed with an honest love of pressing the flesh. He won the Republican primary, then ran against state senator Kent Hance, who used a populist tactic Bush would never forget. Hance compared his own West Texas "credentials" with Bush's Andover-Yale-Harvard ones. When Hance got through with him, Bush smelled like some exotic houseplant on a New England windowsill. "I remember going to the American Agricultural Convention in the Lubbock Coliseum," says Bush. "I was surrounded by farmers. They wanted to talk about the Trilateral Commission. And I look over their shoulders, and there was Hance. I take my hat off to him." Bush lost, 47% to 53%. Never again would he let a rival paint him as an élitist. "George has got a lot folksier since then," says O'Neill.

Bush went back into oil. He started hiring for his own company, Arbusto (Spanish for bush), raising money from a network of East Coast backers who were close to his father and uncle, money manager Jonathan Bush. Among them were drugstore tycoon Lewis Lehrman, who lost a bid for Governor of New York in 1982; venture capitalist William H. Draper III, who would become president of the U.S. Export-Import Bank during the Reagan Administration; and Celanese chief executive John Macomber, who later landed the same post.

If connections got him in the door, talent sealed the deal. "The politician was in him," says Jim McAninch, who ran Bush's drilling operations in the early days. "He was a great promoter and a great money raiser." He also possesses a Clintonian ability to remember names of countless people he has met only briefly.

In 1982 Bush stumbled by trying to go public with a drilling fund just as oil prices dipped. That year he also sold 10% of his company to a Panamanian company run by Philip Uzielli, a longtime friend of Vice President Bush's top adviser James A. Baker III, who later became Secretary of State. What raised eyebrows was the price Uzielli paid: $1 million in exchange for 10% of Bush's company, whose total worth at the time was $382,000. Bush says the infusion wasn't a bailout. Arbusto, he says, "wasn't in trouble. We were in growth mode." Bush says he met Uzielli through investors and at first didn't know of his ties to Baker. "Jim Baker didn't introduce me to him. Jim Baker didn't pick up the phone and say, 'Phil, you must invest with George W.'" So why did Uzielli pay so much for his 10% stake? "There was a lot of romance and a lot of upside in the oil business," Bush explains. "Everybody thought the price of oil was going to $100." Uzielli, who has said he lost money on the deal, couldn't be reached for comment.

In 1984 Bush merged his company with Spectrum 7, an oil-drilling firm run by two supporters of his father, Bill DeWitt and Mercer Reynolds. It was a good fit. Arbusto had oil prospects; Spectrum had a network of investors. The merger doubled the size of Bush's operation, and the Spectrum people wanted to upgrade his image with fancy furniture and a company car, but Bush wouldn't hear of it. "Those were the doo-dah days in Midland," says O'Neill's wife Jan, "and a lot of people couldn't resist--jets, boats, cars. George didn't go for that." He liked the image he had.

He was optimistic, but a sign that high hopes weren't warranted had come in late 1983 when the First National Bank of Midland collapsed under the weight of bad loans. "We had a saying that year," says oilman Don Evans, who later became national finance chairman for Bush's presidential campaign "exploratory" committee: "'Stay alive till '85.'" But '85 was worse. Oil prices sagged, and investments dried up. By December, rumor had it that the price of oil was about to plunge, and it happened right on schedule in January 1986. As prices cratered, those who had been using their oil reserves as collateral defaulted to the banks. Midland's economy folded like a bad poker hand. Bush had always followed conservative business practices, and since he'd had his network of investors to tap, his debt exposure was less than that of many others. He took a 25% pay cut, and his staff took smaller ones. But soon he realized that unless he found a buyer, it was just a matter of time before Spectrum died.

"Everybody was in pretty much the same boat," says Evans' wife Susie, who has known George since elementary school, "and everybody pulled together. When times were hard, we had dinner parties." At some of those parties, George drank more than was wise. "Usually the next morning," Laura Bush says, she would tell him he should quit. Spectrum president Paul Rea gently suggested the same thing.

Bush and his friends say the press has made too much of his drinking, that the W didn't stand for Wild, that the rumors are overblown. Among Bush's Midland crowd, the favorite mind-altering substances were beer and whiskey. And most people say Bush's consumption was not especially gaudy. Jim McAninch's daughter frequently baby-sat for the Bushes' twin girls Barbara and Jenna, "and George would drive her home late at night after his social events," McAninch says. "I never saw him drunk. If I had, I wouldn't have let him drive my girl." Charlie Younger, who jogged 5 or 6 km with Bush almost every day, allows that "George would have more fun than the average guy at the party." For Bush, it was too much fun. "I didn't drink every minute of the day," he says, "but I drank too much."

He confronted the problem once and for all during a three-day weekend in late July 1986 at the Broadmoor, a grand old resort in Colorado Springs. The Bushes and their closest friends had gone there to celebrate a communal 40th-birthday party: George and Don Evans both turned 40 that month, and their wives would reach the milestone later in the year. One night Neil Bush came in from Denver for dinner, and the friends stayed up late, laughing and drinking. "We weren't that loud," says O'Neill. "But the next morning, nobody felt great." Contrary to some reports, Bush made no dramatic breakfast-table declaration about quitting. He said nothing--at first, not even to Laura. It wasn't until they got home that he told her he was finished with alcohol. "He just said, 'I'm going to quit,' and he did," Laura remembers. "That was it. We joked about it later, saying he got the bar bill and that's why."

Part of what prompted him to give it up, a friend says, was that "he didn't want to do anything under the influence that might embarrass his father," who was preparing to run for President. George W. was also experiencing a religious awakening, one that began with his now famous 1985 encounter with evangelist Billy Graham at the Bush-family compound in Kennebunkport, Maine. After praying privately with Graham--"It was a real personal religious visit," he says--he joined a men's Bible-study group in Midland. As the economic crisis deepened, so did his faith. "The words took on a new meaning," he told TIME. "It's not simple, and each person's walk is different. I have sought redemption, and I believe I have received it. And now it's up to me to live the life."

As he did so, his friends and family say, he became less edgy, less angry, more comfortable with himself. "George was already disciplined in a lot of ways except for drinking. He was a great runner," says Laura. "And when he was able to stop, that gave him a lot of confidence and made him feel better about himself." While Bush was working on these issues, in mid-1986, something else happened that would also have a profound impact on him, allowing him to leave Midland with his head up. A corporate savior appeared.

After the oil-price crash, Bush had begun looking for a bigger fish to swallow his little one. His "bail-out strategy," as he calls it now, was to have Spectrum acquired by a publicly traded company so his investors would have a shot at getting their money back. Texas-based Harken Oil & Gas (now known as Harken Energy Corp.) had been buying up troubled independents on the cheap, and Spectrum fit the profile. In one six-month period before the acquisition, Spectrum lost $402,000. It was $3 million in debt, with no hope of attracting a dollar for new drilling. On Sept. 30, 1986, less than three months after Bush's 40th birthday, Harken swooped in with an angelic deal. In exchange for Bush's 14.9% stake in Spectrum, he would receive Harken stock worth some $320,000--his first real personal wealth. Bush was also made a Harken director and retained as a consultant at $80,000 a year--$5,000 more than he had made at Spectrum. He got generous stock options, and Harken hired some of his employees. As for the dozen who weren't hired, Bush worked his network hard and found oil jobs for all of them.

What did the Harken bosses see in Spectrum? Some productive oil wells, to be sure, but mostly they saw the son of the sitting Vice President. "His name was George Bush. That was worth the money they paid him," says Harken founder Phil Kendrick, who sold the company in 1983 but stayed on as a consultant. Whatever the motivation, Bush now had money and no day job, a combination that let him accept an offer that had been lurking in the back of his mind for more than a year--a job that would provide action, fun and something more important. It would get him back into politics and put him close to the old man.

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