"Suppose you go to Washington and try to get at your government," Woodrow Wilson said back in 1912 when he was running for President. "You will always find that while you are politely listened to, the men really consulted are the big men who have the biggest stakes--the big bankers, the big manufacturers, the big masters of commerce....The government of the United States is a foster child of the special interests."
No student of THE scandal of the 1980s, the savings-and-loan bailout, could possibly disagree with Wilson's statement. After all, it was at the behest of the banking industry that Congress deregulated the S&Ls in 1980, setting off a decade of insider looting. And it was big campaign contributors like Charles Keating who got powerful Senators to lean on regulators, delaying the closure of bankrupt banks and thus amplifying the government's ultimate losses. Martin Mayer, author of "The Greatest-Ever Bank Robbery," blames the scandal on "the corruption that must ultimately infect any government where the costs of running for office are greater than those that can or will be borne by the relatively small community of the public-spirited."
As a result, taxpayers are already on the hook for $500 billion, counting interest. Now, without a single hearing or debate, Congress has voted to hit the public with another bill that could reach $30 to $50 billion, not counting interest. Last fall, at the urging of industry lobbyists, The New York Times reports, members of Congress "tucked into appropriations legislation a two-paragraph provision....[requiring] taxpayers to pay such sums as necessary to satisfy all final court judgments" stemming from the 1989 bailout law that brought the Looting Decade to a halt. (Banks and S&L PACs gave $8.4 million to federal candidates in 1997-98, 60 percent to Republicans.)
Hold your hats, because the story gets really perverse. In the 1980s, one of the deregulatory changes pushed by federal officials friendly to the S&L industry was a provision that allowed technically insolvent thrifts to merge with healthy ones and transform their overall negative balance sheets into positive ones by claiming millions of dollars in "supervisory good will" on their books. This ersatz bookkeeping device kept many S&Ls in business through much of the decade--raising the ultimate cost to taxpayers by billions when the thrifts were finally closed.
But in 1989, when Congress voted to end the ability of S&Ls to count this "good will" as capital, a number of these merged banks fell out of regulatory compliance and were forced to restructure, some at great cost to their owners. They sued, and the Supreme Court eventually ruled that the toughened accounting rules were a "breach of contract" for which the industry was owed damages. One indication of the bill came on April 9, when a California judge ordered to government to pay $909 million to the Glendale Federal Bank. Experts say this ruling, in tandem with the stealth two-paragraph provision noted above, has effectively reopened the S&L bailout. First taxpayers had to pay for gamblers who lost money when the rules were loosened; now they have to pay off gamblers who lost money when the rules were re-tightened.
Every $1 billion in judgments "will cost each American household $10," the Times reports. The winners who will profit the most "are prominent businessmen who hold big stakes in savings associations that have filed similar claims." Their names, along with their hard and soft money campaign contributions for the 1997-98 election cycle: Ronald Perelman of the Revlon Group, who so kindly made sure Monica Lewinsky was offered a job in New York ($27,000); Texan Robert M. Bass ($31,500); New York investor Lewis Ranieri ($43,250), and the Pritzker family of Chicago ($208,219).
