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Ralph Nader > In the Public Interest > Did Carter Mean What He Said?

Anyone observing the Senate process of confirming President Carter’s nomination of Robert McKinney as chairman of the Federal Home Loan Bank Board (FHLBB) will understand why the Senate has succeeded less than a dozen times this century in voting down a President’s cabinet or agency nomination.

McKinney came to the Senate confirmation hearings with some significant drawbacks. He is the chief executive of a large Indianapolis savings and loan — First Federal — and a leading partner in a law firm that handles that savings and loans’ business. In these positions, McKinney flouted Mr. Carter’s repeated campaign assurance that he would not perpetuate the “revolving door” practice of appointing members of the industry to regu­late that industry. The Home Loan Bank Board regulates federally chartered S&Ls, having 400 bil­lion dollars in assets.

The former Annapolis classmate of President Carter was also head of “Hoosiers for Carter.” Among the civil rights, consumer and neighbor­hood groups who opposed McKinney, the nomina­tion of an active political supporter seemed also to contradict Mr. Carter’s campaign criticisms about past Presidential routines of rewarding political supporters with high level jobs in government. By contrast, McKinney’s White House supporters say that he is well qualified and he shouldn’t be penal­ized because he supported Carter early.

In his tightly reasoned statement against the McKinney nomination, Sen. Paul Sarbanes (D.- Md.) pointed out that to rebut the presumption against taking someone from the industry to head an agency regulating that industry would require evidence that the nominee was a leader in the industry’s reform movement. Sarbanes found no such evidence.

NEITHER DID THE citizen groups opposing McKinney. In fact, they found that his S&L was de­cidedly resistant to providing modest mortgage funds for the inter-city even in comparison with other Indianapolis savings and loans. They were dismayed by his insensitivity to arrangements that could easily breed conflicts of interest. A building supply company which he ran had indirect busi­ness dealings with First Federal Savings and Loans — where he worked as chairman for 16 years.

McKinney is generally regarded as a dynamic manager and this trait always impresses senators, particularly lethargic ones. But the key question, as Sen. Edward Brooke (R-Mass.) pointed out in his opposition remarks, is whether he has the requisite sensitivity to the needs of the central city and to conflicts of interest. Brooke said the record did not contain evidence of this sensitivity.

“I’m going to get this dead industry off its ass,” blurted a somewhat exasperated McKinney in a meeting with me the day before the Senate com­mittee confirmed him by a vote of 12 to 3. He made this comment after nearly two hours of discussion in the presence of Sens. Riegle and Stevenson. For most of those two hours, McKinney was abstractly reassuring and specifically dismaying.

For example, he would not agree that S&L mem­bers needed participation rights, apart from a lit­tle more economic disclosure. He wouldn’t even go along with the idea of annual proxy solicitations; even stock corporations have resigned themselves to that practice.

HE REPEATED THE customary S&L industry arguments to explain away disinvestment from older urban neighborhoods. He declined to say whether he would support a modest bill, intro­duced by Sen. William Proxmire (D-Wisc.), to encourage S&Ls to reinvest in these neighborhoods by conditioning branch applications in part on the S&L’s record.

McKinney seemed not to have given much thought to many of the community and consumer concerns about savings and loans. This became apparent in a discussion on the question of the Home Loan Bank Board’s reimbursing indigent community groups for expenses incurred in their participating before the board’s rulemaking and other procedures.

Regarding mutuality — the rights of depositors — in the S&L industry, McKinney said: “I agree it’s a charade, but it seems to have worked.” This attitude represents McKinney’s chief liability —the extraordinarily narrow managerial perspec­tive which he brings to a bank board that has to find ways to diffuse the economic significance of this large industry to the vast housing and neigh­borhood needs of the nation. It cannot be done sim­ply by better bank board standards for the industry. People in the affected communities and S&L depositors must be given real rights of par­ticipation in the agency and in the industry.

Both Sens. Riegle and Stevenson were leaning for McKinney before this meeting. The next day, Stevenson said his “gut feeling” was that McKin­ney could make the transition from a two-fisted S&L executive to a two-fisted public servant. Rie­gle declared that, while he wouldn’t have picked McKinney, he was willing to make “an investment of faith” on his behalf.

Presidential nominations, when possessed of some controversy, set up a bazaar-like situation where senators are wont to trade off with the White House. One senator wants his candidate to be reappointed to the next slot on the bank board. Another senator has his own preferred candidate for that slot. A third senator has weakening pollu­tion legislation for which he wanted to secure more White House understanding.

On the Senate floor, McKinney was confirmed by a voice vote. Only Proxmire and Sarbanes gave the reasons why the Congress should watch McKinney’s performance at the bank board with more than usual closeness.