In all that has been written about the gigantic savings and loan bank scandals, one observation is uniformly held by all parties and positions in ‘Washington — criminal fraud and insider abuse were the overwhelming factors in the insolvencies. Two weeks ago, the General Accounting Office (GAO), an investigative arm of the Congress, reported that 26 out of 26 insolvent S & Ls that it studied involved white collar crime.
Since the federal government has guaranteed all deposits those above the $100,000 limit that it is obligated to insure may wonder what all this looting has to do with you. Plenty. Under the bailout plan submitted to Congress by the Bush Administration, you are going to pay for the wreckage wrought by these crooks — an average of $500 for every men and child in the U.S. at the very least.
The Bush plan, which contains some good regulatory reforms, violates the principles of fairness and deterrence when it comes to answering the question: Who pays? The general answer is those entities who are most culpable end most able to pay, not those small depositors and smell taxpayers who are the most innocent and least able to pay. These Americans did riot cause the scandals did not benefit from the scandals and should not pay for them.
Time end time again when big companies or powerful industries get into trouble through their own greed or fault go to Washington for bailouts. None Hove been more at fault in this use of Uncle Earn as the ell purpose bailout man than the commercial banks and the savings and loons. Making the banking industry pay end then, next in line, the corporate taxpayers generally, will send a message that there is a limit beyond which they cannot socialize their crimes on. the backs of innocent working people.
In 1967, Chose Manhattan Bank, which was a key lobbyist along with Citicorp, in successfully pushing for federal bank de-regulation a decade ago, corned $650 million and paid less than 2% federal income tax. Let those who pushed Washington into taking the federal cop off the bank: beat and letting savings and loans invest in junk bonds and speculative real estate — let them soak up the red ink they helped to spill.
This month the Senate and House Banking Committees will write the legislation heavily guided by the Bush plan. One House Banking Committee member told me that the differences are not along Republican and Democratic lines, nor even liberal and conservative lines; they are between “those members who are in the packets of the banks and those who are not.”
Well, judging by early indications, many lawmakers are peering out at you from the pockets of the powerful savings and icon lobby. Most of the amendments to the Bush plan point toward further weakening the bailout safeguards. Senator Donald Riegle, chairman of the Senate Banking Committee, certainly has no stomach to block the Bush plan’s intent to stick the bill to the small taxpayer and, by raising insurance deposit premiums, to the small depositor on whose bank most of the pass-along will be placed.
But there is still hope. A coalition of consumer groups with effective grass roots presence is mobilizing to inform and arouse the American people as they did two months ago against the Reagan Solffy Grab proposal that Congress was trying to adopt. We know what happened to that one once the people flexed their collective outrage in protests.
Now a new wave of protests is necessary, centering on the arguments of simple justice and deterrence. The centerpiece of this citizen drive is the Savings and Loan Bailout Pledge form which Public Citizen is distributing all over the country.
This Pledge is to be sent to your Senators and Representative. Your members of Congress are asked to pledge that “the responsible parties pay” to ensure that a similar scandal will not happen again. They are asked to pledge in writing that (1) they will not support a bailout which sends the bill to depositors and small taxpayers; (2) thou will support legislation to prudently re-regulate the financial industry; and (3) they will support the creation of Financial Consumer Associations to give the customers a permanent voice.
Readers interested in obtaining an information kit and the Pledge can send a self-addressed, stamped, business-size envelope to Public Citizen, P. O. Box 19404 Washington, D.C. 20036, or call 202-546-4996.