The S&L Bailout IV – Foley Takes Charge
Tom Foley (D-WA) is the new House Speaker, replacing Jim Wright who resigned in the wake of charges by the House of Representatives Ethics Committee. Foley’s first move is to handle the $300 billion bailout legislation for the crooked Savings and Loan (5&L) mess. Far from being a new broom, Foley’s new regime appears to be “business as usual.”
Foley’s thinking is to show his firm leadership by rushing the bailout bill to the House floor for a vote as quickly as possible. He was elected Speaker on June 6 and expected to have the House dispatch the bill the next day. But over fifty members of the House Democrats asked for a party Caucus and this put the final vote over until the following week.
After six years of delay in facing up to the growing S&L scandal, the Congressional leaders have been in a rush. Over in the Senate, earlier this year, there was a one day markup by the Senate Banking Committee, followed by a fast two day debate less than a week later that resulted in an overwhelming pro-bailout vote. Citizens could not even get the printed legislation — a 560 page bill — until one day before the Senate floor debate started.
The given explanation for the rush is that the S&L system is accumulating costs of as much as $10 million a day. But the real reason is that. the politicians are sniffing the arousal of a very outraged public and an increasingly investigative media. And they want to get this bailout “behind them” before the tidal wave hits the Congressional shore.
This strategy is neither sound nor even clever politics. For the weaker the bailout bill, the more vigorous the public backlash will become. The news media is on to one instance after another of 5 & L money corrupting a member of Congress. The money flows from officers of the American Continental Corp., owner of Lincoln Savings and Loan, and its business customers to members of Congress is already commanding headlines in California newspapers as this scandal moves toward the national Washington media’s attention.
So, if Foley does not take command through his Party’s Caucus and support strengthening amendments proposed by his more consumer and taxpayer sensitive colleagues, he will leave his Party exposed to certain political backlash.
Given the Senatorial effrontery of making those Americans most innocent and least able to pay to foot the bill for the S&L debacle, these consumer-taxpayer reforms are of a kind that would win a popular referendum almost by acclamation. Here they are in brief:
— Make the responsible parties pay their share by funding the bailout via direct appropriation through the corporate tax code. In short, make corporate taxpayers pay for corporate scandals.
— Limit the amount the new institution can borrow by Congressional authority to pay for failing S&Ls rather than give it open ended authority to borrow and borrow.
— Provide all citizens with access to S&L examination reports and anti-redlining compliance reports which are currently exempted from the Freedom of Information Act so that people can learn early about abuses.
— Require real capital standards for S&Ls of no less than 3% of deposits.
— Establish measures to get more S&L money into housing mortgages and disclose their mortgage lending practices to expose redlining.
— Establish financial consumer associations, privately funded by consumers who choose to become members, to make sure that. consumer rights are not left out in the cold in the future.
Whether Speaker Foley will back such legislative nutrition will signal the kind of leader he will be. After all, this S&L bill is no ordinary bailout. lt is the largest one in American history, amounting to over $1000 for every man, woman and child in the U.S. The Bush plan to make innocent people pay for crime, corruption and the wildest of speculation with the people’s savings would seem to invite some special legislative sensitivities.