Soon after this meeting Mr Gray in Washington was replaced by Mr Danny Wall, who had been the top aide of Senator Garn (who had begun the reckless spree in the first place). Mr Wall acted quickly to prevent the San Francisco branch of his Board from shutting Lincoln down by transferring the regulatory authority for Lincoln Savings and Loan from San Francisco to Washington, and thus under his direct control. {B120} It is estimated that the 20 month delay to the closure of Lincoln Savings that resulted (caused collectively by the five senators and Danny Wall), will cost the taxpayers an additional $1.5 billion dollars. {B121} In all, the cost to taxpayers for the failure of this S&L alone, is estimated at from $2 billion to 2.5 billion.
Few articles have conveyed the favors for favors mechanism underlying American politics better than the article entitled "An amazing tale" on page 66 of the August 26 1989 issue of The Economist, which deals with the Lincoln Savings and Loan debacle. If you next read "High-Rolling Texas: The State That Ate FSLIC", you probably won't need to read much more about how Congress operates. {B122}
However, if you are a glutton for punishment, I would certainly recommend you read the following additional related articles, but make sure you have a sick-bag handy when you read them.
Start with "The Seduction Of Senator Alan Cranston which appeared on page 82 of the December 4 1989 issue of Business Week. {B123} Then try the article entitled "DeConcini Banks On Voter Loyalty" in the Dec 18 1989 issue of Insight which disclosed, among other things, that DeConcini and family had made a 540% profit on parcels of land that they, through privileged political knowledge, knew were to be used for a $3.8 billion canal project called Central Arizona Project. The DeConcinis, it seems, did not share this information with the folks whom they purchased the lands from. {B124} The article also mentions that Senator McCain flew in Keating's private plane on several occasions to the Bahamas to vacation and enjoy hospitality in Keating's house.
In short, each of the articles gives a tip of the iceberg peek into the general ethical standards of the men running the nation, and does a fine job in helping to put American democracy in perspective.
But the Lincoln incident is not an isolated incident, quid pro quo is practically the only game in town.
Additional insights on the topic of quid pro quo can be gained from reading "How one family handles its finances", on page 42 of the June 12 1989 issue of Forbes, which outlined how Jim Wright, the ex Speaker of the House was able to enhance his lifestyle beyond the normal limits of his Congressional salary. {B125} It is worth noting too that in 1986, Jim Wright also used his lobby power on behalf of his fellow Texans to prevent Mr Edwin Gray from putting the squeeze on the S&L industry. I guess it was his way of thanking the thrift and real estate interests who had donated $240,000 to his 1986 campaign war chest.
Meanwhile, in an effort to stamp out thrift examiners, Texans
killed a measure in committee in 1987 that would have increased
the pay of thrift examiners, whose starting pay is only $18,500.
One such individual is Mr Henry Gonzalez, chairman of the House of Representatives' banking committee, who played such an important part in exposing the Lincoln abuses. He is busy investigating another S&L called Silverado which appears just as worthy of headlines. It is alleged that Silverado, like Lincoln, was involved in buying up assets (mainly junk bonds) which had been first artificially pumped up in value by being sold profitably back and forth between selected insiders (prior to selling the overpriced assets to the various S&Ls involved. The insiders allegedly included among others, Colorado-based Silverado S&L, California-based Lincoln S&L, a Miami-based thrift called CenTrust, Houston-based San Jacinto Savings (owned by the now bankrupt Southmark), and a troubled Colorado property development company called MDC Holdings which worked closely with Silverado S&L.
The interesting point to note is that it was Mr Larry Mizel, chairman of MDC Holdings who introduced President Bush when he surprisingly showed up at a Republican fund-raising lunch in Denver in late 1989. Mr Mizel's company is at the center of a federal investigation of Silverado S&L which had as one of its directors none other than one of President Bush's sons, Neil. Both Silverado and Mr Mizel's company (MDC) are being investigated by the honest politician Mr Gonzalez.
Neil Bush, the President's son, was a director of Silverado from 1985-1988, during which time the alleged artificial profit taking was occurring. Silverado's bailout alone cost the taxpayers over $1 billion.
Not only that, the man who provided the insider connection between
all these entities was none other than Michael Milken the junk
bond king. He provided the means for the entities to buy up each
other's thrift junk bonds. Should anyone be surprised?
Perhaps I should have warned the readers to wear knee high rubber boots when approaching politics for a closer view, because it's literally impossible to get a close look into the pig trough without being surrounded by some pretty foul smelling mire. {B126}
Keep your nose plugged, because I have to tell you that even George Bush's campaign manager, Thomas Loeffler (another Texan) solicited support from the Reagan Administration to appoint lobbyist Texan Durward Curlee to the Federal Home Loan Bank Board. Loeffler's client list was a virtual Who's Who of S&L owners, and Curlee was once executive director of the Texas Savings and Loan League. Again it's foxes minding the chicken coop.
Jay Leno, an American talk-show comedian had a brilliant suggestion.
Because there is such a shortage of prison space in America, why
not build a high wall around Capitol Hill and the White House
and convert the whole area into a State Prison!!
For starters, it is practically unthinkable for lawyers to admit guilt, and so even though an increasing number of Washington lawyers or their clients get caught red-handed, they, like Oliver North, take their chances at riding out the controversy, because history has proven that this approach works best. To weather the storm, some or all of the following tactics are almost always employed:
Why have these tactics come to be used so often, so successfully, and increasingly more openly on Capitol Hill? Mainly because these four tactics are the most successful tactics used in law today, and Capitol Hill is literally teeming with lawyers. Sixty out of 100 senators, and 186 out of 435 House members have law degrees, as have the majority of the Senate and House Judiciary Committee members. {B130} Needless to say, the lobbyists are basically lawyers as well. Congress, is little more than a fraternity of lawyers. Capitol Hill is to lawyers what Wall street is to MBAs.
Those who are forced to disembark from the gravy train are usually compensated by the elite for their past loyalty. The media elite quite often help out by promoting their books, or by tucking them under a wing as they did with Nixon in subsequent years.
The special interest lobbying and subsequent legislation that allowed for easy overnight wealth for S&L owners, and merger and acquisition players, will be extremely hard to top in the coming decade. Nevertheless, no one appears to know when to stop. As more and more S&Ls declared bankruptcy, Mr Wall kept the brakes on remedial action by insisting on lowball estimates of the potential S&L industry losses. When it became obvious that the Federal Savings & Loan Insurance Corporation (FSLIC) could no longer cope with the enormity of claims payouts, Danny Wall was placed in charge of the new Office of Thrift Supervision which then had the job of disposing of the assets from the bankrupt S&Ls.
Evidence is now coming to light to suggest that the S&L bailout operation itself was taken as yet another opportunity to offer favors to the wealthy. As director of the Office of Thrift Supervision, Mr Wall was again in the driver's seat, ...talk about leaving the fox to mind the chicken coup. The plan he came up with was called the Southwest Plan, and just two of his deals should be enough to convince anyone that Mr Wall has made many friends among the economic elite.
The first case involves a Mr Ronald O. Perelman. (You might remember Mr Perelman as the billionaire who, according to Forbes
{B120} "DeConcini banks on voter loyalty" Insight (Dec 18 1989): p20
{B121} "The seduction of Senator Alan Cranston" BusinessWeek (Dec 4 1989): p82
{B122} "High-rolling Texas: The state that ate FSLIC" BusinessWeek (Oct 31 1989): p138
{B123} "An amazing tale" The Economist (Aug 26 1989): p66
{B124} "DeConcini banks on voter loyalty" Insight (Dec 18 1989): p21
{B125} "How one family handles its finances" Forbes (Jun 12 1989): p42
{B126} "Hi, Ho, Silverado" The Economist (Jan 13 1990): p78
{B127} "Humpty Dumpty" The Economist (Dec 9 1989): p23
{B128} "'Nuff said" The Economist (Nov 25 1989): p95
{B129} "DeConcini banks on voter loyalty Insight (Dec 18 1989): p21
{B130} "The plaintiff Attorney's great honey rush (Oct 16 1989): p199