Bentsen to Probe Merger Mania : Senate Finance Panel Chief Plans Hearings in Early ’89

Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.), warning that corporate takeovers and mergers “have gotten out of hand” and could trigger business failures in a recession, disclosed Monday that he plans to conduct hearings on the subject early next year.

The proliferation of leveraged buyouts and the consequent piling up of huge corporate debts is especially disturbing in light of the multibillion-dollar crisis facing the savings and loan industry, Bentsen said.

Only last week, a congressional study warned President-elect George Bush that his Administraton “must decide how to finance the $50 billion or more that may be needed to restore financial stability (to S&L; institutions) and thereby prevent panic and collapse.”

While no such sense of urgency has been attached to the problem of hostile corporate takeovers, the situation has been serious enough to generate calls for federal curbs on borrowing for buyouts, a remedy that has been proposed by--among others--House Speaker Jim Wright (D-Tex.) and Federal Reserve Board Chairman Alan Greenspan.

However, Bentsen stopped short of calling for such curbs. As a former businessman, he said in a luncheon interview with reporters, he is not interested in stopping mergers or acquisitions and realizes that “it’s very difficult to draw the line between good ones and bad ones.”

He said he knows of no specific solutions to the problem. “I hope there’s something we can come up with,” he said. “There’s no easy solution.”

Bentsen said he has already discussed the timing and the outline of the committee hearings that he plans with the Finance Committee staff. The hearings are likely to attract extraordinary news media attention, not only because the hectic pace of takeovers has worried investors as well as economists and political leaders, but because Bentsen has become a dominant figure in the Democratic Party since campaigning as the party’s vice presidential nominee this year.

Moreover, as the senator is quick to point out, the Senate Finance Committee is a powerhouse with “the broadest jurisdiction of any committee in the Senate.”

The corporate takeover binge also may be the subject of House hearings. Wright recently expressed concern about what he called the adverse “psychological and economic” impact of buyouts and takeovers on the nation. And he has discussed possible legislation with Rep. John D. Dingell (D-Mich.), chairman of the House Energy and Commerce Committee, which has legislative jurisdiction in securities matters.

Staff members of the House Ways and Means Committee say that panel also plans to present its own proposals after Congress returns from recess in January.

So far, the debate over possible legislation has centered on tax laws that allow corporations to deduct as business expenses interest payments on borrowed money but do not allow such deductions for dividends paid to stockholders. Since stockholders also pay tax on their dividend income, this means that dividends are taxed twice. It also means that it is cheaper for corporations to raise money by borrowing than by issuing stock.

And American corporations have increasingly turned to borrowing for buyouts. Bank Loan Report, an industry newsletter, reports that borrowing from banks for such purposes has totaled $285 billion since October, 1986.

Won’t Seek New Taxes

Bentsen, in his luncheon interview, also agreed with a recent statement by Wright that a good argument can be made in support of Bush’s proposal for reducing the capital gains tax from a maximum of 33% to 15% as long as additional steps are taken to see that it is not just a tax break for the wealthy and that there is equity in the tax code.

While Democrats will try to cooperate with Bush in reducing the federal deficit, Bentsen said, they will not take the lead in proposing any new tax increases as part of a deficit reduction package.

Bentsen, saying that so far he believes Bush is “off to a good start” in his appointments of Cabinet members, described Richard Darman, Bush’s choice for director of the Office of Management and Budget, as “very bright, tough and aggressive” and said, “he will play very hard for political advantage.”

At the same time, he said, Darman is a pragmatist who in negotiations with Congress on the budget “will take the best deal he can get and put the best possible light on it.”

The 67-year-old Texan, smiling and relaxed as he talked to reporters, said he “enjoyed the hell” out of campaigning this year. He would not rule out running for President in 1992, even though he said he has no plans to run.

Asked if he would not be too old by then to run, Bentsen said: “Of course not.” He challenged a young reporter who posed the question to “meet me in the morning for a tennis match” and declared: “I’ve got a 94-year-old father who works 12 hours a day ,six days a week and drives a car with a Fuzz-buster on the dash.”