PAC Money’s Influence in Bailing Out S&Ls; Debated

When it comes to accepting campaign money from groups representing financial institutions, Rep. David Dreier (R-La Verne), a member of the House Banking, Finance and Urban Affairs Committee, wants to be fair. So he gives the green light to everybody--banks, savings and loans, credit unions and others.

“If I decided not to accept a contribution from XYZ interest that delivers financial services, I’d be favoring the other six deliverers that I accept support from,” the California congressman explains.

Rep. Jim Leach (R-Iowa), another member of the Banking Committee, wants to be even-handed, too. But unlike Dreier, he rejects all contributions from interest groups’ political action committees, popularly called PACs.

“Private interests have a vested interest in public policy,” Leach says. “Great care should be taken to avoid anything that develops possible conflicts of interest.”

In their last election campaigns, the Dreiers vastly outnumbered the Leaches--70 to 1, among current members of the House and Senate banking panels. As a result, financial institutions that have a direct stake in a proposed multibillion-dollar bailout of the savings and loan industry pumped $3.8 million into the coffers of committee members who will shape the legislation in coming months.

Bank PACs contributed about $2.9 million, S&Ls; about $680,000 and credit unions about $210,000, according to figures compiled for The Times by Sunshine News Services.

Many lobbyists representing various segments of the financial industry had reacted favorably to President Bush’s initial proposals for reshaping the savings and loan industry. But announcement of details of the plan Tuesday left many thrift industry supporters in shock, and it sets the stage for a battle in Congress over the legislation.

The proposal would increase federal insurance premiums--substantially more for S&Ls; than for banks--to help repay $90 billion to depositors at failed institutions. And to put S&Ls; on a sounder financial footing, the plan would require that thrifts almost double their levels of capital, taking away an advantage that they have enjoyed over banks. It would also put thrifts under federal banking regulators.

Credit unions are not part of the Bush package but may be included when Congress begins working on it.

Although lobbyists generally support the plan, each group will be focusing on fine points that may provide a crucial edge against competitors.

As these groups jockey for advantage, to what extent will their PAC largess influence the outcome? Will Congress tighten controls sufficiently to prevent another S&L; debacle? Will the enormous bailout costs be apportioned equitably among banks, thrifts and taxpayers?

Riegle Sees No Impact

Senate Banking, Housing and Urban Affairs Committee Chairman Donald W. Riegle Jr. (D-Mich.), who accepted nearly $183,000 from financial PACs during his reelection campaign last year, declares confidently: “I don’t think it (PAC money) will have any impact at all.”

Leach hardly agrees, commenting sardonically: “If one believes money doesn’t talk, there will be no impact.”

For decades, S&Ls; have exerted far greater influence on Congress than have banks, according to both Leach and former Rep. Thomas L. Ashley (D-Ohio), a House Banking Committee alumnus who now lobbies for the Assn. of Bank Holding Companies.

“The thrifts long were united under one trade association, whereas the banks were split among various groups,” Ashley says. “Congress has never really liked banks, going back to the National Bank Act of 1863 (which established a national monetary system). Not so with thrifts, which came in as a product of the Depression to provide financing for a top priority: housing.”

Backed by PAC money, able lobbyists and the voting power of millions of depositors and mortgage holders, S&Ls; “historically have gotten their way with Congress as much as any interest group on Capitol Hill,” Leach says. He blames the S&L; crisis on lax regulation and loose laws passed by compliant legislatures at the federal and state levels.

Cites Need for Reform

“At every turn, any effort to rein in the thrifts’ powers and accountability has been shackled,” Leach says. “If there ever has been a case for campaign finance reform, this is it, because we are talking about a bailout that exceeds Lockheed, Chrysler and New York City combined by a factor of 3 or 4.”

As the new chairman of the House Banking Committee, Rep. Henry B. Gonzalez (D-Tex.) will play a major role at hearings and bill-writing sessions on the S&L; package.

Gonzalez, who portrays himself as an advocate for the interests of small depositors, asserted in an interview with a newspaper in his hometown of San Antonio last November that “no PAC money from banks has ever come to me.”

However, Federal Election Commission records show that bank PACs contributed $5,500 to his reelection campaign last year, including $1,000 from the American Bankers Assn., $1,000 from the Assn. of Bank Holding Companies, $1,000 from the Independent Bankers Assn. of America, $2,000 from the Mortgage Bankers Assn. of America and $500 from Texas Commerce Bancshares Inc.

Gonzalez also received $1,500 from S&Ls; and $1,200 from credit unions.

Aides declined to make the congressman available for comment but pointed to a letter he wrote to a columnist for the San Antonio Express-News, professing disdain for PAC money.

‘Seeking Preferential Access’

“It is common in Washington to hire consultants to solicit PAC contributions,” Gonzalez wrote. “I have never done that. I believe it is inappropriate and practically amounts to a ‘buy me’ advertisement to put on such solicitations. . . . Although I have never had a representative from any organization solicit a vote on the basis of past or prospective contributions, it is clear that PAC contributors are seeking preferential access.”

Charles O. Zuver, a lobbyist for the Credit Union National Assn., freely acknowledges that PAC contributions are aimed in part at greasing access to legislators.

“If you do something for somebody, they’ll usually remember you,” he says.

Dreier confirms the truth of that for himself. “If I have a stack of 50 phone messages, I’ll obviously return the calls of people I’ve gotten to know through political activity or support. That’s human nature,” he says.

Dreier faced a weak opponent in last year’s campaign but accepted $41,800 from financial PACs, adding to his $1-million campaign surplus.

Rep. Richard H. Lehman (D-Sanger), another House Banking Committee member, received $20,400 from banks, S&Ls; and credit unions for his 1988 campaign. He says that it “would be naive” to assert that PAC money wields no influence. But he contends that critics exaggerate it.

Pills for His Speeches

Lehman cites a banking industry newsletter that recently called him a “bank basher,” adding that “lobbyists take a pill” when he speaks at hearings.

“But banks contribute to my campaign,” he notes. “Although we disagree on fundamentals, we agree on other things. Everybody’s in the mix here.”

John H. Rousselot, a lobbyist and former Republican congressman from California, helped steer $90,000 to Senate and House candidates last year on behalf of a trade association representing S&Ls; and savings banks.

What does a contribution purchase?

“When a guy has a tough election like (Sen. Alan) Cranston (D-Calif.) did in 1986, he’ll remember,” Rousselot responds, laughing, “and I can tell you he goes through the list to see who hasn’t given.”

As did many, Rousselot’s PAC hedged its bets in the closely contested race, contributing $3,000 to Senate Banking Committee member Cranston and $2,000 to his Republican challenger, then-Rep. Ed Zschau, who pledged to seek a seat on the banking panel if he won.

“I told Alan he had been good to the S&L; industry and we wanted to show our appreciation,” Rousselot says. “Then I went to Zschau and said: ‘As a Republican, I want to see you elected.’ ”

Aided by Cranston

A wealthy Arizona Republican businessman, who raised more than $40,000 for Cranston’s campaign and whose firm gave $85,000 directly to the Democratic Party, received Cranston’s assistance on behalf of his California-based S&L; five months after Cranston’s reelection.

Cranston was one of five senators who in April, 1987, met with federal regulators to plead for an early conclusion to an investigation of Lincoln Savings & Loan of Irvine, Calif., the subsidiary of a firm headed by Charles H. Keating Jr. of Mesa, Ariz.

Cranston, denying that his involvement constituted a conflict of interest, says that he merely agreed with his friend, Keating, that the S&L; was being “overregulated” by federal authorities. Eventually, in a compromise, the institution had to raise about $160 million in new financing, but supervision of the S&L; was transferred from a tough-acting regional office of the Federal Home Loan Bank Board to Washington.

Riegle, who also attended the 1987 meeting with federal regulators, says that he returned about $78,000 in contributions from Keating and his firm, American Continental Corp., to avoid the appearance of a conflict of interest. Three other senators who attended--none of them members of the Banking Committee--did not return the contributions they received from American Continental.

Money Wasted on St Germain

Although 98% of House incumbents won reelection last November, financial PACs threw away $96,150 on Fernand J. St Germain, the longtime Banking Committee chairman who was defeated. St Germain, who tended to favor savings institutions over banks, was hurt by Wall Street Journal articles which concluded that he built his personal fortune with “lots of investment help from people and institutions that have benefited from his official actions.”

Credit union lobbyist Zuver hopes that the usually furious fighting among competing financial interests will be tempered in the debate over an S&L; rescue plan.

“If we are really talking about a national crisis in the financial community, I don’t think people will take many shots at one another. I hope we all come out of it in better shape,” he says.

BANKING ON THEIR SUPPORT Leading Recipients of PAC Contributions from Banks and S&Ls; Senate Banking Committee Figures show contributions during the 1983-88 period. (Senators face election every six years.)

Top 10 Recipients Banks S&Ls; Donald W. Riegle Jr. (D-Mich.) $139,146 $32,550 Terry Sanford (D-N.C.) 140,875 28,375 Jim Sasser (D-Tenn.) 116,480 29,500 Jake Garn (R-Utah) 125,325 15,000 Alfonse M. D’Amato (R-N.Y.) 103,558 32,450 Alan J. Dixon (D-Ill.) 102,440 30,650 Phil Gramm (R-Tex.) 121,425 11,873 Richard C. Shelby (D-Ala.) 85,700 13,750 John Heinz (R-Pa.) 79,401 21,150 Alan Cranston (D-Calif.) 63,495 27,450

House Banking Committee Figures show contributions during the two-year 1987-88 congressional term

Top 10 Recipients Banks S&Ls; Stephen L. Neal (D-N.C.) $98,650 $19,550 John Hiler (R-Ind.) 91,125 8,075 Elizabeth J. Patterson (D-S.C.) 69,150 10,250 David E. Price (D-N.C.) 65,975 13,825 Doug Barnard Jr. (D-Ga.) 69,600 10,500 Carroll Hubbard Jr. (D-Ky.) 54,550 22,000 Thomas R. Carper (D-Del.) 64,503 7,075 Tom Ridge (R-Pa.) 58,475 8,375 Mary Rose Oakar (D-Ohio) 38,950 14,000 Patricia Saiki (R-Hawaii) 47,325 7,275 California members Norman D. Shumway (R-Stockton) 45,395 9,625 David Dreier (R-LaVerne) 31,950 8,350 Nancy Pelosi (D-San Francisco) 31,450 6,950 Richard Lehman (D-Sanger) 11,000 7,850 Alfred A. McCandless (R-Bermuda Dunes) 15,000 3,000 Esteban E. Torres (D-La Puente) 10,350 7,750 Committee chairman Henry B. Gonzalez (D-Tex.) 5,500 1,500

Source: Sunshine News Services