Lincoln Savings, Cranston Losses: Perceptions of Political Propriety : Fund-Raising: When politicians take campaign dollars from wheeler-dealers, they may build war chests at the expense of public trust.

In 1969, one of the first constituent letters to newly elected California Sen. Alan Cranston came from comedian Groucho Marx, who wrote:

“I am one of your strongest supporters and one who believed in your integrity--perhaps even your manhood. I sent you a check for $25 for your campaign.

“Inasmuch as you are now safely ensconced in office, I think you would be doing a handsome deed by returning the $25.”

The senator reportedly replied:

“Dear Groucho:

“I was relieved to learn that you believe in my integrity and my manhood, just as you will be relieved to learn that your $25 check, which I promptly cashed, was good.

“So much for my integrity, my manhood and your 25 bucks.”

Two decades later, Cranston, by his involvement with the now-defunct Lincoln Savings and Loan Assn., has sent a message in the same spirit to the thrift’s beleaguered investors. But this time, it’s no laughing matter; this time, stakes are higher and there are real victims.

The saga of Irvine-based Lincoln Savings involves alleged fraud and insider dealing by its owners, allegations that the regulatory process was subjected to political interference and charges that regulators leaked confidential information. Cleaning up the Lincoln mess may cost U.S. taxpayers more than $2 billion.

What happened defines the collapse of the nation’s savings-and-loan industry. It is also a California political tragedy.

California has come to epitomize the trend toward big politics bankrolled by rich wheeler-dealers. The Lincoln debacle--the role of Cranston and other government officials in it--underscores the perils of a political system gone sour.

Five U.S. senators--Cranston, Dennis DeConcini (D-Ariz.), John Glenn (D-Ohio), John McCain (R-Ariz.) and Donald W. Riegle Jr. (D-Mich.)--are alleged to have improperly intervened with federal regulators on behalf of the failing S&L.; Together, they received more than $1.3 million in contributions from Lincoln’s owner, Charles H. Keating Jr., and his associates, for their own campaign committees or for political committees with which they were affiliated.

Cranston, a senior member of the Senate Banking, Housing and Urban Affairs Committee, took $39,000 in direct contributions for his 1986 reelection campaign and solicited more than $900,000 for voter-education projects and get-out-the vote drives.

All five senators have argued that they did not intervene because of Keating’s donations, that they merely made “routine inquiries” as they would on behalf of any constituent. But that’s not necessarily the public perception.

Whether in perception or reality, public officials cannot go around championing the risky interests of a single generous individual over the greater public good. It is, as Cranston himself admitted, “politically stupid.” Why did politicians in Sacramento and Washington intervene?

They intervened because they weren’t prohibited from intervening. The rationale is that part of a representative’s job is constituent service. It’s just that some constituents--mostly large campaign contributors--are more equal than others. They intervened because the system encourages it--that’s how huge electoral bills are paid.

The bill for Cranston’s narrow 1986 victory was $11 million. And he has already begun raising large sums for 1992. His constant fund-raising is not unusual; the political fact of life for all incumbents is that nothing beats a huge, early war chest to freeze out potential challengers.

Early on, Cranston dismissed the hubbub over his questionable campaign contributions. “I don’t see it as a major issue,” he insisted, “compared with 20 years in the Senate.” But like the current problems of Mayor Tom Bradley, Cranston’s ethical quandaries stem, at least partially, from long tenure in public office.

Cranston, like Bradley, has become a victim of “professional politician syndrome.” Hubris--the overweening arrogance that comes from being in power too long--leads to isolation from the broader constituency. Entrenched incumbents take it upon themselves to be the sole judge of their actions. That’s what happened here. And they judged poorly.

It will be difficult for Cranston, if he runs for a fifth term, to position himself as the “champion of the underdog” when his opponents and the media portray a grinch who stole pensioners’ savings.

Opinion-makers have already begun to write Cranston’s political obituary. The conventional wisdom is that, like Bradley, Cranston will limp into political retirement--absent any legal charges that might stem from his troubles.

In Washington, the California congressional delegation has already suffered the resignation of the third-ranking House Democrat, Tony L. Coelho. The former Merced congressman, once thought to be the embodiment of the high-powered California approach to campaign fund-raising, left in the wake of ethical questions about his financial dealings.

Now Cranston, the Senate’s assistant majority leader, the highest ranking Californian on the Senate leadership ladder, has been weakened by ethical and political questions. At the ballot box and in the media, the political outcome of the Keating scandal may be a bipartisan wash, both in California and nationally.

The group of senators under investigation includes four Democrats and one Republican. But Keating is a Republican who contributed heavily to both parties. M. Danny Wall, the Federal Home Loan Bank Board chairman accused of being too lenient with Lincoln, was a Reagan appointee.

In California, Lincoln collapsed on the watch of Republican Gov. George Deukmejian, whose 1986 campaign received $172,000 in Keating-connected largess.

State legislators of both parties, who are involved in banking and thrift regulation, have also received contributions, including $53,750 from Lincoln to members of the California Assembly’s Finance and Insurance Committee.

The Keating affair has also raised questions about the politics of the regulatory process. One of the hottest is how much political pressure was applied to state and federal regulators. At minimum, what happened constituted inappropriate legislative meddling in the regulatory arena. At worst, it confirmed the existence of a system that requires bureaucrats to be politically responsive to the regulated industries whose contributions keep their elected bosses in power. The Lincoln mess demonstrates the devastating impact on public policy of the “legalized bribery” that fuels the national and state political process.

Back when Southern Pacific ran California and later when lobbyist Artie Samish “selected and elected”--sometimes housed and fed--underpaid, part-time legislators, corruption tended to be personal. The end was self-enrichment. Votes were traded for money, sustenance and other favors.

With the “upgrading” of the past two decades, corruption has tended to become institutional. It stems not from illegal personal behavior but from the necessity to contest legitimate elections to win powerful, attractive, but costly jobs.

Most politicians, Cranston included, would never trade their vote for personal wealth but many have rationalized their corruption by arguing that taking money from special interests is OK as long as it’s “for a good cause.”

That may be Cranston’s rationale for 20 years spent taking contributions from economic interests whose aims don’t mesh with his liberal agenda; he wants to protect that agenda in an increasingly hostile political environment and that requires campaign money.

But is that explanation enough? Or do campaign contributions allow politicians to dodge the moral and legal dilemmas inherent in our current system by, in effect, institutionalizing bribery?

Did the senators’ intervention violate, as Common Cause alleged, rules “prohibiting improper conduct . . . the dispensing of special favors and privilege”?

Did a senator accept “favors or benefits under circumstances that might be construed . . . as influencing the performance of his governmental duties?” That question is at the crux of the terrible dysfunction that pervades our governmental institutions. As long as money is allowed to dominate politics, the public will continue to view politicians more as crooks than as leaders. When political entrepreneurship is replaced by public service, then policy on its merits might--just might--have a chance.