House Bank Operated Like a ‘Cash Club’ for Members : Congress: Bad checks of account-holders were routinely paid out of other funds on hand or held until the money to cover them was deposited.

It looked like a bank, called itself a bank, and in many respects acted like a bank. In reality, however, it was more of a “cash club” where members of the U.S. House of Representatives could and often did write checks with impunity, regardless of whether they had enough funds to cover them.

In an age of automatic teller machines and computerized check clearing, the now-closed House bank was a financial anachronism that relied on handwritten records, easygoing informality and unquestioning service to its only account-holders--members of Congress.

Not every member deposited paychecks there, mainly because the bank paid no interest on checking accounts, made no loans--at least not in the regular sense--and failed to offer many of the services that commercial banks routinely provide.

But it had its compensations. One congressional critic said any House member with an account could walk up to a teller’s cage and cash a check for $1,000 without anyone checking whether the account contained enough funds to cover the sum.

When a House member’s personal check arrived for processing and a member’s account contained insufficient funds, one of two procedures generally was followed.

If the overdraft occurred within three days of the next congressional payday, the check was simply held until the funds were deposited, and the House member never knew the difference. If the next payday was more than three days away, the member was called and asked to make a deposit to cover the amount.

In neither case would the bank refuse to honor the check nor charge a processing fee as would most commercial banks. Checks were to be returned only if a House member failed to make a deposit within several days of being asked to do so.

The House Ethics Committee investigation revealed that 24 members overdrew their account by more than a month’s take-home pay--usually about $5,000--during eight or more months over a 39-month period. Of 20,000 bad checks logged during this time, only five were actually “bounced” by being returned to the member who wrote them.

The bank’s record-keeping was equally lackadaisical. Each day, bank personnel compiled handwritten “tally sheets.” Overdrafts were noted on the back as being held, a designation that also included checks that were torn, smudged or incorrectly signed. And once a member had agreed to cover a check, the handwritten telephone log was routinely thrown away.

At the House bank, the customers always were treated with courtesy. Tellers greeted members of Congress by name or by title if they held a leadership post or chaired a committee. The bank’s location on the first floor of the House side of the Capitol made it a convenient stopping-off place to cash checks.

For years, General Accounting Office reports of repeated overdrafts were brushed aside on grounds that no money ever was lost because of the practice. In effect, members writing checks without funds on hand to cover them borrowed from other members’ deposits in what Speaker Thomas S. Foley (D-Wash.) has termed a “check-writing cooperative.” The bank was not federally insured, and no taxpayer funds were involved in its operations.

Ironically, the bank’s haphazard record-keeping may become the first line of defense for many of the 355 current and former House members who find themselves on the bad-check list that will be made public in early April.

Several of the lawmakers who already have confessed that some of their checks were bad have blamed the bank’s casual management for their predicament, contending that they were never notified that they were short of funds.

Since bank clerks routinely tossed written notes about overdrawn accounts into the trash after telephoning the offending lawmakers, it may be impossible to discover the truth about what House members know about their own overdrafts.

The only lasting record that an overdraft occurred is a little red dot imprinted on the back of a processed check, which signals that it was held, instead of the blue mark imprinted on checks that cleared immediately.