For Buck, the Partisanship Stops Here

The founding chairman of Valencia National Bank takes a seat in Rep. Howard “Buck” McKeon’s office and explains why bankers should quit grousing and accept thinner profits on student loans.

“I’m really not too worried about the banks,” he says with a grin that might be described as knowing. “Banks will do OK.”

McKeon, a Republican from Santa Clarita, was himself the founder of the hometown bank at a time when he was better known as civic leader and co-owner of Howard & Phil’s Western Wear. Now in his third term in Congress, Buck McKeon seems more knowing and more confident, less eager and less frustrated, than the man I first met nearly five years ago.

Then he was a freshman and then Democrats ruled the House of Representatives. McKeon, as friendly as he is conservative, was known around Capitol Hill for the cowboy boots he wore with his suits day after day. As a former school board member and the first mayor of Santa Clarita, he was accustomed to working with people of differing outlooks and expressed dismay over Washington’s partisan ways.

Now Republicans have controlled Congress for nearly four years, and McKeon has kept true to his bipartisan sensibilities. Constituents back home may credit him for helping prevent Elsmere Canyon from becoming a dump site. Here McKeon is better known as the chairman of an education subcommittee who crafted critical legislation on student loans that sailed through the House on a 414-4 vote. Even so, he has succeeded in annoying bankers and the Clinton administration.

Private lenders don’t like it because they say they won’t make enough money. The Clinton administration, which proudly launched its own direct-lending program, doesn’t like McKeon’s bill because, as a Cabinet official put it, “We strongly object to taxpayers subsidizing record bank profits.”

McKeon, meanwhile, shrugs off the administration’s hints of a veto.

“That’s just process,” he says. “I found out long ago that around here, nothing’s easy.”

And now that a Senate committee has embraced McKeon’s student loan plan by an 18-0 vote, with a full vote pending, it seems increasingly likely that President Clinton will sign rather than risk an override.

A year and a half in the making, the story of HR 6, the Higher Education Amendments of 1998, may seem dry and arcane. But it’s of great importance to potentially millions of students who rely on billions of dollars’ worth of loans to attend universities, community colleges or trade schools. The ballooning cost of higher education has made the student loan program indispensable.

McKeon has convened public hearings to explore why higher education has become so expensive.

Meanwhile, because of a quirk in existing statutes, Congress has until July 1 to update the student loan law. (A recent amendment added to a transportation bill may push that deadline to Oct. 1, lifting some of the urgency.)

“What I like to do,” McKeon says, “is solve a problem before it becomes a problem.”

McKeon tells the story as he lifts a small crystal replica of the Capitol dome from his coffee table and rolls it from palm to palm. If politics is the art of compromise, McKeon, a pro-business conservative, has found a willing collaborator in the subcommittee’s senior Democrat, Dale Kildee of Michigan, a pro-labor liberal now in his 22nd year in Congress.

Kildee, in a phone interview, says the legislation is a testament to “Buck’s personality--basically being a gentleman and able to listen to different points of view.” In a Congress where “civility has often been replaced by hostility,” Kildee says, McKeon’s approach is appreciated. “He’s a tough negotiator, but never without the element of civility.”

McKeon and Kildee made an early commitment to preserving the subcommittee’s tradition of cooperation. Rather than risk ideological warfare over the virtues of private sector versus the public sector, they agreed early to preserve both the bank loan program and the government’s direct-loan program, an early Clinton administration accomplishment that fulfilled a campaign promise.

The two men met frequently, and had breakfast together, just the two of them, at least once a month. Lobbyists representing universities, banks and student groups pressured from different sides, but in the end, McKeon and Kildee hammered out the agreement in McKeon’s office.

The trick was to provide loans at lower cost to students without cutting profits so low as to push banks out of the business. McKeon and Kildee decided taxpayers should subsidize 0.5 % of the student loans, a sum estimated to be between $1 billion to $2.7 billion annually.

Although White House officials say this would underwrite record bank profits, McKeon counters that it actually would shave the banks’ existing profit margins by three-tenths of a percentage point. Banks weren’t thrilled, but student groups embraced a plan that would provide the lowest loan rates in 16 years. The cost to students would be the T-bill rate plus 2.3%--a projected 7.43% for July 1. The current rate to borrowers is 8.23%.

Borrowers need lenders and lenders need borrowers. So although Education Secretary Richard W. Riley said the bill would subsidize banks, it is no less true that it would subsidize the student borrowers.

The loan rates from banks or the government’s direct-lending program would be no different. Many politicians in both parties, McKeon says, believe it is important to keep banks in the student-loan business because banks have a proven track record of collecting and Clinton’s program does not.

The ex-banker in McKeon offers some bipartisan wisdom: “It’s easy to give money out, harder to collect it.”

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Scott Harris is on assignment in Washington. His column appears Tuesdays, Thursdays and Sundays. Readers may write to him at The Times’ Valley Edition, 20000 Prairie St., Chatsworth, CA 91311, or via e-mail at scott.harris@latimes.com. Please include a phone number.