No one really knows how much the thrift-industry bailout is going to cost the taxpayers, and the House ethics committee isn’t going to help us find out. Although Speaker Jim Wright is largely responsible for the extent of the current crisis, his key role in precipitating the crisis is not even on the ethics committee’s agenda. But while the committee concentrates on the Speaker’s book-publishing deal, it is worth taking a look at his part in the S&L debacle.
The latest in a long string of embarrassing revelations came from L. William Seidman, director of the Federal Deposit Insurance Corporation (FDIC), who recently told a group of journalists that Edwin Gray, former head of the Federal Home Loan Bank Board (FHLBB), told him at the time that he “felt threatened” by Wright. Gray (Seidman told the reporters) “would come and weep on my shoulder about what he was being asked to do” on behalf of Texas thrifts, which, according to this account, “went far beyond the normal representation” by a member of Congress. Wright’s phone calls to Gray are well documented, and it is known that Fernand St Germain, an ally of Wright’s, canceled testimony by other regulators in 1985 that would have made public both the extent of the crisis and its roots in gross mismanagement; circumstantial evidence suggests that St Germain did so at Wright’s request. They also held up recapitalization of the Federal Savings and Loan Insurance Corporation (FSLIC) for nearly two years, leaving the regulators helpless to intervene while the S&L managers ran up billions in new debt. It took the House 18 months to partially grant the Reagan Administration’s request to give the FHLBB the money that it needed to begin to cope with the crisis. And while the House fiddled, the minimum cost of a bailout rose from about $12 billion in July 1985 to at least $160 billion today.
Comments