4. THE 250 BILLION DOLLAR POLITICAL COVER-UP
cornerstone of George Bush's 1988 presidential campaign was "Read my lips;
no new taxes." The truth about the scope of the savings and loan scandal
would have revealed the hypocrisy of that statement and threatened Bush's candidacy.
Now, as a result of a major investigation by the Center for Investigative
Reporting and PBS Frontline, we have learned that the taxpayers could
have been saved at least $250 billion if there hadn't been a political
In the late
summer of 1988, Federal Home Loan (FHL) Bank Board member Roger Martin had a lunch
meeting in the private office of William Seidman, then head of the FDIC. Elise
Paylan, Roger Martin's executive assistant, also was at the meeting, and reported
"During the meeting with Bill Seidman, they were discussing the
size of the hole, and Roger had -- this was at, sort of the height of
his frustration. He was saying he didn't understand why Chairman Wall
(Danny Wall, chairman of the FHL Bank Board) was not forth-coming about
the true size of the problem. And Roger felt sure then Chairman Wall
knew about this and was just ignoring it. And Chairman Seidman said,
'Well. I know why he's not doing that' and Roger said 'Why?' And Seidman
said 'Well it's because George Gould told him to lie about the numbers.'
Now to be honest, I don't know if lie is the exact word he used, but
lie, misstate, something along that line -- and Roger was quite stunned
by that. ... and when Roger said, 'Oh, is that true?, What makes you
say that?,' Chairman Seidman said 'because he told me to do the same
Martin was asked if Ms. Paylan's account of Seidman's comments was accurate he
replied "That's exactly what he said." Seidman later said he didn't
remember any conversation like that.
(George Gould was the Deputy Under-Secretary
for Finance, working under Treasury Secretary Jim Baker, and the Administration's
political point man on the S&L crisis.)
Jim Barth, Danny Wall's chief
economist at the Bank Board, was asked how much money could have been saved if
the S&L problem had been addressed honestly and frankly before the 1988 election,
with all the S&Ls shut down and the issue tidied up. Barth said $250 billion.
Instead, the total cost of the S&L scandal is now expected to skyrocket
to more than $700 billion. As William Seidman acknowledged "Well,
this is the mother of all government mistakes. It is absolutely the
largest single mistake that you can identify the government has ever
made in terms of financial costs. It is colossal...".
George Bush was elected the 41st President of the United States on November 8th,
SSU CENSORED RESEARCHER: RACHAEL KINBERG
SOURCES: CENTER FOR INVESTIGATIVE REPORTING (CIR)
530 Howard Street, 2nd Floor, San Francisco, CA 94105
FRONTLINE PBS-TV, DATE: 10/22/91
TITLE: 'The Great American Bailout"
AUTHORS: (A co-production of the Center for Investigative Reporting
and FRONTLINE.) Glenn Silber, producer/director; George Clyde, coordinating
producer; Robert Krulwich, correspondent; Wendy Wank, editor; associate
producers were Diana Hembree (Texas), Juan A. Avila Hernandez (Texas),
and William Kistner (Washington, DC); Dan Noyes, project director; Sharon
Tiller, executive producer for CIR; David Fanning, executive producer
COMMENTS: Sharon Tiller, executive producer for CIR, provided
the following comments. First, the press failed to cover the issue during
the critical 1988 election year; not a single question about the S&L
crisis was asked during the three national political debates in 1988.
"The major media also failed to follow up on why the costs of the
bailout kept escalating and whether politics had played a part in the
1988 executive actions on the bailout."
horrendous increase in the cost of the S&L bailout will cost every citizen
in the U.S. thousands of dollars and will substantially weaken the U.S. economy
for decades to come. Because incumbent politicians in the executive branch and
on both sides of the Congressional aisle have found no political advantage in
addressing the bailout issue, rectifying the bailout is dependent upon public
understanding and pressure. The general public needs to be aware of how the political
system has failed to resolve the bailout, partially because both political parties
were so compromised by the savings and loan issue. The voting public needs to
understand this complex issue so they can vote and ask questions on it intelligently
in the 1992 elections, and avoid another cover-up.
"Originally, CIR approached the Wall Street Journal to do a companion
story on the bailout documentary, which they initially agreed to do.
They eventually declined to run the report because they couldn't devote
the time and resources necessary to advance the story." Nonetheless,
"The Great American Bailout" aired to great reviews but little
press coverage. Attempts to do follow-up spin-off print stories in Rolling
Stone, Parade, and the Wall Street Journal all failed from lack of interest
or the publication's failure to advance the story. CIR was "able
to publish one related story in the Sacramento Bee and the American
Banker and several papers picked up the allegations of a political cover-up
in 1988. No other media outlet has made a major effort to advance the
story about what happened in 1988, to our knowledge."