The 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 cover-up.
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 the following:
“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 thing’.”
When 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…”.
Meanwhile George Bush was elected the 41st President of the United States on November 8th, 1988.
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 for FRONTLINE.
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.”
‘The 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.”