Bank Jobs

"SCANDAL FATIGUE." THAT'S the newest inside-the-Beltway buzz word, coined by politicians and their spinmeisters, taken up by their tom-tom beaters in the establishment media, and buttressed by polls purporting to show that Americans are tired of the attention being given to the dark underbelly of politics.

While many folks may be shocked! shocked! (pace Claude Raines in Casablanca) that the getting, holding, and exercise of power are far seamier than the patriotic myths inculcated by high school civics courses would have one believe, money as a corrupting force has played a dominant role in the shaping of this republic from its inception (if you doubt it, you might want to delve into historian William Appleman Williams's classic work, The Contours of American History).

Staring into the sewer and telling you what's there has always been a thankless task--the word "muckraker" was originally coined by Teddy Roosevelt as a term of opprobrium, not as a compliment--and if one has as a vocation the chronicling of today's nearly quotidian revelations, one finds oneself fencing with editors who argue that readers brought up on a sanitized version of our history are turned off by a steady diet of political malfeasances.

But those of us in the muckraking tribe keep hammering away in the hope that the voting public will finally understand the cause-and-effect relationship between ethically corrupt practices that skirt or flout the law and the content of the governance you get.

The latest detritus plucked from Clinton Inc.'s garbage bag provides a perfect example. Last May, Clinton hosted in the White House a meeting for the heads of some of America's largest banks--Chase Manhattan, J.P. Morgan, Banker's Trust, and the like. Administration policy on banking issues was the topic, but the gathering was arranged by the Democratic National Committee, whose chairman and top fund-raiser were handily present. So was Treasury Secretary Robert Rubin and Comptroller of the Currency Eugene Ludwig--who is in charge of regulating the nation's banks.

In reporting this unprecedented meeting between the party's fund-raisers, bankers, and those in charge of regulating them, last Saturday's papers failed to note a separate report in Friday's Wall Street Journal: Rubin--who narrowly escaped from the Goldman Sachs arbitrage scandal to become the single most powerful member of Clinton's cabinet--wants to tear down the Chinese Wall that has historically separated banking from commercial enterprise by allowing banks to be owned by nonfinancial companies.

Favored by the nation's largest banks and advanced in the Senate by their water carrier, Banking Committee Chairman Al D'Amato, this dangerous proposal is opposed by middle- and small-sized banks. It would threaten the integrity of the banking system by making banks targets for corporate takeovers by business giants like IBM, Archer Daniels Midland or Microsoft, leading to a quantum leap in the concentration of financial power; strike at the supposed neutrality of bank lending decisions by opening the door to discrimination against competitors of those corporate behemoths; and allow them to speculate with depositors' money. Even former Federal Reserve Chairman Paul Volcker says the proposal threatens the safety of the banking system: "In the real world, it's going to be very difficult to offer federal deposit insurance to one part of a company and not the whole thing."

Furthermore, independent medium and smaller banks--the mainstay of small business and agricultural loans--have been disappearing already in droves, gobbled up by the largest banks represented at Clinton's White House coffee klatsch; if the Clinton/Rubin proposal is enacted, the pace of bank acquisitions will become even more rapid, and community-based banking will soon disappear entirely.

Clinton went on record last year as favoring legislation that would allow banks to engage in nonbanking business, like selling insurance or securities (forgetting the lessons taught by the speculative frenzy that fueled the S&L crisis). The new corporate-coddling Clinton proposal would be a huge step toward vertical integration of our economy on the Japanese model. With the Japanese economy being driven into the toilet in large measure because of risky bank practices, that hardly seems a recipe for financial health.

Commingling bankers with regulators and party fund-raisers at a White House meeting immeasurably surpasses the influence-peddling made infamous by the Keating Five. It may be hard to prove that laws were broken, but it bears repeating that the scandal is not what's illegal but what's legal.

 
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