Scandals / Banking / U.S.

Brewton, Pete. The Mafia, CIA, and George Bush. New York: S.P.I. Books (Shapolsky Publishers), 1992. 418 pages.

Beginning in 1990, an assortment of articles from the Houston Post found their way into NameBase. In them Pete Brewton described organized crime and CIA connections surrounding the major players in the savings and loan failures, primarily in Texas but also in Florida and California. Brewton met with resistance, first from the Post's lawyers and then, when he expanded the series into a manuscript, from Simon & Schuster. Brewton quit the Post, enrolled in law school, and took his manuscript elsewhere.

The Post series and book are loaded with names of Texas-size wheeler- dealers, but it's circumstantial. There's a little bit on Lloyd Bentsen and sons, a bit more on George Bush and sons, even more on slick operators who appear to be CIA assets, and more still on Mafia-connected deals that involve property flipping as a cover for fraudulent loan schemes using federally-insured funds (your tax dollars). The names come from the records of state and federal agencies and courts, as well as newspaper clippings. The book's title is misleading, as the book itself leaves the impression that this is all business-as-usual for greedy Texans. But unless NAFTA returns the territory to Mexico, where certain Banana Republic of Texas businesses might have more room to deal, it's worthwhile trying to track these fun folks. In that sense, Brewton's contribution is significant.

Mayer, Martin. The Greatest-Ever Bank Robbery: The Collapse of the Savings and Loan Industry. New York: Charles Scribner's Sons, 1990. 354 pages.

Martin Mayer was a member of the finance committee of the President's Commission on Housing beginning in 1981, and has written nearly a dozen books on business and finance, including the bestselling "The Bankers" (1975). In 1982, Congress passed the Garn-St.Germain Act, which tended to deregulate the savings and loans. Until then the industry concentrated on the community-based home-mortgage business, but now it was free to speculate. Getting the cash for these new, risky investments presented no problem, because the federal government still insured all deposits. The U.S. Treasury had to cough up $500 billion to get out of this mess.

Despite the witty humor, it requires fortitude to wade through this book's alphabet soup of regulatory agencies, mixed with esoteric financial instruments pushed by Wall Street sharks. Mayer's conclusion is that deposit insurance was the "crack cocaine of American finance" -- once good old American greed was deregulated, the door was open for massive abuse. Who got the money? Wall Street investment houses got most of it, depositors got some of it because of high interest rates, and the Mafia types and Texas cowboys came in third. Who's to blame? The accounting profession was dishonest, and big-name law firms bullied the regulators. In the end, their S & L clients had plenty of time to convert deposits into questionable investments.

Pizzo, Stephen; Fricker, Mary; and Muolo, Paul. Inside Job: The Looting of America's Savings and Loans. New York: McGraw-Hill, 1989. 443 pages.

These authors, two of whom are associated with the National Thrift News in New York, have put together an award-winning account of the Great S & L Heist. This is a tale of a seven-year period during which "a greedy network of swindlers, mobsters, S & L executives, and con men have capitalized on regulatory weaknesses created by deregulation and have thoroughly fleeced the thrift industry."

On October 15, 1982 Ronald Reagan invited 200 people to witness the signing of the Garn-St.Germain Act, which canceled much of the S & L regulation of the last 50 years. "All in all, I think we've hit the jackpot," he told his appreciative audience. Ten years later Charles Keating is in jail, the people he robbed will never recover their money, and the "Keating Five" (Senators Cranston, DeConcini, Glenn, McCain, and Riegle) are still making excuses. There's every indication that the next generation will pay heavily for the 1980s.

More quality financial reporting like this is needed in America. White-collar crime and violations of the public trust may not provide the sort of footage that improves ratings on the evening news, but they do more than their share of the damage. Use a pen, go to jail.

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