Bill Moyers
April 7, 1992
Who Owns Our Government?


BILL MOYERS: Tonight, "Who Owns Our Government?" I'm Bill Moyers. Tonight we're going to take a close look at the connection between money and government. You may want to put your children to bed. It's not a pretty picture. The influence of money is why millions of Americans have abandoned the political process. They see that Washington has become a mercenary culture where the vote doesn't matter as much as the dollar. Public policy is determined more by campaign contributions than by merit, debate or deliberation.

There may be no better example of this than what has become the most expensive scandal in our history, the savings and loan disaster. It was a carefully calculated raid on the public treasury, bought and paid for by campaign contributions. Producer Martin Koughan reports how this colossal rip-off was in fact an inside job.

CHARLES KEATING: Out here we have the secretarial bay. These are all high-class secretaries, right Sue?


CHARLES KEATING: Right? We would - Ann-Marie, we would probably have, I would think, the highest caliber girl in town. I - they stand in line to come to work here. It's probably because of the pay. It might be because of -

NARRATOR: Charles Keating may turn out to be the biggest bank robber in American history.

CHARLES KEATING: Talk to them. Tell them how you like it here. Did you ever ask me for a raise?


CHARLES KEATING: No. How old are you now?

NARRATOR: But he sure was a good boss.

CHARLES KEATING: OK. You're going to be the first girl that started off as a secretary to make $100,000.

SECRETARY: In what year? In 1990.

CHARLES KEATING: We'll start you right now, raise you to $100,000.

NARRATOR: Raises like this were nothing special at Lincoln because Keating wasn't spending his own money. It was the taxpayers'. He stole it fair and square.

CONGRESSIONAL HEARING WITNESS: The RTC has taken over 690 failed thrifts with $360 billion dollars in assets.

NARRATOR: It all began in this room in the spring of 1980. To some who witnessed it, what happened here in the House Banking Committee was the crime of the century.

Rep. JIM LEACH (R-IA) : It was carefully considered. It was carefully plotted and it represented anything but an accidental hand going into a till.

NARRATOR: Congressman Jim Leach of Iowa watched it happen. He was a junior member of the Banking Committee when the issue of deregulating the savings and loan industry was first raised.

REP. JIM LEACH: An industry that had historically served the little guy, that is, the family home owner, was given the right to make direct investments to invest in commercial real estate itself or anything else itself in certain states - in other words, use federally insured deposits to buy Wendy's or to buy stock or to buy commercial real estate, all in its own name - to speculate. And that kind of power had never been given an insured financial institution inï America's history.

MICHAEL WALDMAN, Congress Watch: S&L deregulation was one of the most disastrous policy moves you've ever had in this country and it was a mistake that was bought and paid for by money from banks and S&L's and big special interests who gave campaign contributions and got something in return.

NARRATOR: And how they gave. While House and Senate banking committees were debating deregulation, savings and loan PACs reported more than $2 million in contributions to committee members. House committee chairman, Fernand St. Germain, was an industry favorite. He alone received nearly $150,000 from S&L PACs in just the first five years of deregulation. St. Germain would prove himself the industry's most loyal ally.

The robbery began on March 27th, 1980. In a late night banking bill conference, St. Germain inserted a seemingly minor amendment raising deposit insurance.

MICHAEL WALDMAN: Originally deposit insurance covered only $40,000 in a deposit. In the middle of the night at a private meeting between House and Senate negotiators, the amount was raised to $100,000 at the insistence of Freddy St. Germain. Why was this important? This meant now that much more money would be coming into S&L's that they could speculate with and there would be Uncle Sam backing it up.

REP. JIM LEACH: The insured deposit thing came suddenly. No one was aware it was on the table and all of a sudden, it was like a momentum that couldn't be blocked. It had not been carefully thought through.

MICHAEL WALDMAN: But if you have deposit insurance with taxpayer money at risk, you have to have very strong regulation. They doubled the deposit insurance and took the regulatory cop off the beat. You actually had a decline in the number of bank examiners. Not just the rules were changed, but they pulled the enforcers off the track of these S&L's.

INTRODUCER: Ladies and gentlemen, the President of the United States and the Secretary of the Treasury.

NARRATOR: The campaign to free S&L's from the burden of government regulation culminated in this happy Rose Garden ceremony in 1982

President RONALD REAGAN: It means help for housing -

NARRATOR: -for the signing of the Garn-St. Germain bill.

Pres. REAGAN: All in all, I think we hit the jackpot.

MICHAEL WALDMAN: Well, it was so appropriate that he used a gambling metaphor because what happened was a whole platoon of riverboat gamblers came in, took over many S&L's and gambled the money away.

REP. JIM LEACH: In retrospect, Garn-St. Germain, which had some pro-visions that were considered reform and reasonable, had other provisions which were of towering dimension and the new powers authorized the savings and loan industry were of such extraordinary magnitude that Congress should rue the day it passed the bill.

NARRATOR: With the signing of Garn-St. Germain, the once-sleepy S&L industry had been transformed into a speculators' paradise. The age of the high-rolling banker had begun, with the fox left guarding the hen house.

CHARLES LEWIS, Center for Public Integrity: The most important people in Washington, in this country, entrusted with watching the savings and loan industry, making sure there were not excesses and abuses in terms of improprieties, those regulators came from the industry and they went back to the industry. We did a study that we're still working on. We found that roughly half of the Federal Home Loan Bank Board officials and half of the F.S.L.I.C. officials either came from the industry or they went back to the industry.

INTERVIEWER: So it became almost impossible to tell who the regulators were and who the regulated were?

Mr. LEWIS: That's right. It all becomes a blur after a while.

NARRATOR: But S&L's began to get into so much trouble so fast, there were still enough honest regulators who noticed. They reported back to Congress that rampant fraud and mismanagement threatened to bring down the industry.

Mr. LEWIS: And so, what is suddenly a $100 million debacle becomes a $200 billion debacle becomes a $400 billion, becomes a $500 billion debacle. If you had dealt with this and nipped it in the bud in '83 and '84 instead of '92, we would have saved hundreds of billions of dollars.

INTERVIEWER: Why wasn't that done?

Mr. LEWIS: It wasn't done because the fixers for a fee, representing the S&L industry, made sure at every turn it didn't happen.

INTERVIEWER: So money really was slowing down the solution?

REP. JIM LEACH: I don't think there's any doubt whatsoever that the industry attempted to call in its chips and some of those chips were of a monetary dimension.

MICHAEL WALDMAN: It was quite clear what was happening in the industry and Congress should have been cracking down. And instead you had key members of Congress trying to fight and block those people who wanted to crack down. There was a hearing on S&L's where a key regulator, Bill Black, was going to testify about the fraud and St. Germain canceled the hearing rather than let his testimony be public.

REP. JIM LEACH: There are some who suggested-

NARRATOR: When Banking Committee reformers tried to increase the authority of regulators to shut down bankrupt S&L's, they found themselves locked in a battle with industry lobbyists and some of their own members.

MICHAEL WALDMAN: Ultimately, there was a tie vote. And who cast the deciding vote, cast a proxy vote for the S&L's? Freddy St. Germain, who was emerging only briefly from their pocket to cast the vote. It was one of the sorriest days in Congressional history.

NARRATOR: So the looting continued almost without pause. Even insolvent S&L's kept pulling in deposits and their owners continued to pay themselves multi-million-dollar salaries.

REP. JIM LEACH: They were looting the public treasury in advance, and then they were using a proportion of the loot coming from the public treasury to influence members of Congress. And so it was the public's money being used to influence the public's representatives, all to be paid on a deferred basis.

CHARLES KEATING: This deal would be probably $175 million. This is a swimming pool and all this area here is a swimming pool. And this center is a dining area and bar. And to get into it, you're going to have to swim through a wall of water and-

NARRATOR: So the money generous Charlie Keating lavished on his boondoggles flowed even more freely to key members of Congress. In all, Keating invested $3 million in political contributions. Prosecutors charge he stole more than $2 billion from Lincoln and he knew every dime of it was yours.

MICHAEL WALDMAN: You would think that this would be a perfect campaign issue, in many ways, for Democrats. They should be in there attacking the fat-cat rich Republicans who are picking your pockets for their elitist friends, right? Well, they're not doing that. Why? Because they were getting money from the same exact places as the Republicans and passing the same policies. As far as S&L's and banks were concerned, there weren't two parties. There was one party, the fund-raising party.

NARRATOR: There was almost no mention of the imminent S&L disaster in the 1988 campaign. The Democrats never criticized the role Republican bankers, including George Bush's son, played in the taxpayer rip-off. And the Republicans never mentioned the Democratic leadership in Congress helped give the bank robbers the key to the public treasury. The only people who didn't know what was going on were the voters. It was a pact of silence purchased by campaign contributions.

REP. JIM LEACH: Anybody that gives a substantial sum of money knows that, at a minimum, they have access on important legislation. They also know from experience that they're prepared to give again in another campaign if the elected representative follows their basic line, if he votes right.

CHARLES KEATING: One question among the many raised in recent weeks had to do with whether my financial support in any way influenced several political figures who took up my cause. I want to say in the most forceful way that I can, I certainly hope so.

MICHAEL WALDMAN: You know, there's a sort of a moral numbness that takes place and people here on Capitol Hill start to take for granted things that from a distance look shockingly corrupt. If a lawyer who had a case before a judge walked in and handed that judge a $5,000 check, we would say that's bribery and send the lawyer to jail. And in Congress it's a campaign contribution.

NARRATOR: Few members of Congress have paid a political price for their role in the S&L scandal. One who did was Fernand St. Germain.

MICHAEL WALDMAN: St. Germain got thrown out of Congress by the voters because of his role in bringing the S&L's down and sticking taxpayers with the tab. Six months later, what does St. Germain turn up as? A lobbyist for an S&L.

NARRATOR: We tried to speak with the former Congressman, but he declined to be interviewed.

[interviewing} People have made rather serious allegations. Would you consider answering them for us?

Rep. FERNAND St. GERMAIN: I gave you my reply.

INTERVIEWER: But the answer is "No," sir?

Rep. St. GERMAIN: You have my reply.

BILL MOYERS: A Justice Department investigation found Fernand St. Germain guilty of - quote - "serious and sustained misconduct," but no charges were ever brought. St. Germain is now a private businessman. As a former member of Congress, he receives a lifetime pension of $65,368 a year, indexed, of course, for inflation.

One more footnote. Despite his promise to give his remaining campaign contributions to charity when he left Congress, earlier this year St. Germain sent this letter to the clerk of the House. In it he says he's converting his campaign contributions to his personal use, all $176,326.62 of it.

Stephen Pizzo is the national correspondent for the National Thrift and Mortgage News. He's also co-author of one of the first and best books written about this scandal, Inside Job: The Looting of America's Savings and Loans.

Steve Pizzo, we know what's on the record. We saw some of that. But will we ever know the full scope of these horrors?

STEPHEN P. PIZZO, Author, "Inside Job": No. By looking at F.E.C. records, we know about $12 million went to Washington during the 80's from the S&L industry, but that's just people who owned S&L's, the S&L's themselves, PACs we know that were connected with them. S&L's were doing something else to get even more money to Washington that'll never be able to be traced. What they do is a contractor in a local town would be dependent on an S&L for their loans to build office buildings, say. They'd come to their S&L and they'd say, "Well, I want to do a strip shopping center on the end of town here and I need a $2 million loan." And the S&L guy would say, "Well, Jack, you have how many employees for your company?"

"Oh, I have about 500." ''Well, what say we give you a $2,100,000 loan?" "Well, gee, sir, I only need $2 million." "Well, here's what I'd like you to do, though. You go to each one of your employees and you tell them to write a $250 or a $500 check to the following Congressmen or Senators. And then you collect those checks. Now, don't let them mail them. You collect them and you bring them to me. We will hand them to the Congressman or the Senator," because it's no fun to bribe someone unless they know who's bribing him. He said, "Well, my employees don't want to contribute to this guy."

"Well, don't worry, because they're not. You tell them that they will reimbursed through their paycheck as overtime or a bonus or something that they don't deserve, but they'll be reimbursed." "Well, I don't want to pay back $100,000." "Don't worry. You won't have to pay that back, either, because here's what I'd like you to do." And I had a contractor tell me exactly this. "I was told to install regular bathtubs in these condominiums we were building, but to bill, to invoice the S&L for jacuzzi tubs that were about $900 more." And that way they just laundered out the campaign contributions through the loan. So the S&L really paid for this loan. The Congressman or Senator who got the checks certainly knew that because it was being handed to him or her by this S&L person.

BILL MOYERS: Didn't some politicians get interest-free loans from some S&L's?

STEPHEN P. PIZZO: Sure. You have people like Tony Coelho, who—

BILL MOYERS: Democratic whip at the time.

STEPHEN P. PIZZO: Absolutely. And at the time when junk bonds were becoming somewhat of a contentious issue in Congress, "Should S&L's invest in junk bonds or shouldn't they?" - a lot of people were saying junk bonds were just steroids artificially pumping up S&L's. That turned out to be the case. Well, Tony Coelho gets a $50,000 loan from Columbia Savings and Loan, run by Thomas Spiegel, the biggest of the junk bond S&L's in California, to do what? Well, to buy - he didn't have the money to buy into a Drexel junk bond issue for Beatrice Foods, so Columbia Savings and Loan leant him the money. He ended up making $12,000 on that.

BILL MOYERS: We hear a lot about the Keating Five, the Senators who got the most money from Keating, but it hasn't been widely reported that in his 1988 campaign, George Bush got something like $190,000 from Keating and companies controlled by Keating.

STEPHEN P. PIZZO: Sure, because during that period of time, Keating was trying very hard - the regulators had been a problem for him. There were regulators like Ed Gray on the Federal Home Loan Bank Board who were leaning on him hard and, and, he, in turn, had to go to Congress then and bribe Congressman and Senators to lean back. This was getting to be an expensive exercise and a dangerous one. He could lose this battle. He decided the best way to do it was simply to stack the Federal Home Loan Bank Board with his own people and he was trying to get his own people on board at this point in time. So yes, his contributions were going to anybody who could make that happen. In fact, he had a meeting actually with George Bush during this period of time.

BILL MOYERS: Is that why in 1988 both parties made this pact of silence, as Martin Koughan said, not to discuss the true cost or disclose the true cost of the bail-out?

STEPHEN P. PIZZO: Absolutely. There was nobody during that campaign, Democrats or Republicans, who wanted the taxpayers to know what a mess this was, so they both conspired and George Bush put a new head to the Federal Home Loan Bank Board in Danny Wall, who went for 10 months before Congress and lied to them consistently about the cost of this. Private economists were saying this is at least $100 million. He'd go to Congress and say, "Gentlemen, this is $10 million, maybe $20 million, tops $20 million. No taxpayer bail-out" and all the - everybody in Congress who knew he was lying would sit there and say, "Well, thank you very much, Mr. Wall. That's very reassuring." It was only three weeks after George Bush won election as president of the United States that Danny Wall went to Congress and said, "Gentlemen, we've got a problem. Oh, it's more than $100 million." I mean, the difference a day makes.

BILL MOYERS: Did you get nauseated doing this book? I mean, you took civics when you were in high school.

STEPHEN P. PIZZO: Let me tell you something about civics. After our book came out, I went into the fact that Congress was - the Senate was actually considering bank deregulation. It was going to be before Senate Banking. And my co-authors and I flew to. Washington with copies of our book and had a meeting with the staff members of the Senate Banking Committee and argued against the logic of bank deregulation. I said, you know, "Don't do this, guys. I mean, at least until you understand what you've done to the S&L's." And finally one of the Cong- staffers looked at me and she said, "Steve, do you have any idea why the Senators sit on this committee?" I thought that was sort of a Civics 1A question, and I said, "Sure, to hold hearings on banking-related matters and propose legislation." She didn't let me finish the sentence. She said, "No, they sit on this committee to attract campaign contributions from the banking industry. And let me tell you something, bankers are paying mightily to get bank deregulation through." And she said, "Now, just who do you have in mind that'd be willing to pay against it?"

BILL MOYERS: Thank you, Stephen Pizzo, for being with us.

STEPHEN P. PIZZO: Thank you, Bill.

BILL MOYERS: Thank you for Inside Job, a book we all should be reading.

It's not as though no one's tried to reform this campaign financing system. Back in 1907 Congress banned corporate contributions to federal campaigns. Then after the Watergate scandal in 1974, Congress established strict limits on individual campaign contributions. And then Congress tried to eliminate the influence of big money on presidential politics by establishing public financing of president campaigns. No luck. Like water finding its own level, money oozes through the system, searching for a loophole.

NARRATOR: Get-togethers like this are now a daily occurrence on Capitol Hill, as many as a dozen a day. It's the dominant party in Washington today, the fund-raising party, and it demands as much time and attention from Congress as running the government. The fun is out here, the business back here. By the end of the night, checks totaling tens of thousands of dollars will be stuffed into this brown envelope and the totals reported here, to the Federal Election Commission. The F.E.C. sets strict limits on contributions for presidential candidates. Individuals may contribute no more than $1,000 and only during the primary season. No contributions are allowed for the general election because that is publicly funded. Both candidates will get $50 million taxpayer dollars, a reform designed to eliminate the secret fat cat contributions made famous by the Watergate scandal. But did it work?

LARRY MAKINSON, Center for Responsive Politics: If you, if you, read the F.E.C. records and took them at face value, you'd think that homemakers and housewives are the biggest source of campaign money in America today.

NARRATOR: Larry Makinson works for the Center for Responsive Politics. His investigation found F.E.C. records often hide as much as they reveal.

LARRY MAKINSON: We don't know who these people are. The candidates aren't telling us. The F.E.C. records don't tell us. If somebody doesn't tell us anything at all, it's almost impossible to find out who's giving money to these candidates.

NARRATOR: Until last year the F.E.C. kept no record at all of what is called "soft money," money channeled indirectly to the candidates through organizations like the Democratic and Republican National Committees. The Center for Responsive Politics has spent years identifying the donors and building this data base.

Mr. LEWIS: Soft money - it's a loophole. To be perfectly honest with you, my take on it is that it is money-laundering. It is a way for all the interests in this city, and there are thousands of those interests, to pour large sums of money into the political process without accountability. They will just give it to the party or give it to the state party or give it to some entity which will then wash that money through the whole system. And then you'll try to figure out who gave money to who, when, and you won't be able to find it.

NARRATOR: Makinson and his partner, Josh Goldstein, have been working to unravel the soft money trail in the 1988 Bush campaign. It's not easy.

LARRY MAKINSON: What have you got, Josh?

JOSH GOLDSTEIN, Center for Responsive Politics: OK, I have-

NARRATOR: They have been correlating F.E.C. reports with soft money contributions and they have been uncovering numbers President Bush's big donors did not want the F.E.C. or you to see. For example, check what the F.E.C. reports show under the name Zappala.

LARRY MAKINSON: We have a Kimberly Zappala, Joanne Zappala and Andrea Zappala, all of the same area in St. Petersburg, Florida. Kimberly puts down that she works for Joseph Zappala and Associates.

NARRATOR: Joseph Zappala? That would be the man President Bush made ambassador to Spain.

LARRY MAKINSON: Do you have a Joseph, Josh?

JOSH GOLDSTEIN: I have Joseph Zappala at $106,000 and he and his wife gave another $5,000.

NARRATOR: That's soft money.

LARRY MAKINSON: The Sembler Company does not pick up Mr. Sembler - yeah, four employees of the Sembler Company. They all gave $1,000 contributions on just about the same date, but Sembler himself, he doesn't show up on our data base.

NARRATOR: Sembler? That would be Melvin F. Sembler, Bush's choice as ambassador to Australia. Now, look at the soft money.

JOSH GOLDSTEIN: I have Melvin F. Sembler giving $101,000 and the Sembler Company gives an additional $15,000.

NARRATOR: What do these men have in common besides interesting jobs? They're members of "Team 100," an elite group of Bush supporters. Its captain was Bob Mosbacher.

LARRY MAKINSON: We've got Robert A. Mosbacher, Jr. Here he is, Mosbacher Energy Company, Houston, Texas. He gave $1,000 on May 4th, 1987.

JOSH GOLDSTEIN: Only $1,000?

LARRY MAKINSON: Only $1,000. That's it. He shows up having given $1,000 to George Bush.

NARRATOR: The President named Bob Mosbacher Secretary of Commerce. The F.E.C. still doesn't know how much he really gave, but we now know that Bob Mosbacher gave at least $100,000. That was the smallest contribution required to join the Bush campaign's Team 100. Two hundred and forty-nine Bush supporters gave over $100,000 in soft money to the 1988 Bush campaign. That's nearly $25 million. Team 100 is a secretive bunch. An alert CBS News crew caught these members arriving for a quiet little White House dinner last October. The White House didn't tell the press or anyone else about the party.

LARRY MAKINSON: We've got Jeffrey and Joy, Ply-Gem Industries, $2,000 from Jeffrey. Looks like $1,500 from Joy. What have you got?

JOSH GOLDSTEIN: I've got Joy Silverman for $107,000.

NARRATOR: Team 100 member Joy Silverman is the wife of Ply-Gem Industries head Jeffrey Silverman. President Bush nominated Joy to be ambassador to Barbados, but she was blocked by the Senate because she has no college education or work experience. In all, six Team 100 members were nominated ambassador. [also Gildenhorn, Switzerland; Wilkins, Netherlands; Hostler, Bahrain}

Mr. LEWIS: The obvious question is, the other people besides the six, what did they get? You've got to be wondering and you have to know in your heart that they got something. They didn't give $100,000 because they had a great affinity for Uncle Sam and they wanted to help their country that day. I mean, that's a crock.

COMMON CAUSE VOLUNTEER: We're still interested in hearing about them in this soft money business.

NARRATOR: The same idea occurred to the volunteers at Common Cause, a public interest lobby. Their researchers took a close look at the Bush Team 100 to see if those big contributions paid any dividends.

Remember those six nominated ambassador? Well, all of them are involved in the real estate business. In fact, one out of every four Team 100 members was a real estate executive, 60 in all. People like developer Donald Trump, builder Trammell Crow and shopping center magnate Alfred Taubman.

President GEORGE BUSH: Real estate has led our economy out of almost all the tough times we've ever had.

NARRATOR: At the urging of his real estate supporters, President Bush has called on Congress to restore a treasured tax loophole.

GEORGE BUSH: My plan would modify the passive loss rule for active real estate developers.

NARRATOR: Modifying the passive loss rules would be of no help at all to home owners or renters. That's why Congress closed that tax loophole in 1986. At a time when there is a glut of office space, many experts question the need for a special tax break for developers. Those deductions have been cited as one factor that helped fuel the massive overdevelopment which caused the collapse of the savings and loan industry. If the Bush proposal passes, Common Cause predicts that those wealthy real estate developers on Team 100, who gave a secret $6 million to the '88 Bush campaign, will qualify for tax breaks worth $2.5 billion.

BILL MOYERS: Ellen Miller heads the Center for Responsive Politics in Washington. It's a non-partisan research group that focuses on money's effect on the political process. Ed Wertheimer is the president of Common Cause, a non-profit public interest lobby with more than 265,000 members.

Can we measure the effect of soft money on president campaigns, the indirect money that goes in this nefarious and circuitous way and finally winds up helping the candidate? Can we measure its impact?

FRED WERTHEIMER, Common Cause: Well, yeah, I think we can measure its impact, both on the campaigns, but much more importantly on government. This group was called Team 100. What it really is, is George Bush's ruling class, 249 individuals, $100,000. Now, any citizen can be a member of this ruling class. That's provided you're able to put up $100,000. It is the most exclusive club in the world and just to describe what it's about, take three of the great examples of the excess and greed of the 1980's. Charles Keating, S&L kingpin, Donald Trump, real estate kingpin, Henry Kravis, corporate raider kingpin - all on the list.

BILL MOYERS: Charles Keating was on the list?

FRED WERTHEIMER: Absolutely. Charles Keating, who cost us $2 billion in taxpayer money, was on that list.

ELLEN MILLER, Center for Responsive Politics: It's torrents of money in $100,000 chunks, in fact more of this kind of sewer money in the last presidential election cycle than we ever had in the days of Watergate.

FRED WERTHEIMER: I believe it's illegal and it's a laundering problem.

BILL MOYERS: The soft money problem?

FRED WERTHEIMER: Soft money is a scam. Everyone knows what's going on. Presidential candidates can't raise the money directly, so they raise it, run it through the parties, get the benefit of it. It's illegal, in my view, but you have the enforcement agency basically wink. Everyone decided to say, "Well, we'll just forget about it." So a system that's sup-posed to be fully publicly financed now gets broken down by a scam which is illegal and which can be stopped. Which can be stopped. This doesn't have to happen.

BILL MOYERS: I'm taken with your point about the impact of - shifting the emphasis from the impact on politics to the impact on government because we are now seeing cause and effect. I mean, these tax breaks for the real estate industry - the Los Angeles Times had a recent report which says that on December 2nd, George Bush met for 45 minutes with his - with real estate executives and lobbyists. They pleaded for tax breaks to make up for the losses they achieved in the 1980's. Then it said Congressional Democrats - Bush, as we saw in the State of the Union, actually made the proposal and Congressional Democrats not only embraced Bush's proposals, they expanded them. And the Los Angeles Times says, "Seldom do tax proposals as costly to the treasury as these catch fire so quickly in Washington and some critics argue that the idea would not have gained such widespread support if home builders, brokers, agents and developers had not showered Bush and key members of Congress with millions of dollars in contributions."

FRED WERTHEIMER: No question about it. And again, these are not tax breaks for ordinary citizens. President Bush's proposal would have helped the developers. He got $6 million from Team 100. The Congressional proposals had three quarters of the House of Representatives co-sponsoring. They got $12 million in PAC money from the real estate industry. This is a classic example about how political money serves the interests of the wealthy, the powerful and the politicians and the taxpayers pay for it.

ELLEN MILLER: And you know that this is only one example, and it's a good, clear example, but it happens in industry after industry in this country and our soft money contributors represent all of those industries, whether it's the tobacco industry or the agriculture industry. And each one of them is contributing to the parties to help candidates, to buy the influence, to buy the access, and it has made the government rife. It goes to both the Democrats and the Republicans and so all of them have become really the party of this elite who fund these campaigns.

BILL MOYERS: Sometimes what money buys from government is not action, but no action - stalemate. Take health care. There's no way Washington cannot hear the clamor to change a system whose costs are out of control and out of reach of vast numbers of people, yet nothing happens. To find out why, you have to watch those millions of dollars in campaign contributions making their way from the health care industry into the coffers of Democrats and Republicans alike.

NARRATOR: For most Americans, it's their worst nightmare: a sudden serious illness, the need for expensive hospital care, an accident that could wipe out your savings overnight. Many of the people who line up in the emergency rooms of big city hospitals are on fixed incomes or they have no jobs. But this is not just a crisis for the poor. Thirty-five million Americans have no health insurance, many of them in the middle class. Nine out of ten Americans say America's health care system needs drastic overhaul, but they are waiting in the wrong line.

It's 8:00 AM and the line has already started to form. A seat in this dreary corridor is one of the most valuable pieces of real estate in Washington. People wait two hours or more just to make sure they get a good seat for the most important show in town, today's hearing in the House Ways and Means Committee.

These people mostly represent special interests in the health care industry, doctors and pharmaceutical companies, hospitals and insurance companies, lobbyists with a job to do.

Rep. DAN ROSTENKOWSKI (D-IL): First we want a proposal that guarantees every American will be covered by health insurance when it certainly is fully implemented.

NARRATOR: There are no casual observers in this room. These lobbyists are here to listen to the administration's health care reform package, to make sure their client comes out a winner.

DAN ROSTENKOWSKI: In the fourth year of his presidency, President Bush has finally come up with a plan to reform our health care system.

NARRATOR: President Bush's moderate reform plan was applauded by lobbyists from the insurance industry and criticized by public interest groups.

Rep. PETE STARK (D-CA) : The President's plan fails to address these two issues of paramount importance to the American people.

NARRATOR: Congressman Don Pease from the 13th District of Ohio has watched this scene for the past 16 years.

Rep. DON PEASE (D-OH) : Well, there are not very many constituents, actual residents of my district in the room hardly ever. Constituents don't travel from Ohio or from Oklahoma or from Tennessee to Washington very often, whereas the PAC people are here all the time. Members do try to represent their constituents, but there is no one there who represents the public interest, per se. Poor people who don't have health insurance, their positions may tend to get overlooked, not deliberately but because they're not in that lobbying game.

VIVECA NOVAK, Common Cause: I think that people out there don't really know the extent to which this game is played in Washington.

NARRATOR: Viveca Novak and Vicki Kemper of Common Cause in-vestigated the health care lobby.

VIVECA NOVAK: We found that there are more than 200 medical industry PACs, that they have given over the last 10 years more than $60 million to Congressional candidates. We have also found that there has been no major discussion of health care reform over the last decade.

Mr. LEWIS: Money is clearly what makes this town work or not work. Sometimes the whole object is to gum up the works-

INTERVIEWER: To make things not happen?

Mr. LEWIS: - to make things not happen, to prevent a bill from becoming law.

NARRATOR: In the last decade, members of the Ways and Means Committee have received, on average, more than $160,000 in campaign contributions from the health care industry. House and Senate leadership averaged more than $250,000. Congress is now considering more than 30 health care reform bills, many written by the industry itself.

Mr. LEWIS: Many of these groups say they have reform proposals. Everything is cloaked in reform. I bet you those 60 bills, "reform" is used hundreds of times in all those bills that are introduced. But the wheels of government are completely intractable and are locked in because you've got all these moneyed forces, all aligned to basically slow it up.

NARRATOR: Campaign contributions by the health care lobby have had one obvious effect: Everyone with a stake in the status quo, doctors and insurance companies, hospitals and pharmaceutical companies, hundreds of health care PACs have paralyzed Congress.

[onscreen: American Medical Association, $11,944,307; National Association of Life Underwriters, $5,554,939; American Dental Association, $4,034,298; American Academy of Ophthalmology, $1,900,561; American Hospital Association, $1,771,307; American Family Corporation, $1,696,850; American Optometric Association, $1,354,496; American Nurses Association, $1,320,179; American Podiatric Medical Association, $1,110,425; American Health Care Association, $1,026,011; Federation of American Health Systems, $934,709; Travelers Corporation, $891,817; Prudential Insurance Company of America, $827,957; American Chiropractic Association, $823,740; Metropolitan Life Insurance Company, $810,356; Pfizer, Inc., $803,634; Abbott Laboratories, $761,449; Torchmark Corporation, $729,040; CIGNA Corporation, $719,049; Bristol-Meyers Squibb Company; $690,176; Eli Lilly and Company, $669,834; Massachusetts Mutual Life Insurance Company, $666,898; Health Insurance Association of America, $583,274; Blue Cross and Blue Shield, $574,918]

VICKI KEMPER, Common Cause: What's best for the country, what is most efficient, is not the primary goal in this system. What seems to be the most important thing is survival, of a member of Congress or of a particular industry.

VIVECA NOVAK: You still have Democrats and Republicans, but I think more and more the important parties are the incumbent party and the non-incumbent party.

NARRATOR: When there is no incumbent in a race, the health care industry tends to cover its bets. Take the last race for Rhode Island's 2nd District, John Reed versus Trudy Coxe. The American Health Care Association gave both candidates the same amount on the same day. So did the Corporation for the Advancement of Psychiatry. So did the American Hospital Association. But the National Association of Life Underwriters bet $3,000 on Republican Trudy Coxe. After she lost they gave the same amount to the winner, money intended to make the new Congressman think twice on health care issues.

DON PEASE: The temptation is always there to say, "Well, on this issue it's not close. My vote's not going to decide the issue. Why should I offend this powerful group? I'll just vote the way they want me to, even though in my mind and heart, I have an idea that the other way may be the right way to vote."

NARRATOR: And as long as the incumbent votes the right way, the money keeps on flowing. In the last race for Virginia's 8th District, incumbent Stan Parris was challenged by Democrat James Moran. Republican Parris was the darling of the American Medical Association. It gave the Parris campaign four separate contributions totaling $10,000, the legal maximum. But when Parris lost, the AMA sent a $5,000 check to the new incumbent, James Moran.

VICKI KEMPER: This is the "cover your bases" strategy. Put the money where you're going to get most for your buck.

NARRATOR: So while the cost of health care doubles every six years and citizens are overwhelmed by the health care crisis-

Rep. BILL ARCHER (R-TX) : The President's plan makes a clear statement-

NARRATOR: - Congress mostly talks, the administration tinkers and the lobbyists hover. There will be an accounting on how each member voted when the time comes to ask for campaign contributions.

BILL ARCHER: - costs jobs for those who can least afford to lose their jobs-

NARRATOR: And there will be plenty of health care money for members who vote the right way. Don Pease, for one, has decided to give up the money chase. He'll retire at the end of this term, frustrated by money's effect on politics, by a Congress held hostage.

DON PEASE: It's not as much fun to be in Congress, to spend all the money that you have to spend, to spend the time raising the money and then to have the frustrations of trying to get accomplished things that you really feel strongly about. I'm a problem-solving kind of a person. We ought to be telling people some things they don't want to hear. And members say, ''Well, why should I do that? I might lose. I'll just be quiet and let things get worse and worse." I do despair sometimes about how we're going to resolve that.

BILL MOYERS: Dr. Gwendolyn Patton, a former university professor, is now the head of a grass roots organization in Montgomery, Alabama, the Working Group on Electoral Democracy.

Dr. Patton, what brought you to a concern for money and politics?

Dr. GWENDOLYN M. PATTON, Working Group on Electoral Democracy: Well, as a youngster I was very much a part of the voting rights struggle with my family and my relatives and grass roots people all over the South. And we really thought that the vote would be the true equalizer. Many of us were disenfranchised, not only black folk, but white folk, the poll tax, all those kinds of barriers. And then finally when we won the right to vote - people were killed, people were maimed and we still have barriers and we've overcome some of those, voter registration and all of that - then we came up against a blockade and that blockade was money.

BILL MOYERS: You know, the other side of it is - one of the scholars who studies money and politics, a leading political scientist, says there's something worse than money in politics and that's no money in politics because it may be true that while money corrupts, it takes a lot of money to pay the TV ads, travel, polls, organizations, all of this undergirding of the political process.

FRED WERTHEIMER: The answer to that is clean money, public financing, free TV. Now, some people sit back and say, "Well, public money, that's going to cost the taxpayer." Let's just take one example from your show. The S&L scandal cost the taxpayers $500 billion. That is $3,600 in taxes for you and you and you and everyone who pays taxes in this audience and everyone in America. One dollar a year for public financing versus $3,600 for the S&L scandal versus the chance to get health care? It's the best investment we can make in this country.

ELLEN MILLER: I think you have to look at this in terms of what the real goal is and we have to challenge in this country the assumption that public elections should be privately financed because that's the inherent problem that we have in terms of the special interests, the vested interests' control and sway over the electoral process. We have to look at the issue of trying to eliminate the access of a citizen's - either his own or her own wealth or access to that wealth as the determinant of influence in this political process 'cause that's what we have today.

GWENDOLYN PATTON: As we look back historically to democracy in this country, we learned that democracy, the vote, has never really been an equalizer. George Washington was elected simply by a handful of wealthy, rich white men with property. And through the years it has always been, you have to pay to play. We in the deep South hope are hoping that the citizens of this country will begin to - you know, to analyze what we call a democracy here. When women got the vote, then you got the poll tax. It has always been, you have to pay to play and I think we ought to, all ought to be outraged and that financing of our elections and not simply on the federal and national level, but on the state level - I can tell you some horror stories on the state level about private money. But in fact-

BILL MOYERS: Influencing government to act?

GWENDOLYN PATTON: Oh, one person in Alabama gave 25 senators out of 35 state senators campaign contributions. He gave 60 state representatives out of 105 representatives campaign contributions - one person, $640,000. He bought the Alabama state legislature and the first item on the agenda was for a dog track that he wanted in our metropolitan city. And so what we say in Alabama, the rank and file, the grass roots, "Alabama's government has gone to the dogs."

FRED WERTHEIMER: Can I pick up on one point here? Change is possible. There is hope. You cannot see the change going on around the world, in the Soviet Union, in Eastern Europe, the transition in South Africa, and think that we can sit here without the world passing us by. We can get change, but this is the bottom line. Citizens here are going to have to demand it. They're going to have to say, ''We're mad as hell and we're not going to take it anymore."

BILL MOYERS: But why do you think the scandals so far, that we've just seen bare surfaces of, have gone down - been swallowed so lamely by most of us?

FRED WERTHEIMER: It has not fallen lamely. Look what's happening this year. The anger is finally starting to come out. I think people people question whether you can actually do it. They get cynical.

BILL MOYERS: They do. They do, Fred, but the fact of the matter is, money is already intertwined in the two alternatives that the people will have. I mean, just take the health care. Health care advisers, lobbyists, are a part of every one of the Democratic campaigns and the principal health care adviser to the George Bush re-election campaign is a registered lob-byist on behalf of four companies in the health industry, plus representing the pharmaceutical manufacturing association.

ELLEN MILLER: I think the corruption of money in politics has thus far been a very subtle and corrosive kind of event. It's not - it's more akin to a thousand smoldering cigars than it is to the smoking gun that we had in Watergate. What I think is happening is that the public, and we see this in poll after poll in this election year, is becoming much more aware of the specific influence of vested interest money in campaigns.

BILL MOYERS: Let's say there is anger out there. They still are limited to choices in November that are deeply infected by the very toxic influence of money we've been talking about.

FRED WERTHEIMER: They can basically say, "Put up or shut up" or perhaps "Get out." They can basically demand an end to this legalized corruption. It is not an overstatement to say that the essence of our democracy is on the line here and we have got to take it back as citizens. And I believe if we demand it, we can do it. But if we sit around and mope, in Washington not just our rights and our democracy, but our economics, our health care, is all going to be played out for dollars with special interests.

GWENDOLYN PATTON: I really think that we're going to have to do it as grass roots citizens, otherwise we risk a real revolutionary type of struggle in this country as the crisis deepens. We have it - down South we're asking candidates to sign pledges to say that they will not take X amount of money, that they will relate and be accountable to the constituents. If we go out there and say "This is not a difficult thing. This is easy. They're thieves. They're robbers," you know, "They're extorting money from us," people understand that.

BILL MOYERS: Using real language. I mean, you talked about "legalized corruption." She says, "stealing," "extortion." Are you all three saying that it should be only public financing? Isn't there a way to have small contributions from millions of citizens so that they feel that they have a stake in this, other than just checking off this list and having the money taken-

FRED WERTHEIMER: We have a little bit of a difference here. We see a role for very small private contributions, but you have to understand that the dollar tax check - off today, the public financing system, millions of citizens are checking off one dollar to get a clean system, and that's where this scam of soft money breaks it down. We think there can be a role for very - for small private contributions, but public financing is the key. It's critical.

BILL MOYERS: It would be very expensive, all the way down through the system. I mean, as Herbert Alexander, who is probably the leading scholar in academia of money in politics, says, "The $2.7 billion spent in 1987 and '88 on all elections was not a lot of money for a nation as large as ours. It was about the size of what Philip Morris and Procter & Gamble spent on their advertising."

FRED WERTHEIMER: Well, we don't have to spend that much money. But I come back to you. What we spend on our elect-we can make a choice. We can put up a little money, a little money, all of us, 200 million Americans, or we can sit here and watch our government being stolen from us, our health care being stolen from us, S&L scandals, anything you can think of, you can watch it being taken away from you by this private money.

ELLEN MILLER: Let me make that even more specifically. For $5 to $10 per taxpayer, we could have a system of total public financing for all Congressional and presidential races - Congress, House and Senate, primary and general, total public financing for a cost of $5 to $10 a taxpayer. I mean, compare that to the cost of the S&L bail-out. And I think the sense is that in order to establish a financially level playing field, that we have to look at some kind of vacuum-sealed system. Sure, there's room in it for small contributions. Maybe those go to political parties. But when you begin to design a system that has the potential for crevasses and cracks, that's when you have the kinds of problems that you have in today's system in terms of soft money.

GWENDOLYN PATTON: I think our government ought to be financed automatically as a line item in the budget. I don't think that - you know, the check-off is OK. I'm not opposed to that. But I think that democracy is so important that it ought to be institutionalized in the expenditures of funds from the government, state and national.

BILL MOYERS: Thank you very much, Ellen Miller, Fred Wertheimer and Gwendolyn Patton. The last word goes to the chair.

I used to think that Henry Miller was just being clever when he said "The blind lead the blind. It's the democratic way." Well, now we know what he meant. Our political leaders have shut their eyes to the corruption of our system, brought on by their obeisance to money, and they do their best to keep us in the dark about their worst. Only too late did we learn how the public was flagrantly ripped off by con men in the thrift industry aided and abetted by a kept Congress. Then both parties joined with the White House in a compact of silence about the true magnitude of the costs. That done, the election over, the very government that did the dirty work in the first place slaps the taxpayers with the price of the clean-up. Without a blush of shame they come back now in 1992 and say, "Give us power again, so we can do it again." Well, it doesn't have to be this way. The British limit their campaigns to just three weeks. They put a limit of $15,000 on spending and they give the candidates free and equal television. We could do this, too, except that the officials who must change our system are the very people who benefit from its plunder. Millions of Americans are angry about all this, as Dr. Patton said, but the plunder is organized and championed. The anger is not.

Thank you for listening to America with us. I'm Bill Moyers.

This transcript was entered on April 2, 2015.

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