The letters S and L have become the scarlet letters of politics.
Consider what happened in July at World Savings & Loan in Oakland, where Herbert and Marion Sandler operate what is widely lauded as the nation's best-run thrift and an industry model for avoiding risky investments that helped cause the thrift crisis.
World Savings' reputation was little comfort to Theodore R. Muenster, the Democratic challenger in Tuesday's U.S. Senate race in South Dakota. Realizing that S&L dollars can be political poison, Muenster forfeited $2,000 that the Sandlers contributed to his campaign.
"Returning money from someone who plays by the rules and does things right is downright silly," complains Herbert Sandler. "We're a squeaky-clean operation."
Squeaky-clean doesn't count for much in this election. The S&L branding iron is searing candidates left and right, Democratic and Republican. What arguably is the nation's most complex financial scandal ever has been crammed into 30-second commercials, 10-second sound bites and one-page press releases linking opponents in any way possible to the letters S and L. Cynics joke that candidates with passbook savings accounts are even at risk.
In some cases the accusations are well deserved, aimed at incumbents with questionable ties to scandal-plagued thrifts. But in many cases the accusations are shots from the hip clearly designed to take advantage of the public's confusion over the complex problem. One member of the House Banking Committee has been accused of siding with the savings and loan business "12 out of 15 times," even though his votes on industry-related matters probably number in the hundreds.
"It's good guys and bad guys. Any candidate who had anything to do with an S&L is considered a bad guy," said Robert Litan, a Brookings Institution fellow specializing in financial institutions.
"You're talking about McCarthyism to the 10th power. It's guilt by association," says Rep. Bob McEwen (R-Ohio).
Litan says the savings and loan topic has degenerated into "a Willie Horton-type issue," making reference to the rapist who became a cornerstone of George Bush's presidential campaign in 1988 against Massachusetts Gov. Michael S. Dukakis. "That's the level at which people understand this," Litan said.
It's hard to say if anybody is likely to win because of S&L smears, but it has become a factor in several close races. For example, Democrat Calvin Dooley is in a tight race for Congress against Rep. Charles Pashayan Jr. (R-Fresno) by raising questions about Pashayan's ties to notorious thrift kingpin Charles H. Keating Jr. And accusations of thrift ties are prominent in the tight battle for California governor between Sen. Pete Wilson (R-Calif.) and former San Francisco mayor Dianne Feinstein.
To be sure, plenty of candidates have a lot to answer for when it comes to their role in the savings and loan debacle, which will stiff taxpayers with a $600-billion bill well into the next century. And S&Ls undoubtedly would be even more of an explosive campaign issue had any of the five senators most closely linked to Keating faced reelection this year. Those in the so-called Keating Five include Sen. Alan Cranston (D-Calif.) and Sen. Donald Riegle (D-Mich.), who is in such hot water he donated to the Treasury Department $212,000 in previous savings and loan contributions.
Past Ties Embarrass
In Chicago, Rep. Frank Annunzio (D-Ill.) is dogged by his past ties with Keating and for cozying up to the thrift industry's main trade group at a time when it was pushing for looser standards.
Sen. John F. Kerry (D-Mass.), who has publicly expressed his outrage about S&L kingpins, is embarrassed over disclosures of links to Florida thrift executive David Paul, who is being sued by the government for allegedly squandering $31 million. Among other things, Kerry attended a "Great Chef's Dinner" that Paul hosted in 1988 at a cost of about $129,000. Paul brought six European chefs to the United States and dispatched an employee of his CenTrust Savings to Paris to plan it.
But many of the accusations are undeserved, or at least unproven.
Rep. Stan Parris (R-Va.) last week was accused of having had lunch once with Keating. Parris insists he has never met with him. Reacting to a commercial that focuses on the issue, Parris' campaign staff points to a Washington Times interview early this year in which Keating himself said Parris was the only lawmaker he tried to meet who didn't hit him up later for campaign donations.
Parris campaign workers also are busy distributing photocopies of nonpartisan praise in the Congressional Record from House Banking Committee Chairman Henry B. Gonzalez (D-Tex.), who credits Parris with recognizing early the depth of the savings and loan mess.
Thrift Reform Bill