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Records of the White House Office of Speechwriting (George H. W. Bush Administration)
Carol Aarhus Alpha Files
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Originally Processed With FOIA(s):
FOIA Number:
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Speechwriting, White House Office of
Series:
Aarhus, Carol, Files
Subseries:
Alpha File, 1990-1992
OA/ID Number:
13866
Folder ID Number:
13866-006
Folder Title:
Savings and Loans
Stack:
Row:
Section:
Shelf:
Position:
G
19
2
5
7
Chronology of Significant Events in S&L Deregulation
O
Prior to 1989, Congress had provided that every major
regulator except the Comptroller of the Currency would be an
"independent" agency:
Federal Home Loan Bank Board
Federal Reserve Board
Federal Deposit Insurance Corporation
Federal Savings and Loan Insurance Corporation
Securities and Exchange Commission
Commodities Futures Trading Corporation
National Credit Union Administration
O
During the 1970's, money market mutual funds offering market
interest rates began drawing funds away from banks and thrifts
where interest rates were capped at low levels under "Regulation
Q." Because of the very high inflation and interest rates during
the Carter Administration, this "disintermediation" accelerated
dramatically during the late 70's.
O
In 1980, President Carter proposed, and a Democratic
Congress passed, the Depository Institutions Deregulation and
Monetary Control Act (DIDMCA). Principal features:
Provided for the phased deregulation of interest rates
in savings and checking accounts
Provided S&Ls with greater discretion in making loans,
holding commercial paper, and offering credit cards
Increased deposit insurance from $40,000 to $100,000
per account (this provision was added in Conference,
without the scrutiny of the usual legislative process)
[Note: The possibility of reducing insurance limits is
a very sensitive issue on which the Bush Administration
has not taken a position]
At the signing ceremony, President Carter said: "[I]t's another
important step in a long but extremely important move toward
deregulation of the private enterprise system of our country."
O
Also in 1980, the independent Federal Home Loan Bank Board
loosened restrictions on thrifts' use of brokered deposits.
O
In 1982, Congress passed the Garn-St. Germain Depository
Institutions Act. Building on the Carter Administration's DIDMCA
initiative, the new law expanded the ability of thrifts to make
commercial loans and increase their consumer lending. In
addition, the new law fully deregulated interest rates on savings
and checking accounts.
O
In 1982, the independent Home Loan Bank Board adopted new
regulatory accounting rules that concealed the insolvency of many
thrifts. In 1982 and 1983, the Board also eased or eliminated
many restrictions on the ability of thrifts to invest directly in
real estate and to engage in commercial lending.
In 1984, the Bush Task Group on Regulation of Financial
Services recommended a comprehensive reform of the regulatory
apparatus. Highlights included:
More effective regulation through the elimination of
archaic and overlapping regulatory structures
Uniform capital and accounting standards to end low
capital levels and phony accounting standards in the
thrift industry - the Report noted that low capital
levels encouraged insured institutions to engage in
high-risk speculative activities
Authorizing the FDIC to institute risk-based insurance
premiums - the Report noted that the current system
forced prudently managed institutions to subsidize high
risk institutions
In early 1985, a working group of President Reagan's Cabinet
Council on Economic Affairs published a report adopting the main
elements of the Bush Task Group recommendation. In early 1987,
legislation to implement the Task Group proposals was introduced
by the Administration, but the Democratic Congress refused to
move the legislation.
o
By late 1984, FSLIC was experiencing high rates of staff
turnover at Federal civil service pay scales. In July 1985, the
Bank Board solved this problem by delegating examining
responsibility to the district Federal Home Loan Banks (which
could pay examiners competitive salaries).
O
In early 1986, the Reagan Administration asked Congress for
$15 billion to recapitalize FSLIC, which was insolvent. The
request encountered strong opposition, especially from Speaker
Jim Wright. More than two years later, Congress finally enacted
a bill providing:
only $10.8 billion in recapitalization (28% less than
the Administration had requested 2 years earlier)
"statutory forbearance" provisions not sought by the
Administration -- these provisions required the use of
phony "regulatory accounting" and permitted thrifts in
"depressed areas" to operate with capital of less than
one-half of one percent of assets
The delay in recapitalizing FSLIC prevented regulators from
closing insolvent institutions before their losses ballooned.
The "statutory forbearance" provisions had similar effects.
Note: The House of Representatives' Special Outside Counsel
who investigated Speaker Wright found that Wright:
on at least one occasion took the FSLIC
recapitalization bill off the House calendar in order
to pressure the Bank Board into altering its position
on a matter affecting a major Dallas real estate
syndicator
sought to have at least two federal regulators removed
from office
intervened on behalf of a Democratic Party official who
had been banned from the thrift industry for engaging
in regulatory violations and unsound practices.
The House ethics committee did not regard any of this as
evidence of undue influence because: "The assertion that
the exercise of undue influence can arise based upon a
legislator's expressions of interest jeopardizes the ability
of Members effectively to represent persons and
organizations having concern with the activities of
executive agencies."
O
In 1989, President Bush proposed the legislation that became
FIRREA. The President also asked for an immediate supplemental
appropriation for DOJ bank fraud investigations, but the
Democratic Congress refused to act on this request.
THE WHITE HOUSE
WASHINGTON
SEPTEMBER 25, 1990
MEMORANDUM FOR DAVID DEMAREST
THE 9:30 GROUP
SPEECHWRITING AND RESEARCH
FROM:
DEB AMENDD
RE:
LATEST SAVINGS AND LOAN STATISTICS FROM JUSTICE
David Runkel of the Justice Department sent over their
latest S & L press release as well as a recent speech on the
subject by the Attorney General. These are attached for your
information.
Department of Justice
FOR IMMEDIATE RELEASE
CRM
THURSDAY, SEPTEMBER 6, 1990
202-514-2007
(TDD) 202-514-1888
SAVINGS AND LOAN PROSECUTION UPDATE
The Department of Justice today issued the following
information describing activity in "major" savings and loan
prosecutions from October 1, 1988 through August 29, 1990.
Informations/Indictments:
274
S&Ls Victimized:
340
Estimated S&L Losses
$3.443 billion
Defendants Charged:
403
Defendants Convicted:
316
Defendants Acquitted:
13*
Prison Sentences:
629 years
Sentenced to prison:
176 (77%)
Awaiting sentence:
101
Sentenced w/o prison or suspended:
54
Fines Imposed:
$3.607 million
Restitution Ordered:
$201.119 million
NOTE: All numbers are approximate.
"Major" is defined as (a) the amount of fraud or loss was
$100,000 or more, or (b) the defendant was an officer, director,
or owner (including shareholder), or (c) the schemes involved
convictions of multiple borrowers in the same institution.
These numbers are based on reports from the 94 offices of
the U.S. Attorneys and from the Dallas Bank Fraud Task Force.
The totals of "major" savings and loan prosecutions since October
1, 1988 are higher than last month's totals because of (a)
activity between August 1-29, 1990, and (b) previously unreported
activity submitted by those offices during the past month.
* One of the 13 defendants was convicted in another case.
Department of Justice
"WHITE COLLAR CRIME: THE NATURE OF THE THREAT"
REMARKS
BY
DICK THORNBURGH
ATTORNEY GENERAL OF THE UNITED STATES
BEFORE THE
ANNUAL LUNCHEON MEETING OF
THE MERCHANTS AND MANUFACTURERS ASSOCIATION
LOS ANGELES, CALIFORNIA
WEDNESDAY, JUNE 27, 1990
Most of you, I'm sure, have seen, if only on TV, one of my
favorite Jimmy Stewart movies -- It's A Wonderful Life. Jimmy
Stewart plays George Bailey -- president of Bailey Building and
Loan -- a reluctant banker, who always plans to leave his
hometown of Bedford Falls. But every time he starts to head out
of town, he has to turn around and save it again. He even gives
up his honeymoon, doling out $2000 cash in hand to stop a run on
the bank. Eventually he reaches a point of despair. His Uncle
Billy has mislaid $8000, and the bank examiner is due the day
before Christmas. George is only kept from throwing himself off
a bridge by the arrival of his guardian angel -- Clarence. "I
wish I'd never been born," George moans. So Clarence -- a pretty
bright angel, long overdue for his wings -- actually shows George
what Bedford Falls would've been like if he hadn't lived -- a
total sinkhole called Pottersville. And we're all very glad to
see George rush back home to hug Donna Reed, safe and -- thanks
to a basket full of money from the townspeople -- solvent again.
I recall George's banking career to you because -- for all
that Forties' romance -- George Bailey is still how we believe
bankers ought to behave. Bailey Building and Loan you will
recognize as an important community institution. George's job
was to help his community grow, in particular, to help families
buy new homes. In fact, any sequel would have had George Bailey
taking part in a genuine miracle even his guardian angel couldn't
have foreseen -- the postwar housing boom. Imagine -- in the
last fifty years, 70 million new homes have been built, three
- 2 -
quarters of the existing dwellings in this country. Bankers like
George Bailey -- and some of you, I'm sure, here today -- loaned
$2.2 trillion in mortgage money, secured by a national housing
stock worth $4 trillion. The S & Ls underwrote that miracle,
which let so many of us live, in reality, a Wonderful Life.
But in contrast, listen to what Shirley Lampel, a widow, had
to say after losing $30,000 -- her whole life savings, which she
had been deceived into thinking were insured -- when the Lincoln
Savings & Loan went belly up in 1989.
"It used to be that a person puts on a mask and goes in with
a gun and robs a bank," said Mrs. Lampel. "Now we go into a bank
and we get mugged. When did the bank become the crook?"
When did the bank become the crook?
This is only one of the reverberating questions, raised by
the nation's S & L crisis. We know that any number of financial
and fiduciary failings contributed to their massive collapse, but
today I want to turn your attention to the moral failing, the
criminality that also stands revealed. Attorneys from our
Department of Justice Fraud Squad talk about an "epidemic of
fraud" among the S & L's presently in default. Twenty-five to
thirty percent, conservatively, of these "thrift failures" can be
laid to wrong-doing by miscreant bank officials.
- 3 -
Only last week, at the Department of Justice President Bush
and I assembled our 93 U.S. Attorneys from around the country to
a day-long conference on how to step up the pressure upon those
perpetrators of what we have come to call "crime in the suites".
The challenge is a substantial one, because these white-
collar criminals are different.
They come not as threatening intruders or violent
assailants, but in the very good company of those we implicitly
trust. There are no gun shots, no blood-stained knives, no
wailing police sirens at the scene of their crimes, but white-
collar criminals still leave their victims -- such as Mrs. Lampel
-- emotionally traumatized as well as economically destitute.
Individual financial losses from their thievery far exceed the
combined "take" from the more publicized thefts of robbery,
larceny, and burglary.
For society as a whole, white-collar criminals undermine our
faith in major institutions of business and finance. They can
cause job loss, false pricing, deterioration of standards -- and
coupled with failure to inspect, to report, to account, as in the
case of the S & Ls -- a malaise of public anxiety and cynicism
that is the bane of good government itself.
- 4 -
Finally, white-collar crime loads tremendous losses on the
country's economy -- most to be borne by consumers and tax-
payers. Total losses from the S & L collapse are estimated by
some to be as high as $500 billion. And the direct losses are
compounded by an undermining of economic growth, the actual
undoing of future chances for that Wonderful Life.
Those are some of the dire results of corrupt practices that
too often plagued the nineteen eighties -- as opposed to the
honest business done during that decade of unprecedented economic
growth. Much activity came from old-fashioned hard work and
entrepreneurial ingenuity, but too much of it slipped beyond
legitimate risk into White Collar Crime. Our investigations have
catalogued seven different and distinct types of white-collar
criminals.
In addition to the S & L predators, they include:
* Defense contractors who lied, bribed, and spied in
committing procurement fraud.
* Investment bankers, brokers, and traders who engaged in
insider trading.
* HUD contractors and consultants seeking to serve "the
greedy rather than the needy."
- 5 -
*
Money-launderers desperately trying to cleanse the blood
stains from illegal drug proceeds.
* Price-fixers and others colluding in restraint of a free
market through antitrust violations.
* And, finally, public officials who aid and abet all of
the foregoing in their illegal undertakings.
You might notice one peculiar thing, as these white-collar
criminals join the line-up. They each leave a lot of paper
behind. That is frequently the only way we can catch white-
collar criminals -- by picking up the damning paper trail that
can corral an embezzler, or expose a penny stock fraud, or
unravel a bogus transaction on the falsely balanced books of an
S & L.
But this is easier said than done. Having spent a dozen
years myself as a corporate lawyer -- before ever trying a
criminal case -- I can attest to how complicated even legitimate
business transactions can be. When shifty operators start to
bend such transactions into illegitimate shape -- to hide fraud,
pay-offs, kickbacks, etc. -- that deliberate tangle is even
harder to unravel. It takes much more than the police breaking
down the doors and seizing the evidence. It requires adept
craftsmen who can break open false books to discover hidden
- 6 -
assets. Catching a white-collar criminal still demands the kind
of investigative probing Judge Samuel Seabury of New York used in
his famous prosecutions of the corrupt in the 1920s. As
described by his biographer,
"Seabury's technique was to perform the unspectacular
job of research where it hurt: income tax returns, bank
deposit slips, savings accounts of the accused's family,
brokerage statements, real estate and other filed papers."
"Research where it hurts." That is exactly what we have
undertaken, for example, against the S & L rip-offs -- the white-
collar crime that most concerns the country today. Still
searching the paper trail for patterns of fraud, bribery, and
corruption in the S & L industry, we continue to winnow carefully
through some 21,000 allegations, major and minor, against the
troubled institutions of American banking. This search has
already allowed us to identify some twenty institutions -- mostly
in Texas, or here in Southern California -- that are the top-
priority targets in our effort to fix criminal responsibility for
the S & L crisis.
So we are embarked on a growing series of investigations to
clear up the criminal side of the S & L mess. We are using an
additional $50 million voted us by Congress late last year -- to
double Justice Department personnel devoted to prosecuting the S
- 7 -
& L crooks in 27 cities, including Los Angeles, employing the
specific model of our highly successful Dallas Bank Fraud Task
Force.
That Dallas Task Force has a record, to date, of 77
indictments and 52 convictions, including the entire executive
suite of the notorious Vernon S & L. Three quarters of those
convicted in Dallas have gone to jail, including Woody Lemons,
former Vernon CEO, now serving a 30-year prison term. And
earlier this month, Vernon's top man -- Don Dixon -- was indicted
on 38 counts for activities surrounding illegal contributions to
political candidates. He is alleged to have even bribed a Texas
bank official with a Kansas hunting trip. They bagged a brace of
pheasant and a bevy of Dallas Million Dollar Saloon dancers.
This is all part of the anti-white-collar-crime drive we now
have underway nationwide, thanks to President Bush's budget
initiative, during the early weeks of his administration. And we
would be further along in this drive, were it not for
Congressional delays and funding shortfalls.
Less than three weeks after George Bush's inauguration, I
appeared before the Senate Banking Committee to outline the
gravity of the S & L situation, and to seek that $50 million to
beef up our anti-fraud efforts during fiscal year 1990. Shortly
thereafter, we requested 36.8 million additional dollars to "jump
- 8 -
start" our anti-white-collar-crime drive during 1989. The
result? Congress turned down flat our request for the $36.8
million, and delayed the $50 million until late last year.
Nonetheless, our drive is up and running. Last year we
secured a total of 791 convictions in major --- that is, over
$100,000 -- financial institution fraud cases. And the FBI has
530 failed financial institutions under current investigation.
President Bush's admonition to pursue "the cheats, the chiselers,
and the charlatans" in the S & L industry will be honored in full
by his federal prosecutors within the Department of Justice.
One further observation about the S & L's. We fully
understand the deep feelings about hard times in the Southwest --
the economic troubles faced during the collapse of real estate
prices -- and we are happy to see that situation start to turn
the corner again. But we must be clear that much of the root
problem among too many of the S & Ls was not the economy. The
problem, in too many cases, was outright criminality, pure and
simple.
Falling oil prices, the bad real estate market, the general
downturn did not form the criminal intent of the S & L rip-off
architects. Like all con artists and swindlers, they fantasized
pyramiding riches that would save them from the consequences of
their illegal excesses. Profits from wild-cat banking would grow
- 9 -
so large -- even if there were violations of the law -- that they
would escape judgment, be seen as pillars of finance. As such
future pillars, they surely deserved the best at present -- even
if they had to slip themselves the best under the table, with a
share to those willing to look the other way.
And that is also why we must exercise more than due
diligence against all types of White Collar Crime. In the case
of the S & Ls, we must exercise an overdue diligence -- to
protect the market integrity, honest enterprise, and fair profits
of the greatest free economy on earth.
There are, of course, other such masters of manipulation.
Some make the daily headlines or the top of the six o'clock news
..
the Michael Milkens, the Leona Helmsleys, the Jim and Tammy
Faye Bakkers. But the more systematic wrong-doers with their
nefariously hidden schemes have been our most important targets.
To list just a few:
* Insider traders and stock manipulators such as Ivan
Boesky, Dennis Levine, Robert Freeman and Paul Bilzerian -- all
sentenced to jail terms -- and Drexel, Burnham, Lambert fined a
total of $650 million for illegal trading activities.
* Those fifteen pit traders on the Chicago exchanges,
- 10 -
caught defrauding their customers -- "stung" by undercover FBI
agents in Operations Sour Mash and Hedgeclipper.
* "Robin HUD," who illegally diverted $5.6 million in
mortgage settlement funds -- only one of nearly 800 present
investigations into HUD Scandals -- sentenced to nearly four
years in prison last week.
* Over 7000 federal, state, and local public officials
convicted of public corruption -- including twenty-two members of
Congress -- prosecuted by the Department's Public Integrity
Section, since I started it fourteen years ago as Assistant
Attorney General in our Criminal Division.
But in all of this heightened effort to pursue white-collar
criminals, one root matter sometimes gets curiously lost: why are
we doing it?
There is always the wrong-headed charge that going after
white-collar crime is anti-business. Clearly, it is not. In
fact, I have always looked upon our actions against White-Collar
Crime as pro-business -- designed to forestall actions that could
well subvert our free enterprise system. We are seeking to
protect the valued institutions of that system when we act
against illegal insider-trading, public corruption, or corporate
violations.
- 11 -
At the same time, we are also protecting our citizenry. We
prosecute white-collar crime for the sake of all our citizens,
especially those who are most hard-pressed to pay the prices that
are fixed artificially high, or the taxes that go only toward
further abuse of the public trust. And in the case of money
laundering, most especially those whose very futures are most
threatened by high-profit drug-trafficking.
The President has directed that we make this a priority
because we -- that is, the Feds, the Department of Justice -- are
often the only ones with the investigative manpower and
prosecutorial capacity and legal scope to handle the cases.
White Collar Crime can't be effectively addressed by private suit
or the local constabulary when it involves sophisticated
conspiracies to defraud or complicated money laundering schemes
reaching across international borders.
Our responsibility to prosecute White-Collar Crime is
especially awesome during a time when so many elsewhere -- in
Russia, and Eastern Europe, and indeed, the world over -- are
looking to the United States for institutional wisdom. How can
we advise others how to move toward democracy and free-market
capitalism if we do not make every effort ourselves to preserve
our institutions from reckless subornation? We must bolster and
secure our system and the world's most exemplary exchange -- our
- 12 -
free marketplace -- against any depredation by those who would
subvert their integrity.
In other words, even globally, we are in this for all the
right Jimmy-Stewart reasons. We believe in George Bailey's
approach to the banking business. Even more, we believe in
protecting the values of institutions like Bailey Building and
Loan, protecting them from fraud and manipulation and looting --
that serial run of white-collar crimes -- because upon such
values depends the integrity of the whole system. We are helping
protect George Bailey's customers, his depositors, his mortgage-
holders, so that they too can enjoy the full fruits of their
labor, the honest increment of their savings, and the real
prospect for a Wonderful Life.
What I've really described for you today are Seven Deadly
White-Collar Crimes -- much like the seven deadly sins of old --
though these slip by in more modern guise, more dissembling of
purpose. I've given you their lineup for the last decade -- the
1980s. For this decade ahead -- the 1990s -- I can assure you
they will be the focus of a renewed and aggressive federal law
enforcement effort to help preserve prospects for that Wonderful
Life for all Americans.
Jan. 27 / Administration of George Bush, 1989
public of
with the Commission's [Quadrennial Com-
expect we're going to have other firestorms
ance with
mission on Executive, Legislative, and Judi-
swirling around. But I have not made deci-
meeting
cial Salaries] recommendation, and because
sions on this one. I'll wait until I get all the
[Chairma
of the way it works on Congress-and the
facts, call them as I see them, and hope that
mission],
ball is clearly in their court-it leaves us
we can convince the American people that
seemed li
with either the Commission recommenda-
that's the way to go.
signal a p
tion or nothing. And so, seeing the prob-
Q. Mr. President, you've set a tone of
Mr. Gorl
lems as I do, I still feel that I should not go
high-mindedness and propriety this week
nature in
about undoing the Reagan decision.
with your emphasis on ethics, also of bipar-
tant strat
Yes, Helen [Helen Thomas, United Press
tisanship in your discussions with Congress.
relationsh
International].
Beyond those matters of process and tone,
nese-the
Savings and Loan Crisis
sir, what would you like the country and
world in
the world to say is the message of your first
Q. Mr. President, your trial balloon on
stands or
week in office as to what your administra-
the S&L's taxing savings and checking ac-
signaling
tion is about?
counts has fallen like a lead balloon. Are
body else
you dropping that plan? Do you have any
Relations With Congress and Government
Going
other plans in the works?
Ethics
in the ba
The President. First place, I think it's a
ant to th
The President. Reaching out to the Con-
little absurd to be commenting on a facet, a
gress. I really am serious about this trying
Soviet-U
possible facet, of solving a problem when it
to get more of a bipartisan foreign policy,
Q. Mr
hasn't even come to me. You're talking
for example. And though we haven't ad-
adviser,
about speculating on something that hasn't
dressed that specifically in terms of issues, I
television
even reached the desk of the President
have addressed it in broad terms to the
and that
even as an option-say nothing of its being
Members of Congress with whom I've met
trying to
a proposal.
here and with whom I met over in the
ance. WI
Q. Well, it certainly has come from your
Residence. And so, I'd like to signal an era
The P
people.
of real openness with Congress.
an exact
The President. Well, as an option, not as a
Look, I know we're going to have con-
himself.
proposal. And I think you're right. There
flicts, Brit [Brit Hume, ABC News]. And I
seems to be some controversy around it.
only in
know we're going to run up against each
times aft
But that doesn't mean that any thinking
other. But I want to start with that ap-
And our
along those lines should cease. But I'm
proach. And we're in a broad review-as
General
going to reserve comment until I actually
you've heard from my various nominees as
indeed,
have it presented to me. And I expect this
they appear before the Senate-on specific
reassess
is the first of many such things that's going
areas of foreign policy. A message would be
Let's tal
to happen of this nature. I will say this: that
taking steps to make clear to the congres-
the savings and loans deposits are backed
strategic
sional leadership that that's what I want to
by the full faith and credit of the Govern-
talks; or
do. The other one, as I mentioned, is trying
on som
ment. And they are sound; they are good-
to set a tone in terms of conflict of interest
with the
dollar good. And I just want to assure the
that I hope will serve us in good stead.
and the
American people of that, and nothing is
going to change in that regard. But in
The President's Visit to China
tion.
And ]
terms of this one idea, let them float
Q. What signal do you think it may send
foot-dra
around. It doesn't bother me for a lot of
the world, sir, that you're making your first
ideas to be considered and debated.
Indeed,
visit to China-after, of course, the ceremo-
Q. The reaction is very negative-the
nial trip to Tokyo-while Soviet leader Gor-
tary Go
public reaction, congressional reaction. Will
bachev, having asked for early talks, is still
long ta
that enter into your decision?
avoid y
waiting for a response?
The President. Anything I do on savings
cause t
The President. Well, I don't know what
and loans or when we get into this budget
signal it sends in that regard. But let me
says Co
deficit reduction program-look, I don't
just remind you that I'm the one who does
give cr
expect it's all going to be sweetness and
not believe in "playing the Soviet card" or
place in
harmony and light. The minute we get
that te
"playing the China card." We have a strong
those proposals up there on February 9th, I
of-do
bilateral relationship with the People's Re-
120
Administration of George Bush, 1989 / Jan. 27
it
whom I have full confidence, is not a Cabi-
Government Ethics
net member, but I think we have a very
strong Chief of Staff setup.
Q. Mr. President, by spending your first
week dwelling as you have on ethics, aren't
Over here, way up in the window-inno-
you voicing an implicit criticism of the
vative standing.
Reagan administration's ethical record?
Monetary Policy
The President. No.
Q. You just touched on the issue of Third
Q. Why else was it necessary to declare
some
World debt. There are many experts who
National Ethics Week, so to speak?
are saying that if there's any danger for the
The President. Because I feel strongly
about it.
the
U.S. economy it's in how greatly leveraged
it is, both in terms of corporated indebted-
Q. Can I follow on that line, sir?
Rep-
ness and Third World debt. And they say
The President. No, she's in first, and then
Man-
of
that the S&L crisis, for example, is simply a
you. Need to cool off on that one. [Laugh-
ter]
an
subsumed feature of this. Do you see this as
a real problem that you're going to address
Savings and Loan Crisis
con-
aggressively, and what kind of steps would
Q. Mr. President, given your strong anti-
of
you take to overcome the high proportion-
tax ban in the campaign, why are you al-
ality of debt to equity that exists in the U.S.
lowing Mr. Brady [Secretary of the Treas-
economy now?
ury-designate] to consider as an option for
The President. The question of corporate
the S&L's a tax increase?
in
debt-on that one, the role of the White
The President. I'm not. He has thrown
down
House and the role of the Federal Govern-
out a lot of different possibilities in discus-
And
ment ought to be to do its level best to
sions we've had. We have people that are
not
keep a strong economy. And I don't believe
experts on what a tax is. I would refer you
when
that it's the government role to assign levels
to Richard Darman, who is the head of the
con-
beyond which a corporation can't borrow.
OMB. And he's the guy that defined that
In terms of Third World debt, we do have a
very well up there with the duck test on
less
the Hill and-
responsibility, and a lot of that's going to be
hard.
working with the private banks and others.
Q. So, you're not thinking of a tax?
ways:
And again, we'll have some recommenda-
The President. Well, I'm just saying I'm
peers
tions; we have to have them pretty soon on
not prepared to say what I think on it right
that
that question.
now till I hear from it, because the more I
asks
I'm not sure I got to the substance of
discuss it, the more you all go out and say
for
this is something that I'm considering when
for
your question-separating out these two
I'm not. It hasn't come to me yet. But I've
things.
on
been around for a long time, and I don't
Q. Try another one.
remember hearing people talk about the
him
Q. -reported differences that you have
fee that went into covering the FDIC [Fed-
only
with Alan Greenspan's [Chairman of the
eral Deposit Insurance Corporation] or
idea
Board of Governors of the Federal Reserve
FSLIC [Federal Savings and Loan Insur-
that
System] testimony in Congress earlier this
ance Corporation] as a tax. I don't reinem-
hould
week with regard to interest rates and mon-
ber people writing that before. But-not
but
etary policy.
trying to get into the fight anymore right
The President. I'll be honest with you. I
now. I'll be back.
I
don't think I'm far apart from Chairman
Government Ethics
that
Greenspan at all-far apart. There may be
Q. You've mentioned ethics in a number
That's
some differences. Because of plant capacity
of ways, and you've talked about the value
eco-
utilization, he is more concerned about in-
of service this year. The last 2 days we've
nomic
flationary pressures than I am right now.
picked up the headlines in the papers, and
of
the
Seems to me, there's an area of difference.
they've read President Reagan has a $5 mil-
Cab-
But basically and generally speaking, I think
lion book deal. He's got a $50,000 a speech
by
we're fairly close together.
deal. With all respect for the office and the
in
125
leorge Bush, 1989
Administration
allantry. He is
From 1984 to 1986, he was Vice Chairman
next week-I think that's the plan-and see
would go over
1
in the Army
of the Commission on Civil Rights. He
where we go from there.
wonderful, wo
orn December
served as a member of the President's Com-
But, Speaker, if you can talk, you're enti-
Secretary. But
five children,
mission for Study of Ethics in Medicine and
tled a rebuttal. [Laughter]
Mosbacher and
Biomedicine and Behavioral Research,
Speaker Wright. I'm not sure, Mr. Presi-
quarter of a ce
1979-1983, and Chairman of the Moreland
dent, that any rebuttal is necessary. We're
advice. I respe
Act Commission on Nursing Homes and
here to listen, and we're here to join with
business. And
Residential Facilities, 1975-1976. From
you in trying to find some creative solution
valuable memb
1968 to 1970, Mr. Abram was president of
to a very serious problem.
It's also an h
rtholomew
Brandeis University in Waltham, MA.
Majority Leader Mitchell. I think the
of State
this swearing-ir
Mr. Abram graduated from the University
Speaker has expressed it for all of us, Mr.
another dear fi
of Georgia (A.B., 1938), the University of
President. We want to work with you. This
He was a trer
ced his inten-
Chicago (J.D., 1940), Oxford University
is a serious problem for the country; it's not
merce, and I k
(Rhodes Scholar) (B.A., 1948; M.A., 1953),
just for us. We've got to do the best we can
rtholomew to
pleased to see
and Davidson College (LL.D., 1972). He
to come up with the fairest, most efficient
or Coordinat-
meant so much
ms. He would
was born June 19, 1918. He is married and
way to solve it.
ble hands.
has five children.
The President. Before we break up here
When what
to start on our consultations, let me say-
tholomew has
ment of Comm
and I think for everybody here-that the
mbassador to
back in 1903-
safety of those deposits is guaranteed, will
as the United
ran described
continue to be guaranteed, and that there
1. He was Di-
Remarks on the Savings and Loan
should be no feeling around the country
ideal qualificat
o-Military Af-
said: "Above e
Crisis During a Meeting With
that some solution will do anything to di-
State in 1977
Congressional Leaders
minish the credit of the United States being
man of affairs,
onal Security
February 3, 1989
behind the deposits in the FSLIC [Federal
ject with which
1977-1979.
Savings and Loan Insurance Corporation],
terprising, resot
ed as Deputy
aff at the De-
FDIC [Federal Deposit Insurance Corpora-
sagacity which
The President. While we have the quick
man of busine
exposure here, let me just thank you all,
tion], whatever it is. And I thought I'd just
graduated
Mr. Speaker, Leader Mitchell, Dole, Bob
take this occasion to make that statement.
ladies and gen
Michel, for coming down here. This is a
Thank you very much.
know anything
1958) and
that he fits tha
A., 1960). He
listening session. We've got a big problem
in this savings and loan. There are no easy
Note: The President spoke at 8:04 a.m. in
he's a savvy in
in Portland,
answers and no worrying about the blame-
the Cabinet Room at the White House. In
entrepreneur W
our children.
plenty to go around. I want to see the prob-
his opening remarks, the President referred
narily successfu
lem solved. We've had a lot of consultation
to Jim Wright, Speaker of the House of Rep-
solid footing ev
resentatives; George J. Mitchell and Robert
times. He also
up on the Hill, and good consultation. And
Treasury will come, I think, to meet with
Dole, Majority and Minority Leaders of the
sailor-won in
old Abram
me tomorrow to present their views, but
Senate, respectively; and Robert H. Michel,
championships.
entative to
they're not being presented here with this
ranking minority member of the House of
he will now tal
United
stacked deck. We need ideas. And if we're
Representatives. A tape was not available
and help chart
for verification of the content of these re-
into a new era o
overlooking something, we want to know
what it is.
marks.
It's Bob's miss
But I think we all agree that it's time to
develop the fo
ced his inten-
get on with the problem. And so, what I
merce of the Ur
ld Abram to
want to do this morning is simply ask your
easily stated, bu
United States
advice and listen. And whatever we come
Secretary, he W
Office of the
up with will not be popular. And I expect
Remarks at the Swearing-In Ceremony
ports aggressive
of Ambassa-
that whatever you come up with will not be
for Robert A. Mosbacher as Secretary of
R&D-research
Commerce
Carlton Pe-
popular. But we've got to get on and get
an export cont
the problem solved. And I appreciate your
February 3, 1989
tween safeguard
en a partner
coming down here early to discuss this
ing exports, res
nd, Wharton
today, and then I'll be meeting, as I say,
The President. Thank you for that warm
national fisheries
Mr. Abram
some more today. And then tomorrow I
welcome. This is a very special occasion for
portant role in
ational Con-
think we have more final recommendations.
me because, as most-I'd say please be
to clean up the
to present.
I'll go out with it publicly probably early
seated, but-[laughter]-1 don't think that
lines. I know tha
Administration of George Bush, 1989 / Feb. 6
nontraditional job as a labor-line handler
policy that recognizes the transportation
and as a single parent with three daughters,
system is the essential lifeblood of our econ-
she gives freely of her time to numerous
omy and also for our defense.
volunteer efforts.
These goals cannot be achieved without
Donald Simonds of the FAA [Federal
the energy and commitment of thousands
Aviation Administration]] is a full-perform-
of team players like those you have met
ance-level air traffic controller and has been
today. I know already from my brief intro-
actively involved in the recruitment of mi-
duction to this Department that this team is
nority candidates for that critical job.
ready, willing, and able to do this important
Anthony A. Schiavone, Superintendent of
job. The American people have selected
the James River Reserve Fleet at the Mari-
you as their President, and you have asked
time Administration, maintains custody of
me to be your wing man. I am humbled by
approximately 125 oceangoing merchant-
your offer. I accept, and I am ready to roll
type vessels that are on ready reserve for
up my sleeves and get the job done.
national defense purposes.
Thank you very much.
Susan Hedgepeth, Chief of the Exemp-
tion Branch in the Office of Hazardous Ma-
Note: The President spoke at 2:42 p.m. in
terials Transportation, develops special re-
the Federal Aviation Administration audi-
quirements for the transportation of hazard-
torium. Secretary Skinner was sworn in by
ous materials.
U.S. District Judge Joel M. Flaum.
Sondra F. Talbert, of the Federal Railroad
Administration, moved into the Depart-
ment's Upward Mobility Training Program
in 1975 and is the first female inspector at
the Interstate Commerce Commission in
The President's News Conference
the Federal Railroad Administration.
February 6, 1989
United States Coast Guard Petty Officer
Kelly M. Mogk, was recently awarded the
Savings and Loan Crisis
Coast Guard Air Medal for heroic achieve-
The President. Well, for the more than
ment in aerial flight while serving as a heli-
half a century, the U.S. has operated a de-
copter rescue swimmer on January 2, 1989.
posit insurance program that provides
Let's give these outstanding employees a
direct government protection to the savings
round of applause. [Applause]
of our citizens. This program has enabled
Mr. President, these individuals' achieve-
tens of millions of Americans to save with
ments reflect the spirit of this Department.
confidence. In all the time since creation of
They are our unsung heroes, the dedicated
the deposit insurance, savers have not lost
public servants who serve the American
$1 of insured deposits, and I am deter-
traveler, the pilot, the truck driver, the
mined that they never will.
boater, and the commuter.
Deposit insurance has always been in-
The Department's team faces many chal-
tended to be self-funded. And this means
lenges. We must be in the forefront in the
that the banks, the savings and loans, and
fight against terrorism. We must do every-
credit unions that are insured pay a small
thing we can to stop the flow of drugs into
amount of their assets each year into a fund
this country. We must keep our aviation
that's used to protect depositors. In every
system both safe and competitive. And we
case, these funds are spent to protect the
must maintain our significant and important
depositors, not the institutions that fail.
presence in the maritime industry. We
For the last 20 years, conditions in our
must also continue to build and maintain
financial markets have grown steadily more
our infrastructure. And I want to acknowl-
complex, and a portion of the savings and
edge-as I look on the next step-are Con-
loan industry has encountered steadily
gressman Martin, are Congressman Mineta,
growing problems. These financial difficul-
Congressman Coughlin. We must work with
ties have led to a continuous erosion of the
Congress, and I will work with Congress to
strength of the Federal Savings and Loan
develop a visionary and comprehensive
Insurance Corporation, FSLIC. Economic
transportation policy for the 21st century, a
conditions have played a major role in this
163
Feb. 6 / Administration of George Bush, 1989
situation. However, unconscionable risktak-
tice Department by approximately $50 mil-
has stood
ing, fraud, and outright criminality have
lion to enable it to create a nationwide pro-
posits bef
also been factors. Because of the accumula-
gram to seek out and punish those that
at all tim
tion of losses at hundreds of these thrift
have committed wrongdoing in the man-
deposit
institutions, additional resources must be
agement of these failed institutions. These
credit of
devoted to cleaning up this problem. We
which me
funds will result in almost doubling the per-
intend to restore our entire deposit insur-
tected.
sonnel devoted to the apprehension and
ance system to complete health.
For the
prosecution of individuals committing fraud
While the issues are complex and the dif-
in our financial markets.
safe, sound
ficulties manifold, we will make the hard
However,
As you can see, these proposals are based
choices, not run from them. We will see
share an
upon several overriding principles. First, I
that the guarantee to depositors is forever
our financ
will not support any new fee on depositors.
honored. And we will see to it that the
absolute part
Second, we should preserve the overall
system is reformed comprehensively so that
to the public
Federal budget structure and not allow the
the situation is not repeated again. To do
important
misdeeds and the wrongdoings of savings
this, I am today announcing a comprehen-
I've deta
and loan executives and the inadequacy of
sive and wide-ranging set of proposals. The
squarely
Secretary of the Treasury, Nicholas Brady,
their regulation to significantly alter our
ting it beh
will describe these proposals to you in detail
overail budget priorities. And third, I have
resources
in a few minutes. However, I think it's im-
concluded that this proposal, if promptly
brought to
portant to summarize some of the major
enacted, will enable our system to prevent
lem. I have
points.
any repetition of this situation. And fourth,
ship of Come
The proposals include four major ele-
I have decided to attack this problem head-
tration will
ments. First, currently insolvent savings in-
on with every available resource of our gov-
gress as the
stitutions will be placed under the joint
ernment because it is a national problem. I
in a few da
management of the FDIC [Federal Deposit
have directed that the combined resources
the Congre
Insurance Corporation] and FSLIC pursu-
of our Federal agencies be brought togeth-
effort to rest
ant to existing law. This will enable us to
er in a team effort to resolve the problem.
financial sy
control future risktaking and to begin re-
And fifth, I believe that banks and thrifts
without the
ducing ongoing losses. Second, the regula-
should pay the real cost of providing the
I welcom
tory mechanism will be substantially over-
deposit insurance protection. The price the
here on this
hauled to enable it to more effectively limit
FDIC charges banks for their insurance has
says a lot all
risktaking. The FDIC would become the in-
not been increased since 1935. We propose
And now I
surance agency for both banks and thrifts
to increase the bank insurance premium by
tions. On the
under this system, although there's no com-
less than 7 cents per $100 of insurance pro-
to these per
mingling of funds. The insurer will have the
tection that they receive. Every penny col-
turn this ov
authority to set minimum standards for cap-
lected would be used to strengthen the
we start with
ital and accounting. Uniform disclosure
FDIC so that the taxpayers will not be
Press Inter
standards will also be implemented. The
called on to rescue it a few years from now.
ence Hunt,
chartering agency for thrifts would come
And I make you a solemn pledge that we
going-
under the general oversight of the Secre-
will make every effort to recover assets di-
Q. Mr. PT
tary of the Treasury. Third, we will create a
verted from these institutions and to place
that the ex
financing corporation to issue $50 billion in
behind bars those who have caused losses
and so forth
bonds to finance the cost of resolving failed
through criminal behavior. Let those who
depositors ad
institutions, which will supplement approxi-
would take advantage of the public trust
your respon
mately $40 billion that has already been
and put at risk the savings of American
the Reagan
spent. All of the principal of these bonds
families anticipate that we will seek them
business and
and a portion of the interest on them will
out, pursue them, and demand the most
The Presio
be paid from industry sources. However,
severe penalties.
not guarant
the balance would be paid from on-budget
In closing, I want to just say a word to the
wouldn't har
outlays of general revenues. Hopefully,
small savers of America. Across this great
what the il
some of these revenues will be recovered in
land, families and individuals work and
there is enot
the future through sale of assets and recov-
save, and we hope to encourage even great-
this together
ery of funds from the wrongdoers. Fourth,
er rates of savings to promote a brighter
I can't equat
we plan to increase the budget of the Jus-
future for our children. Your government
go into any
164
Administration of George Bush, 1989 / Feb. 6
$50
mil-
has stood behind the safety of insured de-
that we've got to solve this problem and
wide
pro-
posits before, it does today, and it will do so
we're on the path to doing that.
that
at all times in the future. Every insured
the
deposit will be backed by the full faith and
Federal Pay Raise
man-
These
credit of the United States of America,
Q. Mr. President, the House votes tomor-
the
per-
which means that it will be absolutely pro-
row on that controversial pay raise plan,
and
tected.
and the Senate has already voted against it.
fraud
For the future, we will seek to achieve a
Would you sign a bill that vetoes the pay
safe, sound, and profitable banking system.
raise not only for the Members of Congress
based
However, integrity and prudence must
but also for Federal judges and other high
First,
I
share an equal position with competition in
officials in the government?
epositors.
our financial markets. Clean markets are an
The President. I've said I support it.
overall
absolute prerequisite to a free economy and
to the public confidence that is its most
Savings and Loan Crisis
allow
the
important ingredient.
savings
Q. Mr. President, there is a feeling that
of
I've determined to face this problem
part of this problem is attributable to de-
equacy
squarely and to ask for your support in put-
regulation of the financial industry. In ret-
our
I
have
ting it behind us. I have ordered that the
rospect, do you think that deregulation
resources of the executive branch be
promptly
might have gone too far in the last 10 years
brought to bear on cleaning up this prob-
prevent
or so? And in the future, is your marching
lem. I have personally met with the leader-
fourth,
order to your administration to be a little
ship of Congress on this issue. My adminis-
head-
more careful in regulating this particular
tration will work cooperatively with Con-
industry?
our
gov-
gress as the legislation that we will submit
oblem.
I
The President. Jerry [Gerald Boyd, New
in a few days' time is considered. I call on
York Times], I don't know the answer. I'd
esources
the Congress to join me in a determined
be most interested to know what our ex-
togeth-
effort to resolve this threat to the American
problem.
perts here feel about how much of the
financial system permanently, and to do so
thrifts
problem could be attributed to deregula-
without the delay.
the
tion. I just don't know the answer to your
I welcome the leaders that are with me
the
question, so I can't reply.
here on this platform. I think their support
has
says a lot about the efficacy of our proposal.
Government Ethics
propose
And now I propose to take just a few ques-
Q. Mr. President, you have placed consid-
by
tions. On the technical aspects, I will defer
erable stress in these early days of your
pro-
to these people, and then I'll be glad to
Presidency on ethics and propriety, yet in
nny
col-
turn this over to Secretary Brady. I believe
recent days there has been controversy on
the
we start with Helen [Helen Thomas, United
Capitol Hill concerning the propriety of
not
be
Press International] and then Terry [Ter-
some of Tower's [Secretary of Defense-des-
now.
ence Hunt, Associated Press], and then get
ignate] alleged behavior; questions raised
that
we
going-
over the weekend about the financial in-
di-
Q. Mr. President, are you guaranteeing
vestments on the private funds of the man
place
that the extra costs-premiums, increases,
in charge of ethics, your counsel, Boyden
losses
and so forth-will not be passed on to the
Gray; and other questions involving mem-
who
depositors and taxpayers? And also, what is
bers of the administration, or members-to-
trust
your responsibility in this debacle-I mean,
be of the administration. And I wonder, sir,
nerican
the Reagan-Bush zeal for deregulation of
what's happened here? Is it too harsh be-
them
business and banking?
havior on our part, too lax behavior on your
most
The President. On the first place, we're
part? What?
not guaranteeing that. I would hope that
The President. I don't think anything has
to
the
wouldn't happen, but there is no guarantee
happened. I learned long ago in public life
great
what the institutions will do. Secondly,
not to make judgments based on allegations.
and
there is enough to be said for everybody in
But having said that, I want to have my
great-
this together trying to solve this problem, so
administration aspire to the highest possible
righter
I can't equate any personal-not inclined to
ethical standards. And we have appointed a
go into any personal blame, simply to say
commission to go out there now and try to
165
Feb. 6 / Administration of George Bush, 1989
detail what these standards should be. And
its endorsement to the Senator, particularly
Q. Mr.
we are in a new era on these matters. Mat-
after all of these allegations, that there is
the depo
ters that might have been approved and
given us
any danger at all of damage to his credibil-
looked at one way may have a different
may be
ity or his ability to do the job.
perception today. And so, what I want to do
large am
Q. Mr. President, there are new and sub-
is finalize our standards and then urge ev-
the same
stantive allegations that Senator Tower lost
erybody in all branches of government to
are still
aspire to those standards. But I do think,
control over the highly classified security
this?
Brit [Brit Hume, ABC News], that it's fair
documents and computer disks that were
The Pr
that we not reach judgment on Senate
used in Geneva under his watch. If those
on, there
hearings before the Senate hearings are
allegations prove to be founded, would you
to the co
concluded because it's very hard to filter
then withdraw his nomination?
won't be
out fact from fiction, spurious allegations
The President. I would not answer hypo-
has been
from fact. And I am not about to make a
thetical questions of that nature. You're tell-
argue wh
judgment based on a sensationalized news-
ing me something that I haven't heard
just don't
paper story. I'm simply not going to do
before. And we did have access to FBI re-
through
that. That wouldn't be fair, and I'm not sure
ports. So, if this matter is now before the
without
how ethical it would be. So, let's wait and
Congress, let them investigate it. But I can't
problem
see this-you're referring to the Tower
go into a hypothesis. All I would be doing
Q. Mr.
matter up there. That matter has been
would be adding to, I think, speculation
Members
looked at by the FBI. The committee now
that is not helpful at this juncture.
and dinn
has that. They have the responsibility to
Q. But, sir, will you pursue these allega-
over the
make determinations, and I'll be very inter-
tions in the executive branch? Are you
of them,
ested to see what they say. But I am not
going to track what the FBI is looking into?
this prob
going to jump to conclusions based on sto-
Are you going to personally surveil these
reception
ries that may or may not have any validity
kinds of allegations yourself?
Hill and 0
at all.
The President. Every rumor and every
get it pass
The Pre
Secretary of Defense-Designate John Tower
innuendo? No. But if there's some substan-
job, but I
Q. Mr. President, even if, as your spokes-
tive allegation of this nature, of course, it
would concern me.
the spirit
man says you do, you continue to back Sen-
Congress,
ator Tower for the position, there are those
Savings and Loan Crisis
ship meet
you've heard who say that the best thing he
could do for you is to step aside because
Q. Mr. President, back to S&L's if we
into every
still being
even if confirmed he then would become
might. Millions of-[laughter]-millions of
their view
damaged goods, weaker in administering a
Americans save alternatively. That is they
Seidman
very, very tough job on your behalf. How
save in mutual funds, stocks, and that kind
on about
do you respond to that suggestion?
of thing. As I read it, you've now outlined a
plan will
The President. Well, I think people would
plan that places a lot of the S&L bailout on
Congress
not want a person to step aside in a rumor,
the backs of the general treasury. How fair
me that th
particularly if the rumor is baseless. And
is that?
this plan,
the process is taking a little longer than I
The President. We've got a major prob-
I'm goin
would like. And yet I think the Senate has
lem, and something has to be done. And
then turn
got to do what they're doing: looking at
this is the fairest system that the best minds
here, who
these allegations very carefully. But you
in this administration can come up with.
detail as y
know, as I said here at this same podium a
And so, I again would ask you to ask the
while back, the American people are basi-
specifics of the treasury burden to the
Secretary
cally fair. And if these allegations prove to
Chairman of the Federal Reserve [Alan
Q. Mr.
be allegations without fact behind them, I
Greenspan] or the Secretary of the Treas-
surround
think the people are going to say: Wait a
ury [Nicholas F. Brady]. Ask how they see
the them
minute. What went on here? How come it
that. But look, as I've said, there is no easy
tion-alleg
was all this? We read this one day, and then
answer to this. All I want to do is make a
money fro
kind of a puff of smoke the next. And so, I
sound proposal, work to put it into effect,
of thing. I
don't think-in your substantive question,
and have that proposal such that the coun-
is still the
though-that if the Senate committee gives
try won't have to face this problem again.
166
Feb. 6 / Administration of George Bush, 1989
hypothetical as to not even be a possibility
which I think you are, that matter was re-
we've
of any kind.
viewed every single year by the Office of
high a
Yes, Charles [Charles Bierbauer, Cable
Government Ethics, and he was deemed in
the rig
Network News]? And then I do have to run.
compliance every single year. But now
think
Savings and Loan Crisis
we've got a new ballgame here. He's the
every
General Counsel here in the White House,
review
Q. Mr. President, we still don't know
and I'm the President. And I've set out rhe-
family
what the taxpayers' burden is in here out of
torically the highest possible standards, and
now ta
this $40 billion. It says first from S&L funds
we're trying to back that up by findings
tion in
and the shortfall from Treasury funds. How
from this Commission. And so, I do think
these i
big is it; and have you, in going through
that we've got to be very careful about per-
and we
your budget, had to knock out some things
ceptions of impropriety when it comes to
to try
to pay for this?
conflict of interest-not rumors or innuen-
Q. S
The President. We've had to knock out a
dos of one sort or another. I don't think I
campa
lot of things on the overall budget for a lot
should deal in those things. But when it
would
of different reasons. But I'd like to leave
comes to perceived conflicts of interest, I'd
why tl
this for Dick [Richard G. Darman, Director
like our people to bend over backwards.
stand t
of the Office of Management and Budget],
And I think that's what has happened in
The
for the questioning, to give the specific
both the question of Lou Sullivan [Secretary
saying
amounts. It is shared, as I've indicated, and
of Health and Human Services-designate].
family
he can give you the amounts that are in-
All he did was ask: Am I entitled to contin-
ing tha
volved.
ue these arrangements with this small uni-
ferent
Listen, thank you all very much, and now
versity? And all Boyden did, in my view
era, so
I'm going to turn this over to Secretary
Brady. And then in order, I guess they'll
now, is to try to go a step beyond what the
we pos
Government Ethics Office has said to avoid
that.
refer to each of these others.
Q. Mr. President, one more word for the
the perception of impropriety. So, I think it
Than
Q. W
small-
might be different now. I have to approach
Q. back here, Mr. President?
it differently as President. Not that you
Preside
The President. What was that substantive
have lower standards. But I just think that,
The
question? [Laughter]
again, this whole question of perception-
right th
Q. In the back-we didn't see you get
we've got to look at it very, very carefully.
back in this area.
But I want to be fair. I do not want to
Note: 1
The President. We didn't get that far
have the loudest charge, no matter how ir-
began a
back, no. But if there's been an egregious
responsible, be that that sets the standards.
Executi
offense to those in the back benches, I will
We've got to achieve more objective stand-
take one parting question. And inasmuch as
ards. And that's why I'm putting a lot of
you raised it, fire away.
faith in the-hope to put a lot of faith in the
findings of Judge Wilkey and former Attor-
Statem
Government Ethics
ney General Griffin Bell. And they will be
on the
Q. Thank you very much, sir. Back on the
looking at all these matters in terms of re-
Monsar
ethics issue, a couple of-
ality, and then, to some degree I'm sure, in
Compa
The President. Mindful that the last ques-
terms of perception. So, what might be
Februa
tion always does get you in great trouble-
legal and might be perfectly sound ethically
[laughter]-go ahead.
might have to be altered, given this new
The I
Q. One of your perspective nominees and
approach because of perception. It's a deli-
tervenir
your Counsel have just recently changed
cate one.
Monsant
their minds on matters that would have vio-
I don't want to have the standards set in
(MEMC
lated the ethics rules under the Reagan ad-
such an irresponsible way that good people
MEMC
ministration. Did you have difficulty in get-
just throw up their hands and say: Look,
in makir
ting the word out that times would be
who needs that kind of grief, who needs it?
The I
tougher under your administration?
Why should I have to give up all my what-
results o
The President. No. I don't think so. For
ever it is-a health plan from the XYZ com-
tee on
example, if you're referring to the Boyden
pany. And yet on the other hand, we're in a
States ((
Gray [Counsel to the President] matter,
different time now. We're in a time when
tary Nic
168
Administration of George Bush, 1989 / Feb. 9
We have a moral contract with our senior
We face a massive task in cleaning up the
the
citizens. And in this budget, Social Security
waste left from decades of environmental
ould
is fully funded, including a full cost-of-living
neglect at America's nuclear weapons
adjustment. We must honor our contract.
plants. Clearly, we must modernize these
We must care about those in the shadow
plants and operate them safely. That's not
of life, and I, like many Americans, am
at issue; our national security depends on it.
deeply troubled by the plight of the home-
But beyond that, we must clean up the old
less. The causes of homelessness are many;
mess that's been left behind. And I propose
the history is long. But the moral impera-
in this budget to more than double our cur-
tive to act is clear. Thanks to the deep well
rent effort to do so. This will allow us to
of
of generosity in this great land, many orga-
a
identify the exact nature of the various
the
nizations already contribute. But we in gov-
problems SO we can clean them up, and
ernment cannot stand on the sidelines. In
clean them up we will.
and
my budget, I ask for greater support for
We've been fortunate during these past 8
emergency food and shelter, for health
years. America is a stronger nation than it
services and measures to prevent substance
was in 1980. Morale in our Armed Forces
abuse, and for clinics for the mentally ill.
has been restored. Our resolve has been
And I propose a new initiative involving
shown. Our readiness has been improved.
the full range of government agencies. We
And we are at peace. There can no longer
en-
must confront this national shame.
be any doubt that peace has been made
There's another issue that I've decided to
more secure through strength. And when
we
mention here tonight. I've long believed
America is stronger, the world is safer.
that the people of Puerto Rico should have
the
the right to determine their own political
Most people don't realize that after the
Our
future. Personally, I strongly favor state-
successful restoration of our strength, the
hood. But I urge the Congress to take the
Pentagon budget has actually been reduced
necessary steps to allow the people to
in real terms for each of the last 4 years.
in
decide in a referendum.
We cannot tolerate continued real reduc-
caid,
Certain problems, the result of decades of
tion in defense. In light of the compelling
unwise practices, threaten the health and
need to reduce the deficit, however, I sup-
of
security of our people. Left unattended,
port a 1-year freeze in the military budget,
they will only get worse. But we can act
something I proposed last fall in my flexible
fami-
now to put them behind us.
freeze plan. And this freeze will apply for
Earlier this week, I announced my sup-
only 1 year, and after that, increases above
Our
it
port for a plan to restore the financial and
inflation will be required. I will not sacrifice
chil-
moral integrity of our savings system. I ask
American preparedness, and I will not com-
redit
Congress to enact our reform proposals
promise American strength.
within 45 days. We must not let this situa-
I should be clear on the conditions at-
those
tion fester. We owe it to the savers in this
tached to my recommendation for the
country to solve this problem. Certainly,
coming year: The savings must be allocated
the savings of Americans must remain
to those priorities for investing in our future
opos-
secure. Let me be clear. Insured depositors
that I've spoken about tonight. This defense
will continue to be fully protected. But any
freeze must be a part of a comprehensive
now
plan to refinance the system must be ac-
budget agreement which meets the targets
and
companied by major reform. Our proposals
spelled out in Gramm-Rudman-Hollings law
will prevent such a crisis from recurring.
without raising taxes and which incorpo-
eli-
The best answer is to make sure that a mess
rates reforms in the budget process.
like this will never happen again. The ma-
I've directed the National Security Coun-
jority of thrifts in communities across the
cil to review our national security and de-
ased,
Nation have been honest. They've played a
fense policies and report back to me within
to
major role in helping families achieve the
90 days to ensure that our capabilities and
ex-
dream of home ownership. But make no
resources meet our commitments and strat-
Let's
mistake, those who are corrupt, those who
egies. I'm also charging the Department of
break the law, must be kicked out of the
Defense with the task of developing a plan
business; and they should go to jail.
to improve the defense procurement proc-
181