magazine, made $750 million last year.) For this particular deal, Mr Perelman put up $315 million, of which $155 million was borrowed, to take over ownership of, among other things, First Texas Gibraltar, an S&L which had racked up its losses serving as a real estate speculation vehicle for none other than the former Democratic Party chairman Robert Strauss, whose very close social friend Mr Alan Greenspan, currently in charge of the Federal Reserve, was the gentleman who initially lobbied for Lincoln Savings and Loan to deregulate the S&L industry! Amazingly small world isn't it, and all so logically interconnected! {B131}

However, to get back to the point. For his $315 million investment, Mr Perelman received the following: good assets worth $7.1 billion; $5.1 billion in Federal guarantees to cover the thrift's bad assets; plus $900 million worth of tax benefits! Within a week, Perelman had sold $2 billion of FTG's dodgy assets which generated tax loss credits that saved him roughly $135 million in taxes. In short, the rate of return on his initial investment, in the first 90 days, amounted to roughly 80%. We should all be so lucky. The rest will be gravy. {B132}

The second case worthy of mention involves the sale to PMH Corporation of five S&L thrifts with 25 retail branches and about $1.3 billion in assets, for the paltry sum of $45 million. Like the deal to Perelman, the terms of the deal ensured that the government (i.e. the taxpayer) would absorb any of the thrifts' existing bad debts. In the first 15 months, $132 million of good assets were sold that more than easily recouped the initial $45 million purchase price. Most of the remaining assets are covered by government guarantee against loss to the new owners, and the estimated $40 million in earnings and tax breaks expected this year alone are pure profit.

Although these deals sound more like giveaways, many of the deals initially sanctioned by Mr Danny Wall were just as lucrative. Incidentally it is probably worth mentioning that Mr Grosfeld, the CEO of PMH's subsidiary, is director of several Blackstone Group funds. And, oh yes, the Blackstone investment firm just happens to be headed up by Mr Peter G. Peterson, former Secretary of Commerce, and by Roger C. Altman, the former Assistant Secretary of the Treasury. {B133}

Unfortunately for the elite and the taxpayer alike, the S&L bailout deals appeared a little too much like additional gifts to the haves at the expense of the taxpayers, so that a special boondoggle committee may have to be set up to investigate the matter. The aspect that has made these bailout deals so beneficial to the lucky buyers is the tax loss credits that went along with the deals. In short, massive tax avoidance vehicles.

The impending Capital Gains Tax cut will be a variation on an already too familiar theme. The Joint Committee on Taxation says the capital gains proposal passed by the House on Sept. 28 1989 would cost $35 billion in lost revenues over the next 10 years. The recipients will be almost exclusively the richest 10%. In the House, 64 Democrats who theoretically owe a fiduciary responsibility to the bottom 90% voted for Bush's tax cuts. {B134}

Because politicians, both Republicans and Democrats alike, come mainly from the richest 10 percent and have small personal fortunes to protect, they are eager to create tax shelters. After all, exemption from taxes is still one of the best vehicles available for amassing and retaining wealth. The tax reforms of 1981, which relieved the elite of so much of their tax share that budget deficits and widespread social program cutbacks resulted, were passed for exactly the same reason. As long as the Congress is controlled by lawyers, the rich will continue getting richer while the poor become poorer.

The Forgotten Concept ...Representation

Democracy by nature implies representation. Congress is supposed to be composed of people who represent the needs and interests of the group who elect them. Unless this happens, democracy doesn't happen!! And it certainly isn't happening!

In reality, Congress is made up mainly of lawyer/politicians who have never known hunger. Few if any have worked for the minimum wage. Few if any can count even one blue collar family as belonging to their circle of friends. Due to the lack of meaningful contact with the nation's poorer citizens, Congress manages at best an academic appreciation of the day to day hardships endured by the people to whom they owe a fiduciary responsibility, but with whom they have little or no real social contact, except for a brief period immediately prior to elections.

American democracy as it functions today does not represent the will of the majority, nor does it satisfy the needs of the majority. Instead, Washington is controlled by lawyers who have cunningly transformed the supposed seat of democracy into an arena in which representatives of the elite, can compete to amicably decide how best to share both foreign and domestic resources. Lawyer/politicians act as the intermediaries to minimize disputes among the special interest parties. Politicians and special interest groups (lawyers, and more lawyers) fit together like hand and glove.

The "quid pro quo" relationship works so well that in both 1986 and 1988, 98% (ninety-eight percent) of House members seeking reelection, were successfully reelected.

Considering the amount of political corruption that came to light during that same period, a 98% percent reelection rate, which now threatens to translate into life tenure for the elite's chosen politicians, exposes yet again how easily and effectively democracy can be manipulated. {B135} The electorate don't choose their representatives, they only get to choose between candidates who are pre-selected by the elite using the campaign support process. America is run by the Golden Rule - Them that's got the gold, rule.

One of the factors contributing to the 98% reelection rate among House members traces back to a long standing privilege enjoyed by incumbent members. Members of Congress are allowed six taxpayer sponsored mass postal mailouts per year to constituents in their election ridings. These mailouts are used primarily to enhance and increase their public profile for reelection purposes, but it is openly acknowledged that these mailouts give incumbents an obvious unfair edge over first-time candidates.

Furthermore, it appears that the reason House elections are held every two years is not to ensure a healthy turnover of people's representatives (as the public are led to believe), but to ensure that politicians are constantly in need of seeking campaign support from their wealthy special interest benefactors, and also to ensure that they can be gotten rid of quickly if they don't play ball.

With all its obvious flaws, the lobby system is unfortunately only the first of many factors which negate democracy in America. The next factor involves the existence of deals made in private.

Back Room Deals (The Secretive Third House)

Voters are aware that in order for a bill to be made into law, it must first get passed by a majority in the House of Representatives, as well as by a majority in the Senate, before it is passed on to the President for his approval.

What most voters are not aware of is that the most important bills (about 20% of all legislation) go through a little known back room bargaining procedure that can and often does effectively negate the decisions reached previously by both the House and the Senate. This vital step involves passing the bill on to a third group which effectively wields more power than either the Senate or the House independently! The group, known as a House-Senate Conference Committee, which is made up of selected members from both the Senate and the House, can insist on meeting behind closed doors. They can take a bill which had already been passed unanimously by both houses, make additions and alterations as they wish, and resubmit it back to each house for a take it or leave it vote. For example, during one such conference committee session, Mr John Murtha (chairman of the House Defense Appropriations Sub-committee) added a clause into a defense-appropriations bill that would give the Speaker of the House the exclusive use of a military airplane at all times! Neither House had debated or voted on that clause. {B136}

To make matters worse, Senate-House conference committees purposely take no minutes, so that no member taking part can be held singularly responsible for having voted for or against any of the changes or additions. Through some unwritten but powerful dictate, decisions reached by this Third and more powerful "back room House" are practically never rejected.

On average, only once in a hundred times does a bill, which has been mauled over by this Third House, get rejected by the House or Senate!!

The existence of covert back room deal making is not new, but then neither is special interest lobbying. With regard to "Special Interest Lobbying", this is the court of last appeal. Behind closed doors, members can once again trot out demands that had been rejected by a majority of either or both lower Houses, ...or amend proposals that had enjoyed overwhelming approval by both Houses! In short, this group has the power to veto the will of the people by vetoing the will of both House and Senate!!

Would the bottom 90% of the nation be so willing to refer to American democracy as the "beacon of democracy" if they knew that the combined will of their elected representatives plus the will of the Senate can be rejected in some smoky back room by a small group of politicians who are by nature prime targets for special interest lobbyists?

I think not!

In 1934, Republican Senator George W. Norris of Nebraska, who had by that time already served 40 years in congress, considered the existence of this power group undemocratic. He had this to say,

"The members of this 'house' are not elected by the people, the people have no voice as to who [conferees] shall be. ...No constituent

{B131} "Greenspan's moment of truth" BusinessWeek (Jul 31 1989): p62
{B132} "The screwiest S&L bailout ever" Fortune (Jun 19 1989): p114
{B133} "Sweet deal" Forbes (Sep 18 1989): p96
{B134} "Why Bush's trickle-up theory is sailing through Congress" BusinessWeek (Oct 16 1989): p47
{B135} "Incumbents' real ace in the hole" Insight (May 22 1989): p22
{B136} "How to please Mr Speaker" The Economist (Nov 18 1989): p34