THE BOULDER DAILY CAMERA - GUEST OPINION
January 7, 1991
Happily for President Bush and former President Reagan, the twin debacles of Saddam Hussein and the recent congressional battle over the budget have deflected the attention of the public from what should have been the most explosive scandal in American history.
What the public has already learned is that a handful of freewheeling government officials, retired military officers and foreign nationals played a major role In U.S. foreign policy, outside the scope of the Constitution, without the permission or even the knowledge of Congress. What the public for the most part has yet to learn is that the two most devastating calamities of our time, the drug epidemic and the looting of our savings and loan industry are, in part, direct extensions of the same process. They involved many of the same individuals and served the same goal: to fulfil Ronald Reagan's obsessive commitment to destroy the communist regime in Nicaragua.
Fantastic as they may seem, allegations concerning the Contra-drug and the
Contra-S&L connections are well supported by a large body of evidence.
Investigations carried out by a congressional subcommittee chaired by Sen. John
Kerry, the Christic Institute, and Investigative reporters who visited Central
America ("Out of Control," Leslie Cockburn, 1987), revealed how our
government, using CIA proprietary and contracted aircraft and pilots, expedited
the importation of tons of cocaine into the U.S. This operation was done for the
benefit of some of the world's most notorious drug traffickers who, in turn,
contributed millions of dollars for the support of the Contra war.
The S&L connection, more recent in the unravelling, had its origins at an
even earlier time - in the wild inflationary spiral of the late 1970s. Congress
attempted to compensate for losses in the savings and loan industry by passing
the first thrift deregulation bill in 1980, designed to phase out interest rate
controls on deposits. The price for attracting new depositors to the ailing
S&Ls was that they were forced to pay more Interest on deposits than they
were receiving on old loans.
This poorly designed bill was followed in 1982 by the Garn-St. Germain Depository Institutions Act, which swept away most of the remaining regulatory and stabilizing criteria of the earlier laws. The new law changed the basic function of S&Ls from the stable home loan market to the much more profitable but risky commercial lending market.
The law contained the potential for almost unbounded fraud, and mobsters and
swindlers moved in swiftly to take advantage of the coming bonanza. Billions of
dollars have vanished. A House committee estimated that at least one-third of
bank failures and over three quarters of S&L insolvencies were the result of
misconduct and fraud.
Three collaborating investigative reporters ("Inside Job: The Looting of
America's Savings and Loans," Pizzo, Fricker and Muolo, 1989) detected the
strong suggestion of a CIA-Contra connection to the S&L scandal. After all
the S&L environment after deregulation offered the perfect setting for
massive money laundering, so useful to the Contra cause. Furthermore, some of
the principal players in the collapse of dozens of S&Ls were known to be
involved in CIA activities, and in some celebrated cases were actually shielded
by the CIA from federal prosecution.
In February 1990, Pete Brewton of the Houston Post began a series of reports,
based on 18 months of his own investigation, which revealed that "at least
27 failed financial institutions - 25 S&Ls and two banks had links to CIA
operatives or to organized crime figures with links to the CIA." The Post,
unavailed of subpoena power, based its reports on "information obtained
from court documents, sworn testimony, law enforcement records and interviews
with key government investigators and prosecutors." Two of the principal
sources were a former Justice Department prosecutor and a former FBI agent.
Because of the CIA's repeated interference in criminal investigation
involving its own contract operatives, and the unavailability of bank records
confiscated and now held by the government, it has been nearly impossible to
prosecute those responsible for theft, or even to discover the fate of billions
of dollars in stolen money. However, the evidence suggests that the CIA used
part of these proceeds to pay for covert operations in Central America.
The House Banking Subcommittee, chaired by Rep. Frank Annunzio, began an
investigation of the Houston Post's allegations in March 1990. Insofar as this
committee's work was allowed to proceed, it found no conflict with the Post's
reports. However, because of the CIA's complete refusal to deal with the Banking
Subcommittee, the matter has since been turned over to the Select Committee on
Intelligence.
It has been estimated that the S&L bailout will ultimately cost U.S. taxpayers $500 billion. Of this staggering amount, approximately $13 billion may be attributed to losses sustained by S&Ls engaged in laundering cocaine profits directed to the support of the Contra war in Nicaragua. It is my view that the American public was twice sinned against: once, by the commission of these crimes by our own government, and again by the institutions that failed to hold the government accountable for these acts. Above all, the uninquisitive and recently silent press failed in its responsibility to a free society: to illuminate even the darkest parts of the total narrative, seeking the truth wherever it may have led. These revelations, if vigorously pursued and brought to the fore, would have precipitated a constitutional crisis and confronted the Congress with the possibility of initiating articles of impeachment for the second time in less than 20 years.
To some, the cure may seem more dreadful than the disease, but the alternative is to emulate the practices of our most maligned enemies.
Howard Garcia is a Boulder physicist