They said it would happen and it did: Rosty loses power.

WASHINGTON -- A House Ways and Means Committee meeting on Aug. 19 offered the first concrete evidence that Rep. Dan Rostenkowski's demotion from panel chairman to rank-and-file member is going to hurt the tax-exempt bond market.

The panel convened in an unusual Friday afternoon session to draft the tax portion of a bill that would reauthorize the Superfund toxic waste cleanup program. The Illinois Democrat attempted to offer an amendment to permit private firms to use tax-exempt bonds to clean up and redevelop contaminated industrial waste sites.

But the committee's acting chairman, Rep. Sam Gibbons, D-Fla., stopped Rostenkowski in his tracks. Gibbons told the scowling former chairman that he would not be permitted to offer his amendment because it did not directly relate to the matter at hand. Under House rules, Gibbons declared, the amendment was "non-germane."

Rostenkowski tried to protest Gibbons' ruling, but Gibbons ignored him and moved on to the next member offering an amendment.

Capitol Hill watchers predicted that something like this would happen back on June 1 when Rostenkowski was charged in a 17-count felony indictment related to the House Post Office scandai. House rules required Rostenkowski to relinquish his chairmanship, although he is permitted to reclaim it when and if he is cleared of the charges.

Bond supporters warned that Rostenkowski's demotion would be a blow to the municipal market because the powerful House Ways and Means chairman had become a supporter of tax-exempt financing over the last few years. He would have been an important ally when, for example, the committee decided to take up legislation by Rep. William Coyne, D-Pa., to relax a host of bond curbs. That could happen next year.

After the session some observers noted that, had Rostenkowski been sitting in the chairman's seat, the amendment would more than likely have made it into the bill. There is a saying around Capitol Hill that anything can be germane if lawmakers want it to be, and Rostenkowski would certainly not have ruled himself out of order. Instead, Rostenkowski was forced to stand helplessly by as his superior blocked the measure.

The scene was a far cry from last year when Rostenkowski helped shepherd President Clinton's tax package through Congress. The package included permanent extensions for the tax exemptions for mortgage revenue bonds and small-issue industrial development bonds, which had expired June 30, 1992.

At the time the extensions were enacted, municipal lobbyists said pressure from Rostenkowski may have been the single most important factor in the two exemptions gaining permanent extensions. Would he have the same kind of clout now? It's hard to believe that would be the case, given the Aug. 19 scene in Ways and Means.

Ironically, a crucial moment last year for mortgage bonds and IDBs occurred during a Ways and Means subcommittee hearing where Chicago Mayor Richard M. Daley and Rostenkowski testified about the proposal for toxic waste cleanup bonds.

The bonds, known as "environmental remediation bonds," had been proposed by another Illinois Democrat, Rep. Mel Reynolds, and Rostenkowski and Daley were at the hearing to lend their support.

The hearing was delayed, giving Daley a chance to lobby Rostenkowski on other matters. Daley reportedly urged Rostenkowski to push for the permanent mortgage bond and IDB extensions, and Rostenkowski was said to have told Daley, "Richie, I'll try to get these things for you."

Richie Daley also wanted environmental remediation bonds. As he told the hearing on that day in July 1993, more than a year before Rostenkowski's indictment, the legislation would help Chicago because the city has numerous contaminated industrial sites.

But this time, Rostenkowski did not have the power to help his mayor out.

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