Days Are Numbered for the Capitol Hill Bank

WASHINGTON -- Public outrage over checks bounced by U.S. representatives has focused attention on the House Bank, an institution that began nearly 200 years ago as a deposit-taking and check-cashing convenience for members.

Earlier this month, Congress voted overwhelmingly to shut the bank down by yearend.

The bank did have its defenders. They said it operates aboveboard and is a useful fringe benefit of House membership, dating back to the days when banks in the capital were scarce and members needed an easy way to pay for trips to their home districts.

But some legal experts contend the House Bank is operating illegally by taking deposits and making overdraft loans without a charter.

Sergeant at Arms' Office

Founded some time between the 2d and 25th Congresses, probably in the early 1800s, the House Bank operates out of the sergeant-at-arms' main office on the first floor of the Capitol. Charles A. Mallon is listed as deputy sergeant at arms and bank director. He reports to Jack Russ, who has been sergeant at arms since 1986.

Mr. Russ, who did not respond to repeated requests for an interview, reports to the speaker of the House.

The House Bank has 440 accounts. When members are elected to Congress they can open an account at the bank and have their paychecks deposited there.

|Like an ATM'

Each account holder receives a book of checks that can be used to pay bills, or withdraw cash from the account, which does not bear interest.

"It was like an ATM," said Thomas "Lud" Ashley, a former Congressman from Ohio who is president of the Association of Bank Holding Companies. "It was 25 feet from where we voted. I deposited my check there and I drew from it for paying my kid's tuition, beer money, the gas bill, the mortgage."

Riggs National Bank of Washington, the local bank known for its close connections to clears the checks for the House Bank, according to the GAO. In the 1970s, the now-defunct National Bank of Washington provided the service.

"We just flat-out stopped, probably in 1979 or 1980," said a former NBW official. "One of the reasons was we had a couple of embarrassing situations with some congressmen." The official did not elaborate.

Riggs has also worked with the bank on a consulting basis and made suggestions regarding check cashing and cash control procedures, according to a July 16 letter from Mr. Russ to Comptroller General Charles A. Bowsher.

The House Bank's service menu includes free checking, travelers checks, wire transfers, foreign currency exchange, and savings bonds.

There are no fees or penalties for bouncing checks, which are covered by other members' deposits. The House Bank has employees who serve as tellers.

According to the General Accounting Office report last month that blew the lid on the loose checking practices, the House Bank had $1.5 million in members' deposits as of June 30, 1990.

Of that $1.5 million, $889,505 was kept in a U.S. Treasury account at Riggs. Another $201,352 was cash in a vault at the sergeant at arms' office, $142,008 was accounts receivable, and $258,128 checks in the process of collection -- drawn on other banks and cashed for members and employees of the House, but not yet deposited with the U.S. Treasury.

Widespread Abuse

The GAO's report uncovered widespread abuse by members. For the first six months of 1990:

* 134 House members bounced 581 checks of at least $1,000 apiece.

* 24 account holders averaged at least one returned check per month.

* 4,325 checks were returned for insufficient funds.

Some Washington attorneys say the scandal is a black mark on Congress at a time when it wants to crack down on bad banking practices.

"There is clearly a double standard at work," said John D. Hawke, a partner with Arnold & Porter in Washington. "Congress has cracked down severely on insider transactions at banks, yet they operate their own bank in disregard of that rule."

Others see the House Bank as a rogue institution without a legitimate charter.

"It looks and smells like a bank. It takes deposits and it makes loans. That is the classic definition of a bank," said a Washington lawyer who requested anonymity.

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