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Al Eisele

Al Eisele

Posted: July 12, 2007 11:30 PM

Congress Acquired by Carlyle Group in Leveraged Buyout


House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid announced Thursday that they have accepted an offer from the Carlyle Group to buy Congress for $100 billion.

The two leaders of the legislative branch said the leveraged buyout offer from the giant Washington-based private equity firm was just what Congress was looking for as it tries to achieve reduced costs and greater productivity while providing more choices for consumers of government services.

"I've made no secret of my desire to create a nationwide franchise for lawmakers in order to serve their constituents more effectively in a cost-efficient manner," Pelosi told a news conference on Capitol Hill. Reid added, "The era of an unresponsive, divided legislative branch is over. The age of less costly, more accessible government services is here."

Pelosi, who will serve as chairman and CEO of the new entity, to be called Congress/Carlyle, predicted that the deal not only will provide needed cash for the congressional appropriations process, but will restore public confidence in the legislative branch and enable it to compete more effectively with the executive and judicial branches.

Reid, who will be president of the new Carlyle property, said, "For more than 200 years, the House and Senate have worked at cross purposes, while the executive and judicial branches have taken a unified approach to their businesses. Now, we will be able to act in a more focused and disciplined manner that will ensure we remain competitive well into the 21st century."

David Rubenstein, a former Carter White House aide who is a co-founder and partner of the Carlyle Group, said, "We have long admired the leadership of Congress and its impressive track record of growth, but we believe that we can achieve significant savings through a reduction in workforce that will allow us to lease two of the three Senate office buildings, and one of the House office buildings, to the private sector. We can also avoid duplication of effort by eliminating at least half of the congressional committees."

Both Pelosi and Reid emphasized that Congress/Carlyle will continue to have branches in all 435 former congressional districts and the District of Columbia, giving it a direct relationship with every household in America. "This will allow us to create a national customer base for government services and significantly reduce our administrative costs," Pelosi said.

Reid added, "It's a natural extension of our efforts over the past six months to make government more responsive, and bring it closer to the people, especially in places like San Francisco and Searchlight, Nevada."

However, the two leaders conceded, in response to reporters' questions, that the proposed sale to Carlyle may raise some constitutional questions, although they expressed confidence that any such obstacles can be overcome.

"Granted, Article I, Section I of the Constitution calls for dividing Congress into two separate bodies with different modes of election and principles of action. But it also stipulates that the extent of their separation is determined solely by the nature of their common functions and their common dependence on the society," Pelosi said.

Another potential obstacle to the proposed sale is the Constitutional requirement that the House is apportioned by population, while the Senate reprsents each state equally, regardless of size. But Reid said that the "Great Compromise" that was key to ratification of the Constitution "is not set in concrete," and that the creation of Congress/Carlyle makes the issue of equal representation a moot point since there will be a single legislative entity.

"The beauty of the Carlyle Group's offer is that we can cut the size of the Senate in half and reduce the House by at least a third," he said. "That will achieve a significant savings through a reduction in workforce."

Asked how senators willl decide who represents their state if the Senate is downsized by half, Reid said, "We'll flip a coin for every state but Nevada. There, the choice will be up to the president of Congress/Carlyle."