House Speaker J. Dennis Hastert, who usually operates discreetly below the radar, set off a firestorm inside Washington last week with one telephone call. Hastert called Treasury Secretary John Snow on behalf of a constituent's loan request. The applicant was no struggling small business, and the amount was not trifling. The speaker was pushing a $1.6 billion loan guarantee for United Airlines, the nation's second-largest carrier.

It was assumed Hastert's clout would carry the day for United. Instead, the Treasury cast the deciding vote Thursday to deny the federal bailout. But the issue is far from settled. After a second intervention by Hastert, the Treasury issued a statement inviting a new United proposal -- presumably including new capital to be poured into the bankrupt airline. That puts Snow and the Treasury in a precarious position. Can they withstand this pressure from the powerful speaker?

This prolongs the loan stabilization program some three years after it was created to preserve America's airline industry following Sept. 11, 2001. The extension is traced to the speaker, third in line for the presidency, pressuring a Cabinet member on behalf of a home-state corporation. The White House, while closely watching developments, is determined to keep its hands off.

The issue is before the three-member Air Transportation Stabilization Board (ATSB), created to oversee the loan guarantees. The Federal Reserve, the Treasury and the Transportation Department each have one vote. In December 2002, when United sought a $1.8 billion loan guarantee, the board voted 2 to 1 against, with Transportation in favor of the bailout. The renewed request is based on economic pressure from $40-a-barrel oil. Other carriers, opposing the United proposal, say they must cope with the same high oil prices.

Transportation Secretary Norman Mineta has recused himself because his wife is a retired United Airlines flight attendant. Deputy Secretary Kirk Van Tine, who cast the dissenting vote on the earlier loan request, is committed to bailing out United and determines the department's position. The Federal Reserve is just as inflexible in the opposite position, and there was no point in Hastert trying to lobby the nonpolitical central bank. He had to go to the Treasury.

The Treasury representative on the ATSB, Undersecretary Brian Roseboro, was as firm against the bailout as the central bank's member, Fed Governor Edward Gramlich. Roseboro, an officer of the American International Group before going into the government, is considered one of the rising stars of the Bush administration. Instead of approaching Roseboro, the speaker telephoned his boss.

After Hastert's call to Snow, United chief executive Glenn Tilton canceled a speech at a New York conference of investors to fly from Chicago to Washington. Tilton and Frederic Brace, United's chief financial officer, met with Treasury officials but not anybody from the unapproachable Fed. It was assumed in Washington that the speaker's clout would carry the day for United.

Hastert placed a second call to Snow on Thursday. He may have known by that time that Roseboro would vote against the loan guarantee. Transportation Undersecretary Jeffrey Shane voted to defer the decision for a week to try to save the loan. The majority of the board issued a decision asserting that the loan was not necessary to maintain a "viable" U.S. aviation system as mandated by the loan guarantee law. The case, finally, seemed closed.

But it wasn't. Presumably influenced by Hastert's interest, the Treasury issued a statement saying it was prepared to reconsider if United submitted "an improved application in the coming days." That is expected to be $250 million to $300 million in new equity. What then will Roseboro and the Treasury be forced to do under political pressure? Will this trigger bailout requests from other airlines?

Republican Sen. Peter Fitzgerald, who has been at odds with his fellow Illinoisan Hastert during his single term in the Senate, which is about to end, opposes the bailout and is interested in a senatorial inquiry of improper lobbying on the issue. The question is whether the speaker, helping a company with headquarters in Chicago and many employees in his congressional district, has stepped over the line in influencing the government's decision.

{copy} 2004 Creators Syndicate Inc.