Rubbergate was the name given to a scandal that broke in early 1992 when it was revealed that the United States House of Representatives allowed members to overdraft their House checking accounts, but were not being penalized by the House Bank. Also known as the House banking scandal. 1992 (MCMXCII) was a leap year starting on Wednesday. ... The United States House of Representatives is one of the two houses of the Congress of the United States. ...

The Scandal

The phrase refers to the common expression that when checks fail, they're said to have "bounced", as if they were made of rubber. The "gate" derives from the common US mass media practice of labeling political scandals with "gate", after the famous Watergate scandal. A cheque (British English) or check (American English), thought to have developed from Persian چك chek, is a negotiable instrument instructing a financial institution to pay a specific amount of a specific currency from a specific demand account held in the maker/depositors name with that institution. ... Rubber is an elastic hydrocarbon polymer which occurs as a milky emulsion (known as latex) in the sap of a number of plants but can also be produced synthetically. ... The United States of America — also referred to as the United States, the U.S.A., the U.S., America, the States, or (archaically) Columbia—is a federal republic of 50 states located primarily in central North America (with the exception of two states: Alaska and Hawaii). ... Mass media is a term used to denote, as a class, that section of the media specifically conceived and designed to reach a very large audience (typically at least as large as the whole population of a nation state). ... A political scandal is a scandal in which politicians engage in various illegal or unethical practices. ... The Watergate building. ...

The House Bank Scandal ultimately ensnared more than 350 House Members, though only 23 of that number were actually convicted of violation of law, the rest simply suffered politically for their fiscal irresponsibility.

It is important to note, however, that the House Bank was not really a "bank" at the time. Members of Congress were allowed to cash checks there, which most did. The facility was operated under very loose rules at the time, using a pencil and ledger system rather than a computerized accounting system, and the bank manager did not provide regular account statements to House members, nor were notifications sent to House members in the event they had overdrawn their accounts. Further contributing to the problem was the fact that the House Bank didn't post deposits in a timely manner, often as much as seven weeks after the fact. Thus, while some knowingly took advantage of the system (and were ultimately convicted of wrongdoing) many members of the House who wrote overdrafts were not actually at fault, as it was the House Bank's responsibility to post deposits in a timely manner.

Another unwritten rule which contributed to the scandal was that the House Bank manager, a Democrat, looked the other way when a House member overdrew his or her account, provided that the overdraft did not exceed the member's next paycheck. Many well-known politicians used this practice to take unauthorized advances on their paychecks which they would often pay back in the future. In a corporate context the practice of drawing money out of the corporation's accounts for personal use is a violation of fiduciary duty to the corporation's shareholders. Congressmen, however, do not legally owe a fiduciary duty to the government, or the people that have elected them, so many of the House members were not convicted for their misappropriation of House funds.

Public Exposure

In the early days of the scandal, when the media began reporting on the loose practices, Republican Minority Whip Newt Gingrich, along with 7 freshman Republicans referred to as "The Young Turks," made the strategic decision to publicize the scandal in an attempt to sweep lawbreaking congressmen, most of them Democrats, out of power, and restore order to the House of Representatives. Gingrich realized that far more Democrats could be implicated in this scandal than Republicans, so he made the decision to make all of the culprits public and "let the chips fall where they may."

Rather than caving in to pressure from Democrats to mitigate the damage and limit it only to the handful of House members who repeatedly broke the law, Gingrich took steps to inform the voting public of the overdrafts and the identities of the congressmen responsible[1].