Candidates Spar in Texas Gubernatorial Debate

The incumbent governor and his Democratic challenger met Wednesday in their first campaign debate, each claiming the other benefited from the state's troubled homeowners insurance industry.

Democrat Tony Sanchez said Gov. Rick Perry should have called a special legislative session to address rising insurance rates and company withdrawals from the Texas market that have left hundreds of thousands of people looking for new policies.

Sanchez said Perry favored the industry because of $1 million in campaign donations from big insurance contributors. The Perry campaign has disputed the amount, but offers no figure of its own.

"He should have called a special session a long time ago. He knew this problem was there,'' Sanchez said.

Perry said as governor, he started an investigation into insurance companies and a lawsuit against Farmers Insurance Group, which said two weeks ago it was leaving the Texas market.

The governor said a special session is unnecessary and noted that Sanchez profited from unregulated homeowners insurance through a subsidiary of his International Bank of Commerce.

Sanchez has said the agency has no control over how policies are constructed. He says his business sees little, if any, profit from the policies.

Later, Sanchez was asked why Texans should believe he can manage the state when his Tesoro Savings and Loan failed, resulting in a $161 million federal taxpayer bailout. The same thrift was used by alleged drug dealers in 1983 and 1984 to launder $25 million from Mexico.

Sanchez again denied wrongdoing, and no charges ever were filed against any Tesoro officials. He said he felt good about how the bank was managed during a time when the banking industry overall was suffering.

"You shouldn't feel good when the federal authorities tell you that there was drug money that came into your bank in suitcases,'' Perry rebutted. "You failed the test of leadership.''

Public polls have consistently shown Perry with a lead. A final debate between the candidates is scheduled Oct. 24. The election is Nov. 5.