Lincoln Savings and Loan

One of the books on the S&L Scam is called Trust Me: Charles Keating and the Missing Billions by Michael Binstein and Charles Bowden. In the letter to the San Jose Mercury News on April 8, 1994, I cited the book and prepared a commentary and a timeline of events. The following is an extract from that letter. All of the page citations in the following timeline refer to Trust Me. The timeline will eventually be included in a much more extensive study of the favorable treatment shown to Keating during the Reagan and Bush administrations. Information added to the original letter is shown in square brackets [ ].

The Timeline.

Edwin Gray was appointed in May 1983 by President Reagan to head the Federal Home Loan Bank Board (FHLBB - the predecessor of the RTC). Although a Reagan loyalist, Ed Gray was an honest man who was deeply concerned about the excesses of the savings and loan industry. In August 1983, the Federal Savings and Loan Insurance Corporation (FSLIC) told him that most S&L's

are increasingly not running on the deposits of local people but feeding off big brokered jumbo accounts ('hot money' in the parlance of the trade)-- $100,000 units. And these federally insured monies are, under deregulation, pouring into risky loans and investments. (p. 209)

Charles Keating's American Continental Corporation (ACC) and its California subsidiary, Lincoln Savings and Loan were major players in this arena. Keating, [the Republican National Committeeman from Arizona,] had taken control of Lincoln on February 22, 1984 and had quickly proceeded to acquire political clout with the Republican adminstration in California and particularly with Larry Taggart, the Savings and Loan Commissioner. Taggart was a man

dedicated to deregulation. When he retires on January 1, 1985, Keating immediately hires him as a consultant. Pat Nolan is the [Republican] California assemblyman who authored the 1982 bill that allowed state-chartered thrifts to plunge 100 percent into non-home mortage investments. In 1985 he lobbies against an effort to reregulate the industry. He gets $35,000 in contributions from ACC company officials. Karl Samuelian is [Republican] California governor George Deukmejian's chief fund-raiser. He is also ACC's lobbyist against reregulation in Sacramento. ACC gives Deukmejian $75,000. In 1985 and 1986, Charlie Keating, his family, and his executives pump almost $350,000 into California campaigns and into soft money political action groups. (p. 251)

This technique of political fund-raising is known as bundling, and it was repeated when Charles Keating contributed $100,000 to the Bush campaign in 1988. In any case, by 1984 the San Francisco branch of the FHLBB was beginning to investigate Lincoln and by 1985, Gray was receiving a daily report on the S&L. In addition, through his efforts to re-regulate the S&L's, Gray had become identified as an enemy of Wall Street and the S&L Industry.

July 1985 - White House Chief of Staff Donald Regan asks Jack Anderson to do a hit piece on Gray - Michael Binstein, co-author of Trust Me, was selected to do the dirty work. (p. 229)

September 30, 1985 - Gray is called to the White House by Ed Rollins and given a message from Donald Regan - "Regan wants you to leave in several months. They want to have their own chairman." (p.230)

March 17, 1986 - Federal examiners from the San Francisco branch of the FHLBB begin to examine Lincoln's books. This investigation continues until April 1987, in the face of violent protests from Keating and major efforts to bog down the FHLBB in legal red tape.

April 9, 1987 - The FHLBB sends a criminal referral to the Justice Department. It recommends "an examination of the evidence of file stuffing [plus forgery of signatures, backdating of financial records and other criminal acts ] uncovered in the audit of Lincoln in the spring of 1986." (p. 288)

May 1987 - The San Francisco branch of FHLBB finishes its one-year audit of Lincoln and recommends it be seized at once. No action is taken as Gray's appointment as Chairman of the FHLBB expires in June 1987.

July 1, 1987. - M. Danny Wall, protege of Senator Jake Garn, and a former member of Garn's senate staff, is appointed by President Reagan as the new Chairman of the FHLBB. Richard Hohlt, a lobbyist for the U.S. League of Savings Institutions, the main lobby of the S&Ls on Capitol Hill says: "When it comes to Danny Wall, he doesn't take a piss unless I give him permission." (p.297)

July 23, 1987 - Responding to the San Francisco audit, William L. Robertson, the chief of examiners of the FHLBB sends an 18-page report to Wall. It states that Keating acquired Lincoln through misrepresentation and has invested federally-insured funds in risky ventures with grossly inadequate safeguards. Robertson recommends Lincoln be placed into receivership. (pp. 299-300)

July 23, 1987 - Robertson is demoted and a man named Darrell Dochow is placed in charge of FHLBB examinations. (p. 300)

July 28, 1987 - The FHLBB decides conservatorship for Lincoln is not viable. (p.300)

May 5, 1988 - The FHLBB holds that the case against Keating "does not legally justify seizing his savings and loan and booting him out." (p.67)

July 1988 - By this time the San Francisco branch of the FHLBB had been frozen out of the Lincoln investigation. The 1988 audit is conducted by auditors from Washington. (p.342)

Fall, 1988 - "Charlie Keating, through bundling, pumps at least $100,000 into George Bush's campaign." (p.340)

1989 - Newly-elected President Bush splits the FHLBB into the Office of Thrift Supervison (OTS) and the Resolution Trust Corporation (RTC)

1990 - The Republican National Committee releases the names of 249 Team 100 members who contributed $100,000 each to the 1988 Bush Campaign to Common Cause Magazine. Charles Keating, Jr. was identified as a contributor. Unless Keating got this money from a fairy godmother, it is highly probable the original source of the money was Lincoln or ACC, which went into bankruptcy in 1989. Why was there no action by RTC investigators to track the money back from the Bush Campaign or the Republican National Committee in 1990, in 1991, in 1992, 1993, or 1994?

1993-1994 [1998] Although to date there has been no action by the RTC to investigate the skimming of S&L funds for political contributions to George Bush in 1988, the RTC in 1993 did begin to investigate allegations that S&L funds may have been skimmed in 1984 or 1985 for political contributions to Bill Clinton. Is it not interesting that the RTC is investigating an allegation of S&L skimming when it relates to [Governor] Clinton, but is not investigating a very clear-cut indication of S&L skimming when it relates to [President] Bush? The bailout of Madison Guaranty has cost the American people about $50 [$73] million, about 1/40th of the bailout cost of Lincoln. You would think the RTC would have directed at least one investigator to review Lincoln and ACC financial records for evidence of skimming.

The total cost to the American People of the Lincoln Savings and Loan bailout: about $2 billion dollars [(1994) - $2.2 or $2.3 billion dollars (1996)]












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