WASHINGTON (AP) _ A large California savings and loan that allegedly had undue clout with politicians and regulators became the second thrift to be taken over recently by the government despite being technically solvent.
The Federal Home Loan Bank Board said Friday that the 29-branch Lincoln Savings and Loan Association in Irvine had dissipated its $5.4 billion in assets, had let its capital dwindle to $20 million and was operating in an unsafe and unsound manner.
Another large savings and loan, Gibraltar Savings of Beverly Hills, Calif., was seized March 31. Regulators stressed that Lincoln’s branches would remain open as usual and that all deposits were guaranteed up to the $100,000 insurance limit.
Lincoln has been up for sale while its parent, American Continental Corp., a luxury resort developer based in Phoenix, Ariz., prepared to file for federal bankruptcy protection, which was done Thursday.
American Continental has contributed heavily to Senate campaigns and had allegedly received favorable treatment from regulators.
The bank board said Lincoln’s financial troubles started in February 1984, when it was bought by American Continental and its management invested in risky real estate ventures, stocks and junk bonds.
″Management appeared to operate Lincoln mainly for the benefit of American Continental Corp. ... (and) has repeatedly violated regulations ... and has refused to follow supervisory directives,″ a bank board statement said.
Lincoln and its owner, American Continental Chairman Charles H. Keating, have been the subject of considerable controversy over the last two years.
An examination completed in May 1987 by regulators at the Federal Home Loan Bank in San Francisco turned up substantial irregularities and recommended the seizure of the institution.
Keating then alleged bias by the regional officials, who technically work for a board controlled by S&L executives in competition with Lincoln, and complained to the nation’s top thrift regulator, M. Danny Wall, the chairman of the federal bank board.
Wall, in an action that angered members of Congress and top regulators at other banking agencies, prohibited regional officials from acting against Lincoln. In November 1987 he granted a new review, which was conducted by examiners based in Washington. That exam, concluded a year later, upheld the findings of the San Francisco agency.
At one point, five senators who received campaign contributions ranging from $34,000 to $112,000 from American Continental officers and employees met with regional regulators at the request of Lincoln.
Attending the April 1987 meeting in San Francisco were Sens. Donald W. Riegle, D-Mich.; Alan Cranston, D-Calif.; Dennis DeConcini, D-Ariz.; John Glenn, D-Ohio, and John McCain, R-Ariz. Riegle, who would become chairman of the Senate Banking Committee less than a year later, subsequently returned his $76,100 contribution.
The House Banking Committee chairman, Rep. Henry B. Gonzalez, on Friday renewed his call for Wall’s resignation, blaming Wall for the ″gross mishandling″ of the case and months of delay that will ultimately cost taxpayers millions of dollars.
Wall, in a telephone interview, said that until Lincoln’s parent company sought bankruptcy protection, the bank board faced legal obstacles in taking over the institution while it was still solvent.
He defended the decision to conduct an independent review of the San Francisco officials’ findings, saying enough questions had been raised about their actions to warrant a second look.