U. S. Regulator Tells of Job Offer by S&L; : Gray Terms Lincoln Savings’ Action an Effort to ‘Buy Him Out’

Lincoln Savings & Loan Assn., the Irvine-based institution that often has been at loggerheads with federal regulators, offered a job last year to the nation’s chief S&L; regulator, Edwin J. Gray Jr., in an apparent effort to “buy him out,” an industry newspaper reported Tuesday.

Gray revealed the November, 1985, job offer from Charles H. Keating Jr., chairman of Lincoln’s parent company, American Continental Corp. in Phoenix, in an affidavit filed last month at the request of Sen. William Proxmire (D-Wis).

The affidavit came amid a bitter feud between Gray and Keating over the future of the troubled S&L; industry and, more urgently, over who should be the next presidential appointments to the three-member Federal Home Loan Bank Board, which Gray chairs.

The other two members have resigned from the board, which regulates federally insured S&Ls;, though one has agreed to stay on until a replacement is named.

Keating, a staunch supporter of S&L; deregulation, has favored “free market” candidates who advocate more use of the wider investment and lending powers given S&Ls; under a 1982 federal deregulation law. Two such candidates are believed to be favored by the White House.

But Gray and industry leaders have blamed the industry’s problems on the 1982 law and on even broader state laws, and they have opposed the “free market” candidates. Gray tried to promote mortgage lending and to limit direct investments through bank board regulations.

Proxmire had been concerned about S&Ls; making direct investments in real estate, rather than in mortgages for home ownership. It has been that issue on which Gray and Keating have “locked horns,” the American Banker said.

“I was frankly very surprised that an institution which had vigorously and continuously opposed key regulatory actions the board had both proposed and adopted would apparently be seeking to get me out of my job,” Gray said in the affidavit filed Sept. 19.

He said he understood that Lincoln would hire him for “a lot of money.”

“It appeared to us that Lincoln Savings was expressing interest in employing me because the management of the institution wanted to buy me out of, that is to say, hire me away from, my job as the chief regulator,” Gray said.

He declined to meet with Keating but did send his chief of staff, Shannon Fairbanks, to a meeting with Keating on Nov. 21, 1985, Gray said.