Cranston Urged Agency to OK Sale of Lincoln : Senator Says He Was ‘Outraged’ by Bank Board Inaction Regarding Deal

Sen. Alan Cranston said Friday that he urged federal regulators to let the sale of Lincoln Savings & Loan in Irvine go through last month to avoid hurting the Arizona economy and the California investors who held much of the $200 million in bonds from the S&L;’s parent company.

The California Democrat said he was “outraged” that regulators didn’t let the parent company, American Continental, sell the institution.

“I never told them to do anything,” Cranston said in a telephone interview late Friday afternoon. “I said if there’s any way to permit the sale, let him do it,” Cranston added, referring to American Continental Chairman Charles H. Keating Jr. “It sure would be a better way to resolve it. Of course, they may have had a better way to resolve it.”

Cranston said he intervened at the request of Keating, something that the senator and other politicians have done previously in the ongoing confrontations between the controversial financier and regulators. Two years ago, Cranston and four other senators--all of whom benefited from Keating campaign contributions--met with regulators over the unusual length of time regulators were taking to examine Lincoln Savings.

Keating had been trying to sell Lincoln for more than a year. One tentative deal fell through in March, and another one was quickly reached with a group headed by John Rousselot, a former congressman from San Gabriel. But in tense days in early April--before the beleaguered company and the S&L; had filed financial reports for 1988--the deal broke down. Keating blamed regulators, with whom he had been feuding since he bought the S&L; in 1984.

Keating finally put the parent company into bankruptcy on April 13, and regulators seized Lincoln the next day, saying it was being operated in an unsafe manner.

In the days before the collapse, Cranston said he urged M. Danny Wall, chairman of the Federal Home Loan Bank Board, and Roger Martin, then one of the three bank board members, to reconsider the proposed sale to Rousselot’s group.

“But I don’t think they gave it fair consideration,” Cranston said.

Neither Wall nor Martin, who has since resigned and moved to Milwaukee, could be reached for comment. Other bank board executives also couldn’t be reached.

But Karl T. Hoyle, a bank board spokesman, has said previously that the Rousselot group simply lacked the cash needed to complete the deal.

“I have the distinct impression that they got into a feud or a vendetta,” Cranston said about Keating and the regulators. “Keating wanted to get out of the S&L; business and the regulators wanted him out, too. But they wanted to put him out of the business.”

Cranston said the failure to approve the sale ruined Arizona’s fourth-largest company, “messed up” that state’s economy and “injured a lot of Californians who had invested in the company.”

The Democratic senator said Rousselot, a conservative Republican who was “not exactly a political bedmate of mine,” seemed to be a qualified buyer.

A sale would have put a different group of executives in charge and eased the tension between the operators and regulators, Cranston said. He said he didn’t know if Lincoln could be salvaged now.

The senator said he had intervened at the request of Keating, whose family and corporate executives have donated $39,100 to Cranston’s campaign funds over the last six years.

Cranston said donations don’t affect him. He said he would do same--and has done same--for those who haven’t contributed to his campaign coffers.

Two years ago, Cranston and three other senators met with Edwin J. Gray, Wall’s predecessor, to discuss the unusual length of time it was taking the bank board to examine Lincoln’s financial condition. A typical two- to three-month exam had dragged on for more than a year.

Earlier this week, Gray said that two years ago the senators--Cranston, Dennis DeConcini (D-Ariz.), John McCain (R-Ariz.) and John Glenn (D-Ohio)--tried to cut a deal for Keating.

Deny Any Deal

He claimed that they asked him to withdraw a stiff new rule that would have hurt Lincoln’s nontraditional investments, such as in securities and real estate development, and promised to “lean” on Keating to turn Lincoln’s business strategy more toward traditional investments, such as home loans.

The senators, or their aides, claimed said no such deal was ever discussed. They said no promise to “lean” on Keating was ever made, and they denied that the subject of the new rule ever came up.

Because Gray said he didn’t know the status of the examination of Lincoln, the senators, joined by Donald W. Riegle Jr. (D-Mich), met a week later with regulatory executives from San Francisco, who were overseeing the examination.

“All I did was stick my head in the door and said I wanted to join with the others in saying don’t drag this examination on and on and on,” Cranston said. “I said do something or leave him alone. If there’s anything criminal, indict him.”

The other senators also said their only interest was in getting regulators to move on the examination because the delays were financially straining American Continental and Lincoln Savings.

Keating and his family and corporate executives had contributed more than $300,000 to all five senators. The lawmakers said they saw no conflict of interest because it was their job to help constituents, regardless of whether they contribute to campaigns.