Lincoln Cleanup Tab Less Than Expected, Regulator Says

Lincoln Savings & Loan will cost taxpayers $1.1 billion to $1.5 billion to sell or close, significantly less than industry experts have predicted, the nation’s top thrift regulator said Tuesday during a visit to Southern California.

M. Danny Wall, director of the Office of Thrift Supervision, said in an interview that regulators do not expect Irvine-based Lincoln to be the costliest thrift cleanup ever, as many analysts had projected.

His figure marks the first time that regulators themselves have estimated the cost of Lincoln’s collapse to taxpayers.

Industry experts previously had pegged the cleanup cost at $2 billion to $2.5 billion, a range that Wall and his aides have long said was too high.

Regulators seized Lincoln on April 14, a day after its parent, American Continental Corp. in Phoenix, filed for bankruptcy protection.

Regulators declared Lincoln insolvent in early August after a $788-million loss for the second quarter, putting the thrift into receivership.

So far, the most money spent to clean up a failed S&L; was $1.7 billion in federal assistance provided late last year for the sale of American Savings & Loan, which was operated out of Irvine, to the Robert Bass Group of Ft. Worth, Tex. The Lincoln cleanup, while expected to be one of the costliest, should not reach the figure for American, Wall said.

“An estimate of $1.1 billion to $1.5 billion strikes me as being in the ballpark,” said Bert Ely, an Alexandria, Va., industry consultant. “But that’s if the regulators move quickly to resolve the situation. If there are delays, I could see it going to $2 billion easily.”

One of the uncertainties about Lincoln, Ely said, is the value of its assets in Arizona, where the S&L; has invested more than $2 billion in development loans and purchases of real estate.

“From what I hear, the bottom (of the real estate market) has not been touched yet,” he said. “The Phoenix economy is generally good; it’s just that real estate got way ahead of itself.”

Meantime, in Washington, new questions were raised about the role of Sen. Alan Cranston (D-Calif.) in two controversial and highly publicized meetings he and four other senators had with regulators regarding Lincoln in April, 1987.

The five senators had intervened to question an unprecedented two-year examination of Lincoln. They had acted on behalf of American Continental’s chairman, Charles H. Keating Jr., who engineered the contribution of more than $300,000 to their election campaigns.

In a report from Copley News Service in Washington on Tuesday, Cranston acknowledged that discussion over the senators’ request to change a regulation detrimental to Lincoln’s business might have come up during a meeting with Wall’s predecessor, Edwin J. Gray. But Cranston said he didn’t recall the regulation being discussed at the meeting.

Gray has accused the senators of trying to make a deal for Keating by suggesting that the businessman would change Lincoln’s untraditional operation in exchange for easing the regulation. But Cranston and the other senators have vehemently denied that any such deal was discussed.

Sen. Dennis DeConcini (D-Ariz.) raised the issue of the regulation in a second meeting with regulatory executives, but the discussion went nowhere and Cranston wasn’t in the room at the time, according to minutes taken by William Black, then one of Gray’s top aides.

Murray Flander, Cranston’s press secretary, said the senator did a poor job of explaining himself.

“The only new thing Alan said was that he would not be altogether surprised if they discussed the regulation because it was the issue of the moment for many S&Ls;,” Flander said. The minutes of the second meeting, he added, do not reflect what occurred at the first meeting.