P.M. BRIEFING : Warnings on Lincoln Savings Ignored, 2 Regulators Testify

Regulators who recommended in 1987 that the government seize Lincoln Savings & Loan Assn. told Congress today they were “shot in the back” by superiors in Washington who allowed it to continue to pile up millions of dollars in losses.

Mike Patriarca, principal supervisory agent in the San Francisco branch of the Office of Thrift Supervision, and William Black, district counsel in San Francisco, told the House Banking Committee that they saw no reason why top thrift regulator M. Danny Wall rejected their 1987 recommendation.

The committee conducted the second of four scheduled hearings into the failure of Irvine-based Lincoln, which is expected to cost taxpayers $2 billion, making it the nation’s costliest thrift collapse.

Patriarca and Black said they tried to have Lincoln closed to stop its losses but were thwarted by the vigorous lobbying of its owner, Phoenix millionaire Charles H. Keating Jr.

The government did not take over Lincoln until this April, allowing the institution to pile up millions in additional losses.

The panel is focusing on a decision by Wall, director of the thrift office, to take Patriarca and Black off the case and transfer it to Washington-based examiners, who subsequently recommended against a government takeover.