Wall Rejects Pressure to Quit as Top S&L; Regulator
Embattled savings and loan regulator M. Danny Wall refused to resign Monday and said President Bush “wants to hear the other side of the story.”
Bush said in an interview published Saturday that he is considering whether to dismiss Wall, who is under fire for his handling of the investigation of Lincoln Savings & Loan in Irvine.
But Wall, after testifying at a congressional hearing Monday, said the President “knows that one is innocent until proven guilty.” He said he had acted properly in handling the case of Lincoln, which suffered a financial collapse that may ultimately cost the taxpayers $2 billion, making it the biggest single thrift failure.
“We knew far less than people think we did,” said Wall, who rejected a recommendation by federal regulators in San Francisco in 1987 that the Federal Home Loan Bank Board seize Lincoln then. Instead, the bank board seized Lincoln in April of this year, after its losses had mounted substantially.
“We had insufficient basis to take the actions” sought by the San Francisco regulators, Wall said. He was chairman of the bank board then and is now chairman of its successor agency, the Office of Thrift Supervision.
The Lincoln issue has become politically explosive because of efforts by five senators, including Alan Cranston (D-Calif.), to intervene with federal officials on Lincoln’s behalf.
Wall said Monday that Cranston’s calls to him in 1987 and 1989 were “perfectly appropriate.” In 1987, Wall said, Cranston urged a prompt decision on a pending regulatory review of Lincoln, and in 1989 Cranston asked for a rapid decision on whether the government would permit the sale of Lincoln to outside investors.
Senate Majority Leader George J. Mitchell (D-Me.) said Monday that the Senate Ethics Committee is conducting a serious inquiry into the actions of the five senators: Cranston, Donald W. Riegle Jr. (D-Mich.), John Glenn (D-Ohio), Dennis DeConcini (D-Ariz.) and John McCain (R-Ariz.).
All five senators received significant campaign contributions from Lincoln’s owner, Charles H. Keating Jr., the Arizona financier who controlled Lincoln’s parent firm, American Continental Corp. of Phoenix. The inquiry is designed to determine if the panel should conduct a full investigation of the five senators with the help of an outside counsel.
“The matter is being investigated,” said Mitchell. “The fact that the Ethics Committee does not put out press releases does not mean that it is not investigating the matter very seriously.”
All five senators have been asked by the committee to respond to the charges that they improperly influenced the federal regulators’ dealings with Lincoln.
House Banking Committee Chairman Henry B. Gonzalez (D-Tex.), who has been holding hearings into the Lincoln debacle, has said Wall systematically misled the committee about the extent of the nation’s failing S&L; problem and mishandled his regulatory duties. He has asked the President to fire Wall.
Wall responded Monday that the committee has not yet given him a chance to provide his version of events. “Many questions should be asked and answered in a timely fashion,” he said.
Wall is now scheduled to testify to the House Banking Committee next Tuesday. The hearings resume today with the testimony of Securities and Exchange Commission Chairman Richard C. Breeden, who will discuss his agency’s inquiries into the activities of Lincoln and American Continental.
Wall’s comments Monday followed an appearance before a special House Banking Committee task force that is monitoring the S&L; bailout. The hearing dealt with the Resolution Trust Corp., the new agency created to shut down insolvent S&Ls; and dispose of their assets such as real estate acquired when borrowers were unable to repay their loans.
