Senate Leader Urges President Bush to Fire M. Danny Wall

Senate Majority Leader George J. Mitchell, urging a “clean break” with the regulatory policies that led to the costly failure of Lincoln Savings & Loan Assn. of Irvine, called on President Bush Monday to replace M. Danny Wall as director of the Office of Thrift Supervision.

And on the other side of the Capitol, House Banking Committee Chairman Henry B. Gonzalez (D-Tex.) charged that the sale at Lincoln branch offices of now-worthless bonds issued by Lincoln’s corporate owner violated both federal and state regulations. Many buyers assumed incorrectly that the bonds were covered by federal deposit insurance.

Gonzalez had already urged Wall’s ouster, and Bush indicated two weeks ago that he would remove him if he found that Wall was not aggressive enough in regulating the savings and loan industry. Republicans in Congress have expressed little support for Wall.

In joining Gonzalez, Mitchell said: “I think new leadership there would be better for all concerned. Given the events that have occurred, everyone would be better served by a clean break.”

Mitchell added at a lunch meeting with reporters that he was not trying to judge Wall’s performance at the OTS or its predecessor agency, the Federal Home Loan Bank Board.

Mitchell was reminded that Sens. Alan Cranston (D-Calif.) and Jake Garn (R-Utah) successfully pressed the House-Senate conference committee dealing with this year’s S&L; bailout bill not to legislate Wall out of a job. The Maine senator snapped back that he did not always agree with what Congress did.

Wall could not be reached for comment on Mitchell’s remarks. In the past, he has accused his critics of bias and unfairness.

The Wall Street Journal, joining the chorus of voices for Wall’s ouster, said in its lead editorial Monday that Wall should resign or Bush should ask for his resignation and direct the Justice Department to review the Lincoln case.

When Wall became FHLBB chairman on July 1, 1987, his staff in San Francisco was urging him to take over Lincoln and seize its assets. Wall delayed such action until earlier this year, and in the meantime, Lincoln’s losses mounted.

It is now estimated that taxpayers will have to pay up to $2.5 billion to make good on federal deposit insurance to Lincoln’s depositors, making it the most expensive savings and loan failure in history.

Lincoln was owned by the American Continental Corp. of Phoenix, whose controversial head, Charles H. Keating Jr., contributed $1.4 million in campaign funds to five senators, including Cranston, who interceded with the FHLBB on behalf of Lincoln in April, 1987. Keating’s actions have led to the appointment of a special counsel by the Senate Ethics Committee to determine if a formal inquiry is warranted.

Gonzalez charged violations of state and federal regulations in the sale in Lincoln’s branch offices of bonds issued by American Continental Corp., Lincoln’s owner. The high-yield bonds, unlike lower-yield certificates of deposit, did not carry federal deposit insurance.

ACC broke federal securities regulations by paying bonuses to bond salespersons and allowing Lincoln tellers to make sales of the parent corporation’s bonds, Gonzalez said. He said the company violated California law by selling more than $13 million worth of bonds during late 1987 without the state’s permission.

“With the offer of hundreds of dollars per month in prohibited bonuses dangling before their eyes, it’s no wonder that employees were lured into steering Lincoln customers away from their safe insured deposits to the high-risk bonds,” he said.