Who Is Alan Trying to Bail Out?

Sen. Alan Cranston (D-Calif.) is rushing to the rescue of Lincoln Savings & Loan bondholders with a scheme that could be costly to taxpayers. That would be a bitter pill to swallow on top of the estimated $2-billion bill already faced by taxpayers to cover losses of those with insured deposits in the failed institution.

One can only guess at the senator’s intentions in trying to open taxpayers’ pocketbooks to pay off the bad investments. But in doing what he is doing, Cranston risks the charge that he is trying to divert attention from the ethics investigation of his own role in the collapse of the savings and loan. Cranston was one of five senators who sought special treatment for Lincoln by federal regulators.

We share Cranston’s concern for the 22,000 Californians who bought bonds in Lincoln’s parent company. The bonds are now virtually worthless. The investors stand to lose $200 million. They are not the only Americans who have made unwise investments, however. Cranston appears to want to make the U.S. Treasury vulnerable to claims for losses in any regulated industry. This is ludicrous. Those who bought the bonds must assume responsibility for their ignorance of the fact that the bonds were not insured. They must also understand that they can hardly expect to escape all responsibility for the high risk they took against the prospect of a high return.

The senator has turned his guns on Edwin J. Gray, the former savings and loan regulator with whom Cranston and three other senators had met on the Lincoln case. It was Gray’s testimony that exposed the meeting with the senators. Cranston has made clear that his aggressive new stance, in effect accusing the accuser, is an opening shot in his 1992 reelection campaign. If his campaign to bail out bondholders is intended to reassure voters, he has made a bad start.