Former Regulator of S & L Industry Assails Cranston

Edwin J. Gray, former chief regulator of the savings and loan industry, said Tuesday that recent attacks on him by Sen. Alan Cranston (D-Calif.) in connection with the Lincoln Savings & Loan failure are the acts of “a desperate, panic-stricken officeholder.”

Gray, who headed the Federal Home Loan Bank Board from May, 1983, to June, 1987, released a letter he sent to Cranston, rejecting the senator’s efforts to blame him for the $2-billion collapse of the Irvine thrift.

“I am sorry, frankly, for my fellow Californians, your constituents, because of your intemperate and abusive outbursts,” Gray wrote in an eight-page, single-spaced letter to Cranston. “Your shrill statements strike me as those of a desperate, panic-stricken officeholder. . . . The truth is, I am not your problem, Sen. Cranston. You are.”

Gray, who has been Cranston’s chief accuser in the Lincoln affair, was responding to a series of California press conferences held by Cranston over the past week in which the senator characterized the former bank board chairman as “a publicity-hungry political hack” who is trying to mask his own culpability by pointing a finger at members of Congress.

Cranston is one of five senators under investigation by the Justice Department and the Senate Ethics Committee for intervening with federal regulators on behalf of Lincoln chief Charles H. Keating Jr. Voter-registration drives supported by Cranston received $850,000 in contributions from Keating, and the financier also contributed $47,000 to the senator’s campaign coffers.

Adverse publicity from the Lincoln scandal has caused Cranston’s popularity in California to plummet, putting his 1992 reelection bid in jeopardy.

In response to Cranston’s charge that Gray should have closed Lincoln in 1987, the former regulator noted that he had no statutory power to do so because Congress at that point had allowed a law governing thrift regulation to lapse.

Gray, who left the bank board one month after regional thrift regulators in San Francisco recommended federal seizure of Lincoln in May, 1987, also suggested that Cranston was being “disingenuous” in criticizing Gray for failing to act on the recommendation.

If he had acted, Gray said, Cranston and other Keating supporters “would have personally run me out of town.”

After the government finally stepped in and seized Lincoln in April, 1989, Gray noted, Cranston was quoted by the San Francisco Chronicle as saying: “I think they made a very unwise decision in shutting them down when they did.”

Gray said Cranston opposed his regulatory efforts to clamp down on high-flying thrifts such as Lincoln. “The fact that it happened partially on my watch is as much a reflection on your failure, yes, on your unwillingness to help me obtain the reforms I went up to the Hill and asked to be passed,” he said.

In the Senate, meanwhile, Cranston introduced a bill that would allow bondholders hurt by Lincoln’s collapse to sue the federal government for negligence in approving the sale of high-risk bonds to Lincoln customers.

The legislation seeks to help 22,000 small investors, most of them elderly Southern Californians, who purchased $200 million in now-worthless junk bonds at Lincoln branches. Many investors mistakenly believed the bonds, issued by Lincoln’s parent firm, American Continental Corp., were insured by the government.