Neil Bush, son of the President and a former savings and loan association director, told a congressional committee on Wednesday that he received a $100,000 loan "that was never meant to be repaid" from a millionaire customer of the association.
The millionaire developer, Kenneth M. Good, invested the money for Bush in 1984, a year before Bush joined the Silverado Banking, Savings & Loan Assn. board. In 1986, Bush actively sought approval of a $900,000 line of credit for Good from Silverado.
Good invested the $100,000 on his behalf in a speculative commodities scheme, Bush said. He was scheduled to share in any profits, but had no liability if the investment failed, he said. The investment later went sour, and Good formally canceled the loan in January.
"It sounds a little fishy," Bush told the House Banking Committee, explaining why he never mentioned the loan on a conflict-of-interest form required of directors.
"As a practical matter, the loan was forgiven the day the money was lost," said Bush, who was a director of Silverado. "The money was never meant to be repaid if there wasn't a success."
Good also was Bush's business partner, providing capital for Bush's oil exploration firm.
Bush told the committee Wednesday that he had never had any conflicts of interest while serving as a director of Silverado Savings, as regulators have charged in an administrative complaint.
He added that the regulators' complaints are "frivolous. The fact they're being pursued is baffling to me."
Referring to the $100,000 risk-free investment for Bush, Rep. Thomas R. Carper (D-Del.) asked, "Why is that not a conflict?"
"It just isn't," responded Bush.
The President's son blamed a depression in Colorado real estate for the 1988 collapse of the Denver-based thrift. Taxpayers will ultimately pay an estimated $1 billion to dispose of the assets of Silverado and pay off depositors, whose accounts were federally insured up to $100,000.
Federal regulators testified Tuesday that Bush voted to approve $106 million in loans from the S&L; to one of his business partners, Bill Walters. Bush failed to mention his relationship with Walters on thrift disclosure forms. Walters defaulted on the loans.
Bush strongly denied that he acted improperly. "There was no conflict of interest in my voting on Bill Walters' matters," Bush said.
"I didn't have any interest, financial or otherwise, in any of Bill Walters' businesses," Bush added. "He was a partner in my business, but I wasn't a partner in any of his businesses."
Asked why Good gave him a $100,000 risk-free investment, Bush answered that Good was wealthy and wanted to give him an opportunity.
The federal Office of Thrift Supervision in January filed an administrative complaint against Bush, charging him with violating conflict-of-interest regulations for not disclosing the investment loan or his business partnership with Good and Walters.
The issue is now before an administrative law judge. The head of the OTS, T. Timothy Ryan Jr., will ultimately decide whether to issue a "cease and desist" order barring the President's son from conflicts if he ever again works for a federally regulated financial institution. The issue could be referred to the Justice Department for further action.
"I'm the one who's in the hot seat," Ryan said Wednesday, when asked at a press conference about what action he might take in the Neil Bush case.
Two major customers of Silverado, Walters and Good, were investors in JNB, an oil exploration company run by Bush. Walters contributed $150,000 in 1983 as a limited partner, and Good later invested $10,000.
"I contributed sweat," Bush said. "I was out there working every day. I generated the deals."
Bush appeared voluntarily at the Banking Committee hearing, which was examining the role of directors in contributing to the collapse of the institution. The committee voted Wednesday to subpoena Good, Walters, two former regulators who handled the case and Silverado's former chairman, vice chairmen and two directors. Joining Bush in voluntary testimony Wednesday were other former outside directors--those who didn't have jobs at the company.
"We did what was right in helping manage Silverado as a board of directors," Bush said. "I didn't lead the charge," he said, discussing Silverado loans to Walters. "The entire board reviewed those deals."
Referring to the S&L; crisis, Bush added, "To finger-point and look for crooks where there are none is not a good service to this country."
Committee members divided along partisan lines in their questioning of Bush. Democrats said Bush and the other directors must share the burden of the S&L;'s failure. Republicans said the President's son bore no personal culpability.
"There is no suggestion by anyone of any criminal conduct by any witnesses, including Mr. Bush," said Rep. Jim Leach (R-Iowa), a committee member.
"Every member of the Silverado board must share responsibility for the mismanagement, the insider dealing, the self-financing schemes, the poor loans and the ultimate demise of the institution," said Rep. Henry B. Gonzalez (D-Tex.), the committee chairman.