Democrats Blast Big Salaries at Failed S

Congressional Democrats attacked the Bush Administration on Friday for keeping top executives of failed savings and loans on the payroll--at six-figure salaries in some cases--after seizing their insolvent institutions.

According to figures presented to a congressional task force, 211 of the 351 savings and loan firms in government hands as of April had retained their highest-paid officer in the same position. Thirty-six of them were receiving higher salaries than they had before their institutions failed.

Officials with the Resolution Trust Corp., the government agency established to supervise the S&L; cleanup, acknowledged that they have been forced in some cases to abide by employment contracts and severance benefits previously awarded to executives at failed S&Ls.;

In other instances, they said, the agency voluntarily has retained former thrift officers because of their S&L; expertise and management experience.

The criticism of the RTC’s personnel policies is part of a Democratic offensive aimed at directing blame at the Bush Administration for the slow and halting pace of the bailout. According to Administration estimates, the S&L; cleanup could cost as much as $130 billion.

Task force members cited recent press reports that six executives who presided over the financial decline of two Orange County thrifts, Mercury Savings and Western Empire Savings, were still receiving lucrative salaries months after they had been taken over. The current status of the six executives could not be determined Friday.

“Why,” asked Rep. Bruce F. Vento (D-Minn.), chairman of the task force, “is the RTC continuing these mega-dollar salaries for a work product that at best is mediocre and at worst is a proven failure?”

Responding to news reports about S&L; executives who continued to draw hefty salaries or awarded themselves large severance benefits, Vento asked the RTC last month to report on its hiring policies at seized thrifts.

On Friday, he complained that the information the agency provided was insufficient.

“What I want to know is who they are and what they are receiving,” the chairman said, banging the podium during the task force hearing. “The public has a $130-billion problem, and you are not providing the information.”

RTC Executive Director David C. Cooke said the agency cannot divulge salary information for specific thrift officers because it would violate their privacy rights.

Cooke noted that the government “doesn’t really have the authority to break employee contracts” until it acquires full ownership of a seized thrift. In the meantime, he said, the government must abide by its legal obligations, including salary and severance benefits.

In April, Mercury Savings’ former chief executive, Leonard Shane, sued the government for payment of $850,000 in retirement benefits he said he was owed by the defunct S&L.;

“I don’t think we should be paying these pensions,” Vento said, referring to Shane’s suit and similar claims pressed by other S&L; officials.

Three weeks ago, Shane said he was quitting as a $100,000-a-year consultant to the thrift because regulators who seized the institutions in February haven’t used his services.

Miffed that he wasn’t being called on and embarrassed that he was paid for doing nothing, Shane sent a letter to the regulator managing Mercury asking that his consulting pact be terminated.

Although the agency tries to avoid hiring S&L; officers it considers unprincipled or incompetent, not all executives at failed thrifts deserve to be blacklisted, said Michael Martinelli, director of the RTC’s central U.S. division. He added that “the vast majority of employees in these S&Ls; are not bad people.”

Carmen Sullivan, director of the RTC’s Southwest region, presented statistics showing that 112 out of 187 top executives at seized thrifts in Texas and Oklahoma are still drawing salaries, with 35 making more than $100,000 a year and six earning in excess of $200,000.

In most of those cases, she said, the officials had taken on expanded duties that warranted the higher pay.

“I just can’t emphasize enough how complicated these institutions are,” Cooke said. “We need trained people from the private sector.” He also said the corporation’s work is slowed by the fact that “there are more failed thrifts than we had planned for.”

Times Staff Writer James S. Granelli in Orange County contributed to this story.