BANKING / FINANCE : Bill to Allow Lincoln Bondholders to Sue U.S. Going Nowhere

Sen. Alan Cranston’s bill to allow bondholders of Lincoln Savings & Loan’s former parent firm to sue the government appears to be bollixed up in a Senate committee, going nowhere.

The California Democrat, under political heat for intervening with federal regulators on Lincoln’s behalf, is wooing bondholders who sunk what is now said to be $275 million into the parent firm, American Continental Corp. in Phoenix.

Cranston’s bill, introduced in January, would allow thousands of bondholders to sue the government for any losses they don’t recoup in their pending class-action lawsuits against the former operators and advisers to the failed Irvine thrift.

Regulators seized Lincoln in April, 1989, a day after American Continental filed for bankruptcy protection. Regulators predict the thrift will be among the nation’s costliest cleanups, with a taxpayer bill of more than $2 billion.

Cranston’s bill essentially waives sovereign immunity, which prohibits most suits against the government. He has said previously that such bills come up every session.

But he has little or no support for his Lincoln bill, acknowledged Murray Flander, Cranston’s press secretary. Legislation benefiting single-issue groups from a particular state typically goes nowhere unless endorsed first by both senators from that state, he said.

“It would help a helluva lot if (Republican Sen. Pete) Wilson got on board,” Flander said.

But Wilson, who is running for governor, opposes Cranston’s effort.

“There’s no federal precedent for doing such a thing,” asserted Lynda Schuler, Wilson’s press secretary. She said the General Accounting Office, Congress’ investigative arm, already has refused to say that federal regulators are responsible in any way for the bond losses.

Wilson instead supports a recently introduced bill that would broaden criminal laws and recover taxpayer losses from those convicted of fraud.

Wilson’s stance doesn’t sit well with Shirley Lampel, a nearly blind Tustin woman who embarrassed Cranston with a barrage of accusatory questions at a Santa Ana public forum in December. She said at least 200 letters have been sent to Wilson seeking his support for Cranston’s bill.

But Schuler said Wilson has gotten 28 such letters, “a statistically insignificant” amount out of the 10,000 letters the senator gets weekly.