Thornburgh Wary of House’s S&L; Bill : Attorney General Says Anti-Fraud Efforts Don’t Require Legislation’s Proposals

Atty. Gen. Dick Thornburgh said today that legislation moving through the House would interfere with the Administration’s pursuit of savings and loan fraud.

Thornburgh, in testimony to the Senate Judiciary Committee, generally praised an anti-fraud bill adopted by the Senate two weeks ago, but he said sections of legislation moving through the House would be counterproductive.

One provision creates a National Commission on Financial Crimes, with members appointed by President Bush and congressional leaders, to study and recommend changes to the government’s anti-fraud effort.

“We believe that the proposed commission would be counterproductive . . . (and would) almost certainly interfere in the continuing aggressive investigation and prosecution of financial institution malefactors,” Thornburgh said.

He also opposed a House proposal to expand the jurisdiction of the Secret Service, an arm of the Treasury Department that already investigates counterfeiting, to include fraud.

Thornburgh said the FBI, a Justice Department bureau, has the “necessary and proven expertise” to serve as the primary agency probing S&L; fraud. The House legislation, he said, “represents a cumbersome approach to addressing financial-institution offenses.”

The Senate bill provides $162.5 million in each of the next three years to increase the number of prosecutors and FBI agents pursuing S&L; cases. It also increased the maximum prison sentence for bank fraud from 20 years to 30 years.

L. William Seidman, chairman of the Federal Deposit Insurance Corp., said S&L; abuses, more prevalent in the Southwest and Southern California, are now turning up in the Northeast and Florida as well.

Timothy Ryan, director of the Office of Thrift Supervision, complained that well-publicized sentences of S&L; executives ranging up to 30 years “unfortunately . . . are the exception.” He ticked off examples of what he considered light sentences, including one year of unsupervised probation given an Alabama S&L; vice president found responsible for $2 million in losses.

Meanwhile, Bert Ely, a financial institutions analyst in Alexandria, Va., maintains in a new study that fraud cost $5 billion, or only 3% of what he figures is the bailout’s $147-billion total cost.