Thrift Failed After a Loan to Bush’s Son Jeb
A savings and loan became insolvent after lending President Bush’s son Jeb and a partner about half the money toward purchase of a $9-million office building, and the federal government ended up repaying most of the loan, the New York Times reported.
Although it involved no criminal behavior, the loan is an example of the kind of poor lending practices that led to the thrift industry’s troubles, the newspaper said.
California Federal Bank of Los Angeles ending up buying the failed thrift, Broward Federal Savings and Loan of Sunrise, Fla., from federal regulators two years ago.
The Jeb Bush transaction was unrelated to civil charges that the president’s youngest son, Neil, 35, acted improperly in his role as a director of Silverado Banking, Savings and Loan Association of Denver. That S&L; failed in 1988 after making questionable loans.
The Miami deal involves Jeb Bush, 37, and his partner, Armando Codina, who own a partnership called 1390 Brickell.
In 1985, the two bought a Miami office building at that address for $9 million. They used a $7-million mortgage from an insurance company and a $4.6-million loan from Broward Federal Savings and Loan of Sunrise, Fla. The surplus money was to be used for improvements and a reserve account.
The loan from Broward Federal was obtained through J. E. Houston Financial Group, headed by J. Edward Houston, a former associate of Bush and Codina.
Broward Federal became insolvent in 1988, and the federal government paid more than $4 million to make good the loan on the Miami property as part of the bailout of the S&L; industry.
Bush and Codina negotiated a settlement with regulators in which they repaid $505,000 and retained control of the building, the Times said.
It said Bush and Codina expressed surprise that the settlement could be interpreted as use of taxpayers’ money to bail out the loan. Asked if they were aware that the money for the repayment came from taxpayers, both said no.
Federal officials defended the agreement, saying that it was the best settlement available because of the weakened commercial real estate market in Miami and because the loan was secured by a risky second mortgage.
They said Jeb Bush received no preferential treatment.
A lawsuit between the 1390 Brickell partnership and Houston over who should pay back the $4.6 million was settled out of court under the auspices of federal regulators.
They were authorized to step in because of a Dec. 31, 1988, agreement under which the assets and liabilities of Broward Federal were sold to California Federal Bank.
The agreement called for the government to guarantee any loss experienced by Cal Fed in taking over Broward’s affairs, to pay Cal Fed’s costs in managing the loans and to pay costs of any litigation to resolve them.