Lincoln Savings Debacle Gives Rise to Woman’s Anger

Her speech is so soft-spoken and non-threatening that it’s hard at first to pick up the anger in Leah Kane. But it’s there-- under control and right beneath the surface--an anger born of childhood memories and resurrected by the debacle of Charles H. Keating Jr. and the collapse of Lincoln Savings & Loan.

For many of us, I suspect, the ongoing saga of the Irvine thrift’s failure and Keating’s alleged role has a numbing effect. We tend to tune out scandals that aren’t easily graspable. Not sophisticated in the lingo of financial fraud, we forget that real people have been devastated by it.

Kane has spent much of the last 2 1/2 years trying to make sure that people don’t forget. As a resident of Leisure World in El Toro, she’s picked up the cudgel for the 200 residents there who were left holding the bag of worthless bonds involved in the Keating affair.

You have to try to picture what Lincoln’s collapse meant to some at Leisure World. Lincoln was as much a symbol of trust as a neighborhood grocery store. People had been going there for years and knew the bank employees by name. A former manager had been a neighbor.

For people concerned about the safety of their life savings, “Lincoln Savings was just as solid as the Rock of Gibraltar as far as Leisure World was concerned,” Kane says.

So when federal regulators took over Lincoln in the spring of 1989, the trapdoor of life opened beneath those Leisure World residents who had trusted in it.

Because of their age--the Leisure World bondholders were in their 60s, 70s, 80s and 90s--the Lincoln collapse evoked memories of the Depression, another era when trust died.

As a young girl, Kane remembers the humiliation her immigrant father experienced after losing everything in a bank collapse. “That’s what killed my father,” she said. “I never forgot that. It always stayed in the back of my mind and I vowed that if it ever happened to me, I would fight it with everything I had.”

When Lincoln collapsed and it became clear that many Leisure World residents, including her, would be hard hit--the 200 residents had invested about $10 million in the bad bonds--Kane acted. With many of the investors feeling either angry, embarrassed or hopeless about losing so much of their savings, Kane organized them.

She contacted the residents’ class-action attorney and called a meeting within two months of the federal takeover. About 150 residents showed up and there have been several follow-up meetings. She spent long hours on the phone, either listening to other people’s tales of financial ruin or helping plan a unified strategy. She went to Sacramento and Washington to talk to lawmakers. Through it all, she helped bolster the flagging hopes of people who suddenly felt terribly alone and vulnerable.

There’s a peculiar dynamic in fraud cases like this. You’d think being wiped out financially would be enough of a curse, but people often pile on feelings of guilt or shame--either for buying the bonds in the first place or for buying them with the prospect of getting only marginally higher return yields than, say, a certificate of deposit.

Thus, the scandal continues to take its toll. Kane says many people suffered medical problems as a result of losing their savings. “I’ve spoken to a number of people recently who have gotten out of the hospital, telling me this worry about losing their income and not being able to live with dignity and have the proper medical care they need has been a terrible stress on them.”

A widow, Kane has in recent years struggled with a daughter’s cancer and a son’s health problems. In a way, she’s drawn strength from the Keating crusade. “I think the fact that we all banded together, helped each other, has meant a lot. It helped me a lot and the fact that people have come up and said they appreciated what I have done has meant a lot.”

What drove her? “I was furious about things. I felt it was a terrible disgrace to these people, an embarrassment to these people, who are such good citizens and finally managed to save some money to live in dignity and take care of themselves. And I was so angry with this whole white-collar crime going on, and I vowed to fight it.

“We’re not talking about wealthy people. Of the 200 people, there were very few that were really well off and could afford to lose the money. Most of them are middle-class people who worked hard all their lives, and this was a good part of their life savings. In many cases it was their life savings.”