For GlenFed Chairman, a Victory to Savor

You could say that Steve Trafton spent Monday on a Rocky Mountain high--literally and figuratively.

Having spent 10 days climbing in the Colorado Rockies, the Glendale Federal Bank chairman came down from the clouds only to have his head back in them after hearing some long-awaited news: that the U.S. Supreme Court had vindicated him and his institution in a seven-year battle with the federal government over a broken promise.

“I must say that the struggle with the government has been very long and very arduous, one of the tougher struggles of my life,” Trafton said by phone from a hotel outside the Maroon Bells Wilderness Area near Basalt, Colo.

“As opposed to the physical challenge of climbing a mountain, this was against the arrogance of the government and the irrationality of its case,” he said. “Our lopsided victory demonstrates that the government didn’t have a leg to stand on.”

The victory was the Supreme Court’s decision to uphold a 1994 ruling by a federal appeals court that the government had breached a contract with GlenFed and, therefore, was liable for damages.

The fight grew out of an agreement made in 1981, when GlenFed bought a Florida thrift in one of many mergers encouraged by the government to save failing institutions.

Eight years later, Congress changed the rule on the provision known as “supervisory goodwill.” From then on, it said, thrifts could not count the goodwill as part of their capital.

The crisis sapped GlenFed’s earnings power and forced it to the brink of failure. A government seizure was narrowly averted in 1993, when Trafton pulled off an against-the-odds private recapitalization.

Trafton said he was appalled by the government’s lack of cooperation.

“We’ve tried repeatedly to come up with creative solutions to settle, but the government would never discuss it,” he said. “Unfortunately, the taxpayers will have to bear the brunt of it.”

The tenacious Trafton joined GlenFed as chief financial officer in 1990 and became chairman and chief executive in 1992. Uphill battles are hardly new for Trafton, a lifelong mountaineer and explorer who has made several trips to the Canadian Arctic and served for 13 years on the Seattle Mountain Rescue Council.

“Trafton is a hardball player, and he played it just right,” said Bert Ely, a banking industry analyst in Alexandria, Va. “His obligation is to do the right thing for his stockholders, and I think he did the right thing.”

Despite the victory, the mood at GlenFed offices in downtown Glendale was low-key.

Half a dozen executives were on hand at the nondescript former branch building that serves as headquarters to hear the news at 7 a.m. as it was reported on the CNBC cable channel. A few cheers were let loose, but no champagne was uncorked, no victory parties were planned.

“This has not been a productive day,” said a smiling Richard A. Fink, GlenFed senior executive vice president.

Nonetheless, Fink said he is “very happy. This has been a major piece of the bank and a major cause we’ve been fighting for six years. We’ve really been validated by the ruling today.”

Trafton, reared on a horse ranch near Seattle, will turn 50 in September. To celebrate, his wife plans to take him to Switzerland, where they will climb the Matterhorn and the Eiger.

The legal battle served as training for his hobby. “My mood was always one of treating this a lot like a mountain climb,” Trafton said. “I secretly enjoyed it.”

As for celebrating the hard-won legal victory? He and his 14-year-old son, John, planned to head right back into the mountains to bag a couple of more “14ers”--Colorado’s challenging peaks of 14,000 or more feet--on top of the eight they had scaled so far this trip. No bubbly was needed.

“I’m sure we’ll have a toast of lemonade or something,” he said, “and I’ll use my imagination.”

Times staff writer Patrice Apodaca contributed to this report.