Since 1979 the value of home mortgages held by the secondary mortgage market has been growing much more rapidly than the value of home mortgages held by savings and loans associations:

Thus, in 1982 and 1983 combined, while savings and loans saw a net decline of 5 billion in home mortgages heid, the secondary market increased its home morgage holdings by approximately $135 billion. In percentages. the share of the net increase in home mʊngages held by savings and loans dropped from 55% in 1976 to 22% in 1983 while the share held by the secondary market rose from 19% to 69% in the same years."

The significance of the new secondary market is obvious. Savings and loans are simply no longer the only or dominant source of funding for home financing, and they are no longer critical to mortgage organization. There is, indeed, no evidence to suggest that the savings and loan industry as now constituted — or the thrift industry in general — is necessary to maintain a viable home mortgage market. Consequently in terms of home mortgage financing, there is no rea son why savings and loans should not be permitted to make significant amounts of direct investments.

In view of the powerful reasons why direct investments are necessary for the financial health of the savings and loan industry, only overwhelming evidence of imminent and acute risk from direct investments could rationally justify the Proposed Rule. Professor Benston's study, with which I concur, demonstrates that the Board's assumptions are apparently without foundation and that the Proposed Rule could seriously harm the savings and loan industry.

Thus, the Proposed Rule is, in my opinion, unsound in principle and unsupported by the evidence.

I understand that Lincoln Savings and Loan Association has requested that the Board allow me to meet with it or its staff in order to discuss my view that the Proposed Rule is unwarranted and could prove harmful if put into effect. I hope that the Board will agree to such a meeting, and I am prepared to meet with the Board or its appropriate staff members in Washington at the earliest possible

time.

I appreciate this opportunity to express my opinion about the Proposed Rule. and I hope that the Board will give me the opportunity to discuss the issue with it further before it reaches a final decision in this matter.

Very truly yours.

Дайтей

Apparently the FHLB Bank of San Francisco leaked the closing of the Bass deal, the purchase of FCA in Stockton, California. So Bass has cancelled his preempted announcement. However, there will be private signing in Washington with Danny Wall on January 28 at the PHLBB. It will be closed to all except you and Congressman Lehman, if you want to attend. There will be a future public ceremony

in Stockton.

If you would like to put a statement in the press kit
of the FHLBB, I'll have Murray contact Carl Hoyle at the
PHLBB. Only you and Congressman Lehman will be permitted to
have press statements in the Press Kit.

Mr. Bass is available to meet with you anytime early next year to discuss thrift issues at your convenience.

PS.

(1) I talked to Loki's meth - suggested sure set up a meeting early next year with FSLC fohio. agreed.

(2) I talked to Kelry Meek, Cony Sonyales
I
staff - he said he would call the
7#LBB-1C Cark Hayle (Cory Affairs and
indicate they have no problem
auth the sake of fun wen

(3) The Bass Group may do a public event
carlier (ie tentatively Jon?) in Stockton
If you want to participate - have Jadine
Contact Mary Whalen 202 65-98201

SPECIAL COUNSEL

MEMORANDUM OF UNDERSTANDING

BETWEEN LINCOLN SAVINGS AND LOAN ASSOCIATION
AND THE FEDERAL HOME LOAN BANK BOARD

गाब

This memorandum is dated as of February

1988,

by and between the Federal Home Loan Bank Board ("FHLBB") and Lincoln Savings and Loan Association, Irvine, California ("Lincoln") .

WHEREAS, the Federal Home Loan Bank of San

Francisco ("FHLBank S.F.") commenced an examination of Lincoln on March 13, 1986, which resulted in a Report of Examination dated April 20, 1987; Lincoln filed a written response dated June 26, 1987; the Office of Enforcement of the FHL88 also began an investigation into certain practices and transactions at Lincoln in February 1987; and

WHEREAS, Lincoln is in the process of applying with

'the FHLBB for the acquisition of another FSLIC-insured institution that is a member of the Federal Home Loan Bank of Seattle ("FHLBank ̧ Seattle"), and in connection therewith,

Lincoln is also applying to transfer its headquarters to the

Twelfth FHLBank District and hence, transfer its membership to FHLBank ·

Seattle; and

SPECIAL COUNSEL
EX. 562

WHEREAS, Lincoln believes that its March 1986

examination does not present a fair portrayal of the

association's current financial condition or operations, but enters into this Memorandum of Understanding in a spirit of regulatory compliance and cooperation in order to resolve all issues outstanding as a result of the March 1986 examination and the enforcement investigation; and

WHEREAS, in light of Lincoln's transfer of its FHLBank membership to FHLBank Seattle, Lincoln and the FHLBB enter into this Memorandum with the understanding that a new examination of Lincoln will be undertaken beginning in March 1988 by examiners from the FHLBank

Seattle; and

WHEREAS, the FHLBB agrees that it will not initiate any proceedings resulting from the March 1986 examination and enforcement investigation, and in full resolution of all issues outstanding between the parties as a result of the March 1986 examination and the enforcement investigation;

NOW, THEREFORE, the following understandings have

been reached: