The chief officials of the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. the federal agencies that regulate commercial banks -- are angry at the action taken three weeks ago by the Federal Home Loan Bank Board, which regulates the S&L industry.767′′ 77/ A May 6, 1988 article in The American Banker' reported that, "[T]he Bank Board has talked to the Federal Bureau of Investigation about nabbing news leakers who have provided the press and the public with several confidential documents, including details of a controversial thrift examination. The PHLBB's reported discussions with the FBI, however, did not bring the leaks to an end. Consequently, ACC filed a lawsuit in the United States District Court in Arizona against the Office of Thrift Supervision, the FDIC and individuals who have been identified to date as sources of the leaks. Those individuals include M. Danny Wall, William K. Black, Darrel W. Dochow and two employees of the FDIC. Unfortunately, even the filing of this lawsuit has not brought the leaks to an end. They have continued unabated. For example, another article was published in the July 1989 issue of Regardie's that disclosed sensitive and inaccurate information from "confidential government documents. These leaks and other actions by the FHLBB after the execution of the MOU, described more fully below constitute a breach of that agreement. The FHLBB had an obligation to act in good faith and breached that obligation by repeatedly and illegally disclosing confidential information regarding Lincoln, failing to consult with Lincoln during the 1988 examination after the execution of the MOU and by the assignment of an individual, Kevin O'Connell, to the examination who had a demonstrated bias 767 771 78/ Day, K., "Banking Regulators Angered by Decision to Transfer Supervision of California S&L," Washington Post, June 10, 1988 at G1. McTaque, J., "Bank Board Chagrined by Data Leaks," The Binstein, M., "A Confederacy of Greed: The Greatest Moments of the Greatest Scandal in History," Regardie's, July 1989 at 95. 73 against Lincoln and whom the FHLBB had agreed would not participate in the examination. The FHLBB further breached its obligations under the MOU by "rehashing" issues in the 1988 examination that had previously been covered in the 1986 examination and which the MOU foreclosed from consideration. Much has been reported in the press that the execution of the MOU resulted from undue political influence on behalf of ACC and Lincoln. However the facts are clearly to the contrary: (1) the meeting between the Senators and Chairman Gray occurred in April 1987, fully thirteen months before the MOU was executed on May 20, 1988; (2) Chairman Gray (certainly not a political ally of Lincoln or Keating) requested and arranged the meeting between the Senators and members of the FHLB-SP staff; (3) by the time the ERC memorandum was completed on April 30, 1988, Chairman Gray had been out of office for nine months; (4) when the MOU was executed and agreement reached to transfer jurisdiction over Lincoln from PHLB-SF to ORA in Washington, D.C., Chairman Gray had been out of office for nearly a year, and the entire composition of the FHLBB had changed;797 (5) none of the Senators ever had contact with any member of the FHLBB which passed on the MOU concerning ACC or Lincoln, and (6) Chairman Wall testified, under oath, that no politician influenced the decision in any manner.807 The House Banking Committee and the media seem now to be eager to find that political contributions made by Keating and other members of ACC's management to the senators who met with Gray and FHLB-SF staff were somehow sinister, calculated to compel There senators to attempt to influence improperly the FHL88.81/ 797 The FHLBB members of Chairman Gray's Board were Mary A. Grigsby and Donald I. Hovde. Chairman Wall's Board included Roger Martin and Lawrence White. 80/ 81/ Testimony of M. Danny Wall before the House Banking See, 9. Shenon, P. 5 Senators Struggle to Avoid Keating is, of course, nothing improper about a constituent raising issues of possible regulatory impropriety with elected representatives, and the inference that lawful contributions compel men of integrity to act otherwise is simply unjustified. Similarly, it should be no surprise that the regulatory harassment and threatened destruction of the employer of thousands of people in several states should pique the interest of elected officials charged with responsibility for oversight of those regulators.82/ 82/ Like 'Corruption,' Los Angeles Times, November 12, 1989 at For example, Senator John Glenn noted that "one of the approximately 30 cases each week involving constituents with 75 As early as May of this year, however, shortly after the FHL38 seized Lincoln, the campaign of innuendo concerning these contributions was in full swing. It is, of course, true that Keating and other members of ACC management made significant contributions to these senators. That has never been a secret. Indeed even Chairman Gray acknowledged, in his November 7, 1989 testimony before the House Banking Committee, that he was aware of Keating's contributions at the time he first met with Senator Riegle. Keating's financial commitment to political activism and community involvement was not limited to these five senators, however. These senators represent only five of the many political candidates to whom Keating made contributions, always at their request, during the last five years. Further, political figures are not the only, or even the primary, beneficiaries of Keating's, ACC's, and Lincoln's generosity during the last five years. Indeed, the schedules of contributions made by ACC and Lincoln during those years are dominated by the names of charities and religious organizations. ACC believes that all of these contributions were made and reported in accordance with all applicable laws. More importantly, there was nothing sinister about ACC and Keating's contributions and certainly nothing which makes their contributions an unusual event in this country. Rather, these contributions are a reflection of their commitment to the vigorous tradition of individual and corporate involvement in this country's social and political life. According to the Federal Election Commission ("FEC"), during the 1988 election cycle there were 2,008 corporate sponsored Political Action Committees ("PAC") registered with the FEČ and close to 5,000 PACs of all types registered. The corporate PACs received almost $97 million, and disbursed almost $90 million. According to the FEC, during a oneyear period from 1987 to 1988, the top four corporate PACS, AT&T PAC, Federal Express Corporation PAC, UPS PAC, and the Philip Morris PAC, made contributions ranging from $2.8 million to $870,000. During the same year, the U.S. League of Savings and Loans, the largest savings and loan industry trade association, ranked number 15 of all trade associations who made contributions to federal political candidates and number 24 of the "top spenders' among trade association PAC's. These figures, of course, do not include the individual political contributions made by corporate executives of these companies or by other individuals who regularly contribute generously to charitable and political causes. Despite the frequency of individual and corporate political contributions in this country and, indeed, the dependence of this country's political system on those contributions, political involvement through contributions is today being called into question. The furor with which charges of impropriety have been made appears to have resulted in elected officials now becoming reluctant to do that for which they were elected; i.e., to hear and represent their constituents. As a November 6, 1989 article in The Wall Street Journal reported, "the S&L bailout is unexpectedly forcing members of Congress to re-examine what they once considered a benign and basic chore: putting in a good word with bureaucrats on behalf of constituents."837 it describes a so-called "reform" which is a contemplated part of the "bailout". - a "public log of all inquiries from members of Congress about the sales of sick savings and loan and their assets. The chilling effect of this proposal, and of the recent months' attack on the Senators who made inquiry on behalf of Lincoln, is clear. While one Congressman is quoted in that article as pointing out that "If the bureaucracy isn't doing what it's supposed to do, we are supposed to prod it, another Congressman said "that in the interest of self-preservation, the best policy is to hesitate before picking up the telephone: 'when in doubt, don't.' If the current innuendo-charged climate prevents corporate and individual citizens from having access to their elected representatives, the democratic process is threatened. If politicians must fear for their political survival every time they consider hearing, much less acting upon, a constituent's concern, the abuse of power by federal agencies will continue unabated, and the only citizens (if any) who will be able to get the ear of their elected representatives are those who have never been sufficiently committed to an issue even to write the smallest check. XII. The 1988 and 1989 Regulatory Examinations ORA commenced its new examination of Lincoln in July 1988, which was to be focused on Lincoln's condition as of June 30, 1988. Darrel Dochow and members of his FHLBB staff visited Lincoln's Phoenix offices to discuss how the examination would proceed, and promised to visit Phoenix frequently during the examination to assure fairness and provide opportunities to discuss issues as they arose. Lincoln's management instructed Lincoln employees to cooperate fully with the FHLB8 to provide information and resolve issues expeditiously. Despite Lincoln's continued cooperation in the examination process and continued compliance with the MOU (which Dochow characterised at a September 6, 1988 Lincoln Board meeting as "terrific cooperation by Lincoln personnel), the FHLBB repeatedly acted in contravention of the MOU during the examination process, including issuing a cease and desist order with respect to a transaction already addressed during the 1986 examination. 837 Thomas, P., S&L Bailout Makes Lawmakers a Bit Thriftier 77 |