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I want to assure the members who weren't here at the outset that you have been recorded at the time you arrived by the staff, so that your name is recorded as being present, and that's given to the reporter so that the proceedings will show you present. I'm going to ask the witnesses to please rise.

The CHAIRMAN. Unless there is some reason why a witness per-
haps having some time problems, it is the Chair's intention to call
you in the order we have listed you. So we would recognize Mr.
William Crawford, the commissioner for the California State De-
partment Savings and Loans, first.

STATEMENT OF WILLIAM CRAWFORD, COMMISSIONER,
CALIFORNIA STATE DEPARTMENT SAVINGS AND LOANS
Mr. CRAWFORD. Mr. Chairman, Members of the committee, my
name is William J. Crawford. I have been the Savings and Loan
Commissioner for the State of California since February 11, 1985. I
entered this business many years ago in 1948 as a regulator, as an
examiner; went into the industry in 1954; and, in 1984, late 1984,
the Governor asked me how I would like to be Savings and Loan
Commissioner.

So I said fine. I became a regulator again. I hope by next April
that I will end my career, but I started as a regulator, end as a
regulator, but most of my experience is as a regulatee. I gave a 10-
page prepared statement. Attached to the back of that statement
are some schedules. As a former regulatee, I am used to going to a
board of directors and being held accountable on a monthly basis,
and on Thursday you deliver the financial statements. The third
Tuesday was the board meetings.

The Thursday before you had to have the financials and every-
thing and the agenda that was going to come up at the board meet-
ing. So I would like to just, in my short prepared statement here, I
would just like to go through the exhibits I've put on the back. Ba-
sically, you look at an organization to see if they have a consistent
history of success. To figure out if they have a consistent history of
success, you have to look at their peers.

I was always comparing myself to the peers. Here are eight of
eleven top savings and loans in the United States are in California.
The No. 8 is Downey Savings and Loan, that just happens to be
nearly a perfect match for Lincoln with $3.8 billion in assets. In
fact, they are a little smaller. They ranked 67th in the country
compared to Lincoln at 65th.

Now, I know this is an unusual period because we got a new
bookkeeper in Lincoln when we got a conservator, but for the first
6 months of this year, Downey Savings earned $27 million, and
with the new bookkeeper, Lincoln lost $817 million. The California
industry lost $719 million, but if we didn't have Lincoln, the Cali-
fornia industry would have had a positive earnings of $98 million.
California is a large Savings & Loan State where there are many
successful peers. They have $402 billion in assets; 29 percent of the
assets. The California State chartered industry was a very prestigi-
ous industry during the 1960's and historically. In the 1980's when
they permitted conversion to Federal stock companies, we lost our

Patriarca Exhibit 1

three premier institutions. No. 1, 2 and 3 on this list used to be
State charters. But we had some that were not so premier, and
American Savings and Lincoln Savings also were State charters
but were lost through conservatorship.

Downey is the only State charter left. In examining Lincoln and
American Continental, I decided that I could not understand the
company without looking at American Continental. So I sent an ex-
aminer to the library to look up the record clear back to 1973, and
Mr. Keating has said that he ran a successful profitable thrift, a
sound institution. From 1973 to 1982, American Continental in-
creased its liabilities by $81 million and decreased its net worth by
$5 million.

They took it over February 11, 1984. I omitted 1983 because 1983
was a window-dressing year with financing from Drexel Burnham.
Though the company only averaged $800,000 a year in earnings for
the previous 10 years, they made $19 million for that 1 year, but
they also blew up their liabilities, assets and net worth by borrow-
ing.

might mention that Mr. Keating states that he bought a trou-
bled thrift and turned it around. Actually, this was a case as shown
in section C where the little fish swallowed the big fish. American
Continental had $23 million in net worth. He made a decision
sometime during 1983 to buy this company. So I took the December
31, 1982 figures and American Continental had $230 million in
assets while Lincoln had $829 million.121Lincoln had $29 million in
net worth. American Continental had $23 million. Now, he said he
bought a troubled thrift and turned it around. He paid $51 million
for it. That is 1.8 times Lincoln's book at that time. He paid 2.2
times American Continental's book for Lincoln. He said that he
bought the stock of a troubled thrift. Lincoln was trading on the
market and he bought some of the shares at $8 a share.

But for more than 80 percent, about 82 percent of the shares, he
paid $20.83. If you divide that by the $8, he paid 2.6 times market.
You don't pay 2.6 times market for a troubled institution. You see
one that's troubled, it's got $17 a share and the first thing you
know it's a dollar a share or 25 cents a share.

So then we look what happened in the 44 years while they were
still keeping the books, and between February 11, 1984 or the end
of 1983 and September 1988, which was the last time they reported
to their shareholders, they increased their liabilities by $6 billion
and decreased the net worth by $125 million.

Now, all this is with ACC keeping the books and the books were
cooked, so this is a best case scenario. Now we get a new conserva-
tor and bookkeeper and in the 9 months from September 1988 to
June 1989, the tangible net worth went down a minus $948 million.
Actually, they decreased it from a positive $140 million. So it went
down over a billion dollars.

Next page, I show how they compare with 35 and 11 retail type
operations. The 11 retail type are in the 35 and the left hand
column is Lincoln. Lincoln had less than 4 percent of its assets in
consumer type lending. Consumer loans, one to four family units,
and multifamily loans; whereas the best operations, the retail oper-
ations had 74 percent and the entire district of institutions selected
that were publicly traded had 59 percent of this type of thing.

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Now, let's go to Lincoln land loans; land and ADC loans. Lincoln
had 27.5 percent of its assets in this. The district average for the 35
was 1.6 percent and the retail operations only had 2 percent. So
that gives you a little profile of their asset mix. Then we go down
to how they ranked in the whole United States. This was the 11th
district. This was the whole United States.

They were 65th in size. They were first in land and ADC loans;
third in legal expense; 11th in professional fees; and 14th in broker
deposits. The Arizona newspaper carried an article of the highest
paid executives in Arizona. The 17 highest paid executives. Eight of
those 17 highest paid executives worked for American Continental
Corp. I believe in the last 3 years this company, the parent itself,
leaving Lincoln out, lost about $25 million each year.

You'll notice the salaries. $7.9 million they paid in 1988 to these
eight executives. And you'll notice the second highest paid execu-
tive only worked-he made $1 million, but he only worked for I
think 8 months. If you analyzed his salary, it would be $1.428 mil-
lion, and that's $119,000 a month.

When we handled the first initial buyer that came through, the
Ernest Leff Group and Spencer Scott, we were told that Charlie
threw them a curve ball. He was going to push down Jack Atchison
from American Continental into Lincoln because he had a 2 year
severance pay in his contract. That's just hearsay, but that's what
they represented.

American Continental, if you look at the structure, this had 54
corporations. The bottom part of this shows that--

The CHAIRMAN. Mr. Crawford, will you yield to me at that point?
Mr. CRAWFORD. Yes.

The CHAIRMAN. This list of individual's salaries that total $7.9
million, do you know whether these are Keating family members?
Mr. CRAWFORD. I think Mr. Wurzebacher is. Of course, Mr. Keat-
ing. Charles Keating, III. Robert Hubbard. Four of them are. Half
of them. That's a good mix.

The CHAIRMAN. Well, he is a family man, you know.

Mr. CRAWFORD. That's right. In the first group here, you'll notice
that they only have first and second tier subsidiaries in American
Continental. But you go down to Lincoln Savings, you get the fifth
tier subsidiaries. That gives you a lot of places to hide the smoking
gun.

If you look at the number of corporations they had when they
acquired the company, they had 17. But in 1984, right after the ac-
quisition, they added another 17 and then they added more than
that, to where they had more than triple the number of corpora-
tions they had before.

This is very difficult to get in and out in 4 months. They want
you to get in and get out in 4 months. If you had a simple institu-
tion, that's fine. wanted to say a little something about-you
don't have this exhibit, but counting the person that was in place
at the time they took over the institution, they said they were
going to keep it as a traditional thrift and they were going to aug-
ment the staff.

Well, they certainly augmented the staff. They had seven chair-
men, counting that person, and counting John Rousselot, who
became chairman on April 11, 1989. They had six presidents, in-

cluding Roger Clark from the FDIC, which is running the institu-
tion now. So that's quite a turnover. They didn't have any turnover
at the ACC top. I think sometimes the presidents and chairmen of
the board of Lincoln were just errand boys to go back and forth.
I have one other thing. They talked about examinations and
what we do about it. We examined this institution with four regu-
lar exams and two special exams. So that's six since the institution
was acquired. When I came to work in February 1985, we only had
98 employees on staff. Right now, we have 64 examiners, about 16
appraisers, about four attorneys, and the rest are administrative or
clerical.

ACC needed 48 CPAs and 15 attorneys on staff, yet I showed you
where they ranked with Savings & Loans in the United States on
legal and professional fees. So this was a complicated organization,
complicated on purpose to conceal the true nature of the transac-
tions.

[The prepared statement of William Crawford can be found in
the appendix.]

The CHAIRMAN. Thank you very much, Mr. Crawford. The next
witness is Mr. Davis.

STATEMENT OF WILLIAM DAVIS, CHIEF DEPUTY COMMISSION-
ER, CALIFORNIA DEPARTMENT OF SAVINGS AND LOAN

Mr. DAVIS. Mr. Chairman, my name is William Davis. I'm the
chief deputy commissioner for the California Department of Sav-
ings and Loan. I was appointed to that position in April, 1985 and
have worked with Commissioner Crawford since then. Prior to that
I was in the savings and loan industry in California since 1962,
about 23 years in the industry as a regulatee.

I really do not have any opening statement today except to say
that we're here to look into the Lincoln insiders and how they pro-
vided the fanciest financial fiction that money could buy. As Mr.
Crawford said, it took 48 CPAs and 15 attorneys on their staff to
keep this fiction believable. It also took the assistance from many
outside, expensive validators and no one will ever know the true
cost of the Lincoln case.

Mr. Keating and others charge that the regulators were endeav-
oring to write down Lincoln's valuable assets and were ruining his
healthy, profitable financial institutions while the regulators did
not originate any of these assets nor any of the other high risk
strategies that produced a $948 million negative tangible net worth
for Lincoln June 30, 1989 and we're just pleased to be here and
pleased to answer your questions. Thank you.

The CHAIRMAN. Thank you very much, Mr. Davis. I wanted to
say that we're very grateful for the voluminous testimony that you
presented in your formal presentation. That will be in the record
intact and therefore we are very grateful for the excellent manner
in which you have summarized and encapsulated your testimony.
Our next witness is Mr. Patriarca.

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STATEMENT OF MIKE PATRIARCA

Mr. PATRIARCA. Good morning, Mr. Chairman. My name is Mike
Patriarca and at the outset, Mr. Chairman, I would like to express

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the gratitude of us from San Francisco to you and to the committee for postponing our scheduled appearance in light of the earthquake. It was very considerate.

The CHAIRMAN. Thank you very much.

Mr. PATRIARCA. For the last 3 years, I've been in charge of the
examination and supervision of the thrifts in California, Arizona,
and Nevada. Prior to undertaking this happy task, I was an en-
forcement attorney and supervisory official at the Comptroller of
the Currency. In my prepared statement, Mr. Chairman, I've at-
tempted to outline several of the pieces to the Lincoln puzzle.

This morning, I'd like briefly to highlight the novel aspects of
the case and since our performance in San Francisco as the super-
visors we were in charge has been questioned, I'd like to give you
my candid assessment of how we did./g

The story of Lincoln unfortunately is sadly familiar. Fraud, in-
sider abuse, risk taking beyond all bounds with insured deposits
that went unchecked by a board of directors and outside auditors
until the losses were truly extraordinary. Unfortunately, even the
regulators have some blame to share in the Lincoln debacle.

The plot, sadly enough, has been rerun in recent years with abso-
lutely numbing frequency but in other ways, the Lincoln story does
have its unique aspects. Chief among these perhaps is the incredi-
ble arsenal of hired guns that Lincoln hired to lend it respectabil-
ity. Individuals, firms, and officials who should have known better
fell all over themselves to sell their reputation in furtherance of
the Lincoln cause. In both numbers and prestige the Lincoln arse-
nal was truly a formidable force. It covered many arenas.

Frankly, I've often thought of our battles with Lincoln as a kind
of surrealistic David and Goliath story with the regulators, with all
the statutory authorities you've given us, cast as the David.

I've absolutely no respect for the tactics that were employed by
Lincoln but I have to tell you I had to expect-I had to respect
their willingness to go to war with the Government and I had to
respect the weapons that they brandished in all three of the Gov-
ernment's branches.

When it came to wielding influence the Keating crowd really
outshone those Texas ne'er-do-wells that my brother, Mr. Selby,
had to supervise. Unfortunately, the Texas crowd was no match for
Lincoln.

The bitter irony of all this, however, is that all those resources
that were brought to bear to stymie the regulators and to obstruct
the regulatory process were paid for with tax payer dollars.

Another unique, if you will, and particularly tawdry aspect of the Lincoln case is that it wasn't enough just to rob the depositors and taxpayers of their funds, the Keating crowd really extended themselves by going out into Lincoln's branches and selling to retail customers incredibly risky paper from the Lincoln's holding company, paper that is now absolutely worthless. It seems to me by this wanton act ACC and its management really distinguished themselves among the legion of low-life thrift management who have been a scourge on the landscape for the last several years.

Finally, the Lincoln case has its unique aspects on the regulatory front as well. As you know, the Bank Board removed our jurisdiction to exam and supervise Lincoln. This was a mistake. Not be

cause it embarrassed me and my San Francisco colleagues in the
national spotlight, but because it called into question the whole or-
ganization's willingness as a vigorous regulator. I genuinely believe
based on my 14 years, experience as a regulator that what is now
the Office of Thrift Supervision is a credible regulatory source and
is the equal of the Commercial Bank Regulators. I genuinely be-
lieve that.

I urge the committee not to attribute to the whole organization
and don't judge the whole organization on the basis of one badly
mishandled case. This case was badly mishandled but to project it
to the effectiveness of the whole organization would be a terrible
injustice to the thousands of regulatory personnel who are doing a
particularly good job.

Well, that brings me to a review of how good a job we in San
Francisco did when we supervised Lincoln. Certainly it was a
unique case and it certainly posed regulatory challenges that I
hope not to meet again. I think in dealing with these challenges
the San Francisco staff did an exemplary job in almost all respects.
We conducted an examination in 1986 despite numerous obsta-
cles based in our way by the Keating folks and the tactics that they
used to get us to back down. We didn't back down. We persisted in
identifying the risks posed by Lincoln and in gathering the evi-
dence needed to put the company into receivership.

I believe today, as I believed then, that there was a basis for put-
ting this company into receivership and that the actions were
available that could have prevented the losses that eventually in-
curred.

I take no comfort at all from having ultimately been vindicated
on the Lincoln case. I'm also a taxpayer and there is no comfort at
all in looking at $2 billion that has been: squandered and stolen.

I don't feel satisfied a bit. Although I believe the San Francisco
efforts in the Lincoln case were tremendous; in hindsight, I also
think that there are things that we could have done better and
that there were mistakes that we made.

I'd like to address a couple of those now.

First, we approved a tax-sharing agreement between Lincoln and
its holding company that permitted the holding company eventual-
ly to wrongfully syphon off more than $90 million of money from
Lincoln.

Here's how it happened. Lincoln submitted an application to us
in early 1986 to have a tax-sharing agreement with the holding
company; they said this is a nonevent. Tax-sharing agreements are
in fact common. By the tax-sharing agreement Lincoln would pay
its tax liabilities to the holding company, ACC, instead of directly
to the IRS. ACC, in turn, would file a consolidated tax return and
pay everybody's taxes together.

Well, we got the application, we reviewed it, we sent it back to
Lincoln saying we will approve this but there are conditions. Chief
among those conditions is you have to amend this tax-sharing
agreement so that there is no pare-payment of Lincoln's tax liabil-
ity to ACC. You can't pay in advance of when the payments are
due to the IRS because that will be a loan to the holding company.
Loans to holding companies are expressly prohibited by the regula-
tion.

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We sent it back to them saying that-we got telephone calls from
the Lincoln counsel saying its in the hands of our tax accountants,
they're amending it, we're going to fix your concern, not to worry.

In fact, they amended the agreement, they sent it back with a
cover letter saying its been amended to satisfy all the concerns you
expressed, here it is. We approved it. Unfortunately, in reviewing it
it had been crafted in such a way that we didn't find-ultimately,
they say, allowed them to upstream these taxes.

Now, the Lincoln people say, but, the regulators in San Francisco
approved this, we were perfectly entitled to do that. That's absolute
nonsense. The regulation specifically states no money can be lent
from the institution to the holding company and this so-called ap-
tant misrepresentations.
proval that they got from us was the product of repeated and bla-

Naturally, if we had to do it again, we wouldn't have approved
the application at all, much less with conditions. But we did intend
to go onsite and to examine whether they were in fact complying
with the tax-sharing agreement. Unfortunately, our examination to
do that was postponed. I'll get into that in a moment.

In early 1987, we hired a company called Kenneth Leventhal &
Co., and they're acknowledged experts in real estate accounting.
We hired them to look into some of the questionable accounting
Lincoln and ACC, its holding company.
practices that we had identified in our examination with regard to

Kenneth Leventhal identified, on the basis of documents that we
had a series of questions that they thought had significant impact
on Lincoln, but they said "we have to go onsite to really nail down
the case." Among those questions were whether Lincoln was adher-
ing to the tax-sharing agreement. The onsite presence that was
needed to do that was scheduled for a field visit in September 1987.
When we notified Lincoln at the end of August that w were
coming in for a 2-week field visit, they responded that it would
take a court order to permit us to enter their premises and conduct
the examination. We also immediately asked for and received a
meeting with high level Bank Board officials, and the high level
amination.
Bank Board officials, in turn, instructed us not to perform the ex-

We nevertheless sent a written outline of Kenneth Leventhal's
concerns and the areas of inquiry to the Bank Board staff in Wash-
ington. When the decision was finally made to take away our juris-
diction on the Lincoln case, we recommended that a holding com-
pany examination be undertaken, that we review all intercompany
transactions, including the tax-sharing agreement. The Washington
after our field visit was scheduled.
folks began an examination of ACC on September 1, 1988, 1 year

This leads me to another area, where our performance in San
Francisco has been faulted. We've been criticized for not perform-
ing a holding company examination in connection with our 1986
examination at Lincoln. Others, noting that the Washington-led ex-
amination in 1988 identified abuses that hadn't come to light in
the holding company.
our exam in 1986, suggested that we screwed up by not examining

Well, on the basis of my fairly significant experience as an en-
forcement attorney and as a supervisory official, I thought we had

enough from our 1986 examination to place Lincoln into receiver-
ship. My counsel, who had been Deputy Director of FSLIC and
head of the Bank Board's litigation division, felt we had enough
from our 1986 examination to put it in receivership.

We had a nationally prominent law firm to help us come in and
analyze the legal aspects of the case, and they thought we had
enough. The head of the Bank Board's Office of Regulatory Activi-
ties, who had previously been for a number of years Deputy Comp
troller of the Currency in charge of problem banks, thought we had
enough in the 1986 examination to put Lincoln into receivership.
The Bank Board's Office of Enforcement thought we didn't have
enough. Frankly, I was astonished that an office whose sole reason
for existing was to aggressively pursue wrongdoers and high risk-
takers, and to protect the insurance fund, would advise against the
receivership on Lincoln. Frankly, I still find that astonishing.

Nevertheless, the Office of Enforcement was entitled to its opin-
ion, and the Bank Board was entitled to rely on its opinion and to
reject ours. The short answer to why we didn't do a holding compa-
ny examination in 1986 is that the exam that we did of Lincoln
was an exercise in pulling teeth. It was an exercise in being frus-
trated and meeting with refusals to provide even the modest, most
modest of documentation on the part of Lincoln management.

After an extended period of doing just that, we thought we had
enough and we thought the time necessary to examine the holding
company was unwarranted. Besides that, Lincoln comprised over
90 percent of the assets of the holding company. We had assur-
ances from the Office of Enforcement that they were going to
depose the holding company officials, and in fact our examination
of Lincoln did look at portions of ACC as well.

I will note as a footnote that most of the problem transactions
found in the 1988 exam occurred after our 1986 exam.

The issue of delay is another that's been raised by folks review-
ing San Francisco's handling of the Lincoln case, specifically, why
did it take 6 months after we concluded our onsite work to send in
this recommendation for receivership. I take personal and complete
responsibility for the decision that led to that delay.

I came to my job in San Francisco on Monday, August 18, 1986,
having ended my OCC career the previous Friday afternoon.
During the first week that I was on the job, we had a meeting in
Washington about the then ongoing problems with the Lincoln ex-
amination. During my first month on the job, the Washington Post
ran a front-page article in which Lincoln officials and the former
Deputy General Counsel of the Treasury Department, on their
behalf, alleged that the Bank Board was harassing Lincoln, that
the Bank Board had a personal vendetta against Lincoln's manage
ment, that the Bank Board was biased and that the chief means of
harassment was our examination of Lincoln.

In light of the serious findings that we were coming up with in
the examination, and in light of the serious consequences that were
likely to follow from that I thought, and in view of the loudly al-
leged bias and harassment by these Lincoln folks who were incred-
ibly well-financed and litigious, I decided personally that we were
product.
going to cut square corners on the completion of the examination

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I instructed my staff to give the Lincoln management a complete
rendition of our examination findings, and to give them every op-
portunity to rebut our findings. I intended to eliminate all those
claims of bias, vendetta, by basing our conclusions solely on the
facts, and solely on facts that Lincoln had the opportunity to
review and rebut.

By meticulous adherence to standards of fairness, I aimed to both
reach the right substantive conclusion in supervisory course, and to
create a record that would demonstrate in a subsequent legal chal-
lenge that there was no bias that played any part in our recom-
mendation.

Needless to say, Lincoln took full advantage of my decision and
used the process to further delay the conclusion of the examina-
tion. Examination closing meetings and asset classification meet-
ings were rescheduled and reheld. We gave the institution addition-
al time to submit arguments and documents that would affect our
conclusions on the variety of issues. These submissions were made
late, and were frequently incomplete.

In an incredible reversal, Lincoln's management and lawyers
that had blocked even the most innocuous request for information
during our actual examination, were now coming forward with box-
loads of documents, when it seemed that inundating us would still
drag out the process. They overloaded us with seemingly irrelevant
material. Nevertheless, it did require our review to determine its
significance.

You may not agree with the decision I made to cut square cor-
ners. It did result in a delay of about 4 months in completing our
examination product and recommendation. But it also accom-
plished what I intended to do. The facts upon which we based our
decision withstood Lincoln's challenge and they withstood and were
upheld by a subsequent review by the Office of Regulatory Activi-

Furthermore, we demonstrated a fairness to the decisionmaking
process that can be subject to no serious question. I think there is
some basis for criticizing us for not revoking ACC's debt authority
while we supervised Lincoln. When it acquired Lincoln, the Bank
Board granted ACC the authority to incur up to $550 million in
debt, subject to an annual review of a debt budget by us.

Our review of holding company debt budgets is routinely an ex-
ercise in quantitative financial analysis. What we look for in the
debt budget is are the assumptions reasonable and realistic; are the
projections reasonable and realistic; and does it appear that the
company can service, from a cash flow standpoint, the debt that its
projecting to incur.

Under our regulations, the review of the budget does not consid-
er the parties lending the money to the holding company or the
other qualitative aspects. Nevertheless, separately, we were ques-
tioning the accuracy of the disclosures that ACC wes making in
connection with the sale of its subordinated debt to the public. We
detailed these concerns in telephone calls and in a February 3,
1987, memo to the Bank Board's Corporation and Securities Divi-
sion. Our disclosure concerns were, in turn, relayed to the SEC,
and we provided the SEC with a number of documents in connec-
tion with their review of the ACC disclosure.

We had no authority to deal directly with disclosure problems,
other than to bring them to the attention of the people who had
the authority to deal with them, and we did that. If I could do it
again, however, I would take an expansive view of our authority to
review the debt budget and attempt to deal with the disclosure
problems by eliminating their authority to incur debt.

Our failure on this issue was not in neglecting to perform our
customary review and analysis of the debt budget. We did that.
What we failed to do is to identify a way of solving this problem
that was outside the normal course. Quite frankly, we expect that
of ourselves, and I take the criticism that we did not do it.

On the whole, Mr. Chairman, I am satisfied with the quality of
San Francisco's supervision of Lincoln Savings. There are things
that I would do differently if I had to do them again, but these are
relative few in the context of scores of very difficult and thorny
issues involving the Lincoln case.

When I came on the scene in San Francisco, the vigorous super-
vision of Lincoln was well underway. Throughout the years that I
have observed the San Francisco staff, they perform remarkably
well, and I think in the course of your review of the Lincoln case,
you will note that, facing miserable conditions, between the battles
that were going on with Lincoln and the battles that were going on
with Washington, they performed extraordinarily well.

Throughout, San Francisco's staff have remained true to their
principles. They have not wilted in the face of threats and pres-
sure, and they have never looked the other way. They take posi-
tions because they are right, not because they are easy, and frank-
ly, I am proud to be associated with them.

[The prepared statement of Mike Patriarca can be found in the appendix.]

The CHAIRMAN. Thank you very much, Mr. Patriarca, and I am in complete agreement and admiration, and I want to thank you for your and your colleagues' great work, honestly performed, efficiently carried out, in the light of what we know to be very, very heavy pressures that, unfortunately, all too often, we are led to be lieve, happens more than it should in our Government, and in retrospect, every one of us can always say, well, we could have done it this way, we could have done it that way, but basically, you conclude that your regulatory conclusions were something that you still affirm and reaffirm.

Mr. PATRIARCA. Absolutely.

The CHAIRMAN. Our next witness is Mr. Black.

STATEMENT OF WILLIAM BLACK, ACTING DISTRICT COUNSEL,
SAN FRANCISCO REGION, OFFICE OF THRIFT SUPERVISION
Mr. BLACK. Thank you very much, Mr. Chairman. Mr. Patriarca
has given our thanks that you were able to postpone the hearing to
allow us to come. I would like to give our thanks that you are con-
ducting the hearing. It took some courage, we know, on your folks'
part, as well, and I understand the committee has stood together
on it.

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