Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, March 22, 1990                   TAG: 9003221830
SECTION: BUSINESS                    PAGE: B7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                 LENGTH: Medium

JUDGE BARS S&L SEIZURE/ CASE COULD SLOW BUSH BAILOUT PLAN

U.S. District Judge Royce C. Lamberth issued a preliminary injunction forbidding the Treasury Department's Office of Thrift Supervision from taking control of Olympic Federal Savings and Loan Association in Berwyn, Ill.

The ruling came the same day that a top S&L regulator said the government planned to dramatically increase the pace of the bailout by selling or closing 140 institutions by the end of June.

Lamberth ruled that both thrift office director Salvatore R. Martoche and his predecessor, M. Danny Wall, were unconstitutionally appointed. He said the government cannot seize the suburban Chicago thrift until a new director is constitutionally appointed.

Late Wednesday, the judge rejected a government request to stay his order. Thrift agency lawyers said they would appeal.

Lamberth stressed that his order applies only to Olympic. But, in his 46-page opinion, he acknowledged: "This may lead to a great deal of litigation and place [the thrift office's] operations in some confusion."

The decision could slow Bush's bailout by giving an estimated 200 other thrifts believed near failure the grounds to request a similar injunction. Regulators had not moved to take over Olympic, but the thrift believed it was in imminent danger of seizure.

The ruling also potentially calls into question the legality of the takeover of 137 thrifts, with $97 billion in assets, since Aug. 9, when Bush signed the bailout law.

Because of the uncertainty, the sale or ultimate closing of those institutions may be postponed, adding to the taxpayer cost of the bailout, estimated at $160 billion over 10 years.

In U.S. District Court in Topeka, Kan., Franklin Savings Association of Ottawa, Kan., is challenging thrift regulators' constitutional authority in a bid to overturn its February seizure.

Lamberth's ruling would not affect the 265 S&Ls seized before Aug. 9, when Wall was the constitutionally appointed chairman of the now defunct Federal Home Loan Bank Board.

Olympic contended, and Lamberth agreed, that Wall was improperly named director of the thrift office when the Federal Home Loan Bank Board was dismantled and many of its duties transferred to the thrift office.

Martoche, because he had been confirmed by the Senate as an assistant secretary of the Treasury Department, could normally have succeeded an outgoing thrift office director on an acting basis. However, in this case he cannot because he succeeds someone who never legally held the job, the judge said.