Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, July 24, 1990 TAG: 9007240433
SECTION: NATIONAL/INTERNATIONAL PAGE: A/2 EDITION: EVENING
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Bert Ely, a financial institutions analyst in Alexandria, Va., and formerly of Roanoke, maintains that fraud cost $5 billion, or only 3 percent of what he figures is the bailout's $147 billion total cost.
Most of the losses come from falling real estate values and from excessive interest rates paid by ailing institutions to attract depositors, he figures. Bad bailout deals made in 1988 and losses on junk bonds also contributed.
Fraud, nevertheless, has become the focus of political debate on S&Ls. Attorney General Dick Thornburgh, making his first congressional appearance on the subject, and top banking regulators were scheduled to testify on the subject today before the Senate Judiciary Committee.
In other thrift news:
The Treasury Department said Monday that the busiest month ever for the S&L cleanup helped swell the budget deficit to $11.2 billion in June, a month when corporate tax payments normally produce a surplus.
An attorney representing a GOP lobbyist involved in a much-criticized S&L bailout asked the Senate Ethics Committee to investigate whether the staff of Sen. Howard Metzenbaum, D-Ohio, struck a "sordid deal" to share investigative information with The New York Times.
The Judiciary Committee's hearing came two weeks after the Senate overwhelmingly adopted a crime bill including get-tough provisions aimed at bank and thrift fraud.
The bill provides $162.5 million in each of the next three years to increase the number of prosecutors and FBI agents pursuing S&L cases. It also increased the maximum prison sentence for bank fraud from 20 years to 30 years and provides a special life sentence to S&L kingpins. They are defined as those who act in concert with three others to steal $5 million or more.
Similar legislation is moving through the House.
On the witness list today in addition to Thornburgh were William Seidman, chairman of the Federal Deposit Insurance Corp.; Timothy Ryan, director of the Office of Thrift Supervision; and John Robson, deputy secretary of the Treasury.
The $11.2 billion June federal budget shortfall, compared with a $7.8 billion surplus in June 1989, brought red ink for the first nine months of fiscal 1990 to $163.1 billion, more than half again as much as the $105.4 billion deficit at this time last year.
If the deficit continues to accumulate at this pace, it could top the record deficit of $221.1 billion in 1986. Analysts attribute the ballooning budget gap to S&L bailout spending and to sluggish economic growth, which is producing lower-than-expected tax revenues.
Bailout spending by the government's Resolution Trust Corp. totaled $15.8 billion in June - a third of its total spending through June of $45 billion. Eighty-three of the trust's 207 bailouts and closings came in June.
Attorney Stanley Brand, representing lobbyist Robert Thompson, a former aide to then-Vice President Bush, asked for a probe of "what can only be described as a sordid deal to provide the Senate's investigative information to a single newspaper in return for favorable coverage on the eve of the Senate's hearing."
Metzenbaum chairs the Judiciary subcommittee on antitrust, monopolies and business rights, which is looking into Thompson's involvement in negotiating the bailout of 15 thrift institutions now combined under the name of Bluebonnet Savings Bank of Dallas.
The Times' story on questions surrounding the bailout appeared July 8, the day before Metzenbaum held a hearing on the subject.
Howell Raines, the Times' Washington bureau chief, said, "As a matter of policy we don't discuss sources or the editorial process." He said the story was "meticulously researched from a number of sources" and "was industriously and honorably reported."
Nancy Coffey, a spokeswoman for Metzenbaum, said the senator considered Brand's complaint too ridiculous to comment on.
"Since when is it against the law for a senator to talk to one reporter?" she asked, adding that "no prearrangements" were attached to Metzenbaum's comments.
Meanwhile, the Times reported in today's editions that Thompson invested $100,000 with a federal regulator, Paul Heafy, who also was involved in Thompson's negotiations to buy an insolvent bank in Oklahoma.
The newspaper reported that the investment, which was to buy distressed loans from federal regulators, did not violate conflict of interest laws, but Senate investigators wanted to look into the financing of the deal.
Heafy is chief liquidator for the Federal Deposit Insurance Corp. in Oklahoma City. The Times said he and Thompson refused the Times' requests for interviews.
by CNB