Charles H. Keating Jr. says the savings and loan industry was done in by incompetent federal regulators, not by greedy thrift owners. And if you believe that, Keating has some junk bonds he would like to sell you. Keating, whose Lincoln Savings and Loan of Irvine, Calif., is likely to be remembered as the most costly thrift failure in history, is taking to the airwaves to convince the taxpayers that he and other public-spirited thrift owners like himself were driven into bankruptcy by government banking supervisors.
Making the rounds like an author on a self-promotional book tour, Keating has appeared in recent days on "Meet the Press," "Good Morning, America," and "Crossfire." As Keating tells it, there was a government conspiracy to cut down his profitable savings and loan in its prime.Keating was more camera-shy last fall when he was brought before the House Banking Committee to testify under oath about the Lincoln debacle. He first requested that all TV cameras be turned off. As it turned out, Keating wanted the blackout, not because he had something sensitive to say but apparently because he didn't want the spectacle of himself taking the Fifth on the 5 o'clock news. After declining to testify, Keating walked silently past reporters and sped off in his limousine.
He didn't want to talk to Congress, but Keating left behind a press release that blamed the regulators for the closing of Lincoln.
Everybody needs a scapegoat, especially a guy who operated a savings and loan in an inherently unsafe way, making entirely inappropriate and excessive investments with someone else's money and the insured backing of the U.S. taxpayers. Lincoln's investments were tied in large part to high-risk operations such as buying and selling raw land, investing in speculative real estate and buying junk bonds. Keating essentially ignored the traditional and safer role of the thrift business - home mortgages.
What Keating hopes you will forget is that just 3 percent of the money he gambled with was his own capital. The rest came from the federally insured deposits of the little people who believed the "savings" part of the savings and loan industry.
The way Keating ran Lincoln was not much different from taking his depositors' money to Las Vegas and betting the whole wad on red at the roulette wheel. A gambler may have a lucky streak for a time, but inevitably his luck runs out. Unfortunately, the American taxpayers will be the ones paying off Keating's heavy gambling losses of $2 billion or more.
Notwithstanding the civil bank fraud suit against him, what Keating may have done legally was more indicative of the savings and loan debacle than any of his alleged illegal activities.
To the extent that federal deregulation allowed Keating to get away with that, he is right about spreading the blame around. But Keating should keep on spreading until the blame comes back to him.
He took advantage of deposit insurance, created after the Great Depression as a confidence builder, and bought himself a license to gamble.