Prosecutors surprised by a judge's decision to set bail at $5 million for Charles H. Keating Jr. on savings and loan fraud charges agreed to a hearing Thursday on lowering the amount.

For District Attorney Ira Reiner and his staff, the high bail set Tuesday by Superior Court Judge Gary Klausner came as something of a shock.In negotiating Keating's surrender, prosecutors told the defense the bail decision would be left to the judge, but they indicated the amount would probably be far lower.

"When the judge set it at $5 million, we were probably as surprised as Mr. Keating," said Mike Botula, a Reiner spokesman.

Keating and three co-defendants, whose bail was set at $1 million each, remained in jail in the first criminal case stemming from the $2 billion collapse of Lincoln Savings and Loan, the nation's biggest S&L failure.

They face up to 10 years in prison if convicted.

Keating, a 66-year-old developer from Paradise Valley, Ariz., headed Lincoln's parent, American Continental Corp. in Phoenix.

The defendants were accused of swindling junk-bond investors by misrepresenting the safety of the investments. All told, more than 20,000 investors are believed to have lost $250 million on the now virtually worthless securities.

The judge, in setting bail, said he considered the charges serious.

Afterward, posecutors agreed to waive the normal five-day wait before a bail reduction hearing.

Keating became a prominent symbol of the nation's S&L scandal because of his lavish personal habits, his risky investments, his political access and the high cost of bailing out Lincoln.