A former federal regulator says "the whole setting was an intimidating one" when he met with four senators to discuss financier Charles Keating and the problems of Lincoln Savings and Loan Association.
Edwin Gray, the former top federal thrift regulator, testified Tuesday that Sen. Dennis DeConcini, D-Ariz., flanked by three fellow lawmakers, opened the meeting by referring to Keating as "our friend from Lincoln Savings."The testimony came at a Senate Ethics Committee hearing into charges five senators intervened improperly on behalf of Keating and his savings and loan after he provided them with considerable campaign contributions.
The collapse of Lincoln, located in Irvine, Calif., will cost taxpayers an estimated $2 billion, and Keating is currently under indictment in California.
Gray, former chairman of the Federal Home Loan Bank Board, was to come in for more cross-examination Wednesday by lawyers for the "Keating Five."
Testifying Tuesday, Gray told the panel of an April 2, 1987, meeting at which DeConcini offered him a deal. He was to drop a regulation curbing risky investments by Lincoln, he said. In return, the Arizona senator promised to see to it that Lincoln would make more home loans.
"I considered it improper," Gray testified. "The whole setting was an intimidating one."
"DeConcini said, `We're very concerned about this direct investment regulation of yours. . . . We'd like you to withdraw it until we can find out if it's constitutional. If you can do that, we'll get our friend at Lincoln to make more home loans."'
Gray described DeConcini as leader of the meeting but stressed that the Arizona senator used the word "we" in making the request. Also on hand were three of the other senators under investigation: Republican John McCain of Arizona and Democrats John Glenn of Ohio and Alan Cranston of California.
The fifth, Democrat Donald Riegle of Michigan, was not at the meeting but did attend a session a week later with California-based regulators looking into the problems at Lincoln.