Senators pressed him, ex-thrift regulator says

November 28, 1990|By Dan Fesperman | Dan Fesperman,Washington Bureau of The Sun

WASHINGTON -- Former thrift regulator Edwin Gray testified yesterday that he felt intimidated and improperly pressured by the four senators who met with him in April 1987 on behalf of savings and loan executive Charles H. Keating Jr.

But Mr. Gray said he didn't scold the senators then or later because he was seeking their support on regulatory legislation.

"I was living and dying by my hopes to get that legislation, and the last thing I wanted to do was get a bunch of senators angry at me," Mr. Gray told the Senate Ethics Committee during the sixth day of public hearings on the case of the so-called "Keating Five" senators.

The senators -- Alan B. Cranston, D-Calif., Dennis DeConcini, D-Ariz., John Glenn, D-Ohio, John McCain, R-Ariz., and Donald W. Riegle Jr., D-Mich. -- are accused of pressuring Mr. Gray and other regulators in exchange for political contributions from Mr. Keating.

Mr. Gray's testimony is considered important to some of the more serious allegations, especially where Mr. DeConcini is concerned, and he testified that Mr. DeConcini was the host and also "the least passive" during discussions of Lincoln Savings & Loan.

All four senators who attended the meeting have disputed Mr. Gray's account of it.

Mr. Keating was particularly irked by the Federal Home Loan Bank Board's adoption of a regulation in January 1985 that limited the speculative "direct investments" of state-chartered thrifts to 10 percent of their assets. Mr. Gray, whose term as chairman expired in late 1987, said Mr. Keating first attempted to derail the regulation by offering him a job, which he refused.

By 1986, Mr. Gray said, Mr. Keating was planting stories in the press that he was out to get Mr. Keating. He said the opposite was true, and among the evidence before the Ethics Committee is a memo on which Mr. Keating apparently scribbled "Gray must be fired."

On March 6, 1987, Mr. Gray said, he met with Mr. Riegle, who was soon to take over as chairman of the Senate Banking Committee. Mr. Gray said he was seeking Mr. Riegle's support for additional bonding authority to help shore up federal savings insurance; but just after the meeting was over, Mr. Riegle drew him aside and said, "You know, there are some senators out west who are very unhappy with your handling of the regulation of Lincoln, and I think you ought to talk to them."

Mr. Gray said he protested briefly, but Mr. Riegle would only say, "Well, you'll be getting a call."

Not long after that, he said, a meeting was arranged between him and an unspecified group of senators. He said he didn't know which senator set the meeting up because it was done through his staff, but he said he was told not to bring any of his staff to the meeting, a request he found unusual.

When he arrived for the meeting at Senator DeConcini's office, he said, Senators McCain, Glenn and Cranston were also waiting, and none were accompanied by staff. Senator Riegle did not attend, although evidence indicates the meeting was at least partly his idea.

Mr. Gray said Mr. DeConcini opened the meeting, saying, "Chairmen, we're here to talk about our friend at Lincoln Savings and Loan."

According to Mr. Gray, Mr. McCain then said, "Now we don't want to do anything that's improper," and Mr. Gray said he responded, "It's not improper to ask questions."

Then Mr. DeConcini offered a plan under which Lincoln would begin offering home loans -- generally considered safer investments -- if the bank board would withdraw the rule, Mr. Gray said.

Mr. Gray, who is now the president of a Miami bank, said he felt the offer was improper because "they had asked me to withdraw a duly adopted regulation." He said also that he felt "awkward and pressured -- the whole setting was an intimidating one."

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