Trials of an Independent Regulator

...But many lawyers and accountants also did their bit to bilk the public...

...Constitutional protections of a free press, though, make the issue of how to get better performance, in the public interest, out of the commercial media an even tougher problem to solve...

...As the mammoth disaster was building, the politicians did their best to conceal it from the public...

...The same has happened before to regulators who crossed or worried a President...

...Indeed, the biggest operators in the so-called "thrift" industry—Charles H. Keating Jr...

...This sigh of regret is no solution, however...

...Or were many other loyalists, whether at Treasury or the White House or different regulatory agencies, with support from the private sector, involved in the deed...

...The S&L scandal raises grave doubts about an accounting system that allows the executives of private companies to select and pay for accountants who will give them the most favorable audits their money can buy...

...He tells us with relief that his former firm, now known as BDO Seidman, has not, "as of this writing," been involved in any lawsuits over negligent or crooked accounting for S&Ls...

...Although the ideal may seem impossible to achieve, that is not necessarily the case...

...The S&L disaster had a cast of thousands, including a long list in the private sector...

...When Sununu himself was forced to resign as chief of staff, someone said to Seidman, "Poor John is his own worst enemy...

...With deregulation having liberated these banks from investing depositors' money only in housing, the professionals plunged for the biggest returns they could get...

...The most fascinating part of Seidman's book describes the way he was pressured, coaxed, tempted, wheedled, smeared, and finally forced to resign as head of the Federal Deposit Insurance Corporation and the organization set up under its wing to deal with the S&L mess, the Resolution Trust Corporation...

...Seidman tried, and for several years succeeded...

...Yet the issue here is not whether Bush handled the elimination of Seidman from the chairmanship of the FDIC optimally...

...Near the end, Sununu "unexpectedly" told Seidman, "This whole affair is not my battle...

...Instead, the attacks on him, via leaks to the press, were stepped up...

...Along the way toward the block, President Bush, in a kinder and gentler mode, met with Seidman and asked him to consider resigning to become his "special ambassador" to Panama and Nicaragua to direct a new Central American aid program of $750 million...

...Michael R. Milken, the junk bond king of Drexel Burnham Lambert, unloaded hundreds of millions of junk bonds on the S&Ls...

...Granting that the S&L crisis was not a good media story, especially for TV, because it was "too dull, too complex," Seidman, who was open and straight with the press, feels there were a few good early-warning stories, but the newspapers didn't stay with the story or play it hard enough...

...Breeden, notes Seidman, "was later to be rewarded with the chairmanship of the Securities and Exchange Commission...

...Some print reporters and television journalists fight hard for stories they regard as important, whatever the lack of support or outright resistance they encounter from their bosses...

...George Bush made no reference to the looming S&L collapse during the campaign...

...Was it really Treasury Secretary Nicholas F. Brady, Bush's closest friend all the way back to their Yale days together, who was behind the execution of Seidman...

...But too many slog on as team players, good soldiers, or rather bad soldiers—frustrated, increasingly lazy, timorous, protecting their asses...

...As with his discussion of the accountants, the lawyers, the politicians in Congress, the White House, the Treasury, the regulatory agencies, the banks, and the corporate board rooms, the Seidman sagas of the financial scandals of recent years raise serious questions about the functioning of a major American institution: the media...

...Bush, says Seidman, "complimented me on my great service to the country and my unquestioned integrity...

...During the 1988 Presidential election campaign, there was only one mention of it—by Democratic standard-bearer Michael S. Dukakis, who said the S&L problem was a big one and blamed it on the Republicans' deregulation policies...

...In preparation for this, Seidman reports, the FDIC prepared information on the various bills passed by Congress that had eased regulation of the S&Ls and increased their vulnerability...

...Reviewed by Leonard Silk Senior Research Fellow, Ralph Bunche Institute on the UN, City University of New York...

...Or was he just responding to the President's plea, "Who will rid me of this quarrelsome accountant...

...No bigger financial blunder, he believes, is recorded in history...

...But he doesn't know whether they were "just lucky not to have been aggressive in attracting the wrong kind of S&L clients" or "had learned their lesson from the Equity Fund scandal," in which the firm of Seidman and Seidman (though not William Seidman personally) was involved...

...As Vice President under Ronald Reagan, Bush had headed the task force on deregulation and had "an obvious interest in avoiding any discussion of the baleful results of misplaced deregulatory zeal...

...taxpayers...

...But he couldn't survive in a time when the general mood was greedy and go-go, and when other institutions that were supposed to be serving the national interest, private and public, did not do their job...

...Nevertheless, Seidman has given us a very useful aid-to-memory...

...He repeated this denial of responsibility for disposing of Seidman in an interview with Garrick Utley of NBC, stating that the Treasury Department was the one seeking more authority and control over the FDIC...

...It is a Treasury affair and not a White House initiative...

...An independent agency head can serve the public interest for a long while if he is smart enough to know what is going on around him, principled enough to hold out against temptations, and tricky enough to protect himself by gaining strong press and public support —and even Congressional backing...

...Despite Bill Seidman's intention as well to be a team player and good soldier in the Republican cause, his conscience kept getting the better of him?and getting him into trouble with the Bush Administration...

...In the face of intense competition for audiences and advertisers, the media have been, with a few exceptions, dumbing themselves and behaving more and more like any other business chasing dollars...

...Widespread violations by professionals and by banking and business executives call for basic reforms of accounting practices, government regulation and corporate governance to protect shareholders, taxpayers and the general public...

...The S&L scandal was not simply a feeding frenzy brought on by corruption...

...Keating, when asked whether his large contributions to politicians had bought him influence, replied with a remarkable burst of honesty, "I certainly hope so...

...Even Seidman, a Reagan admirer, blames the ideologues for careless and excessive deregulation, for forgetting that the government's loose use of its "full faith and credit had castrated the market's regulatory strength" and had created "an open invitation to gamble with other people's money...

...The S&L mistakes," he writes, "resulted in the closing down of one-third of the industry, destroying the agency charged with promoting and insuring it, and costing the American taxpayers around $200 billion, plus interest on that amount, probably forever...

...But Seidman still declined to resign, and no further offer of the ambassadorship was ever made...

...of Arizona's Lincoln Savings and Loan, David Paul of CenTrust in Miami, Tom Spiegel of Columbia Savings and Loan in Los Angeles, Donald Dixon of Texas' Vernon bank (known to regulators as "Vermin Savings and Loan")—gave to both sides...

...But Seidman, determined to do an honest job for the public, hung in as long as he could, causing the Administration to back and fill lest it be publicly exposed for getting rid of a truth-telling messenger...

...There are doubtless better and worse ways for a President—or any other big shot—to get rid of a troublesome subordinate...

...it was an ideological disaster as well, nourished by Right-wing economists and other worshipers of what President Reagan called "the magic of the market...

...He dug his own grave by his stubborn efforts to give an accurate assessment of the S&L debacle, which contradicted the White House and Treasury versions, and by his refusal to show favoritism toward Neil Bush, the fourth son of the President, who was a director of Silverado Savings and Loan of Denver, Colorado...

...Crooks will always be attracted by the smell of easy money,'' says Seidman, otherwise a champion of free enterprise...

...former columnist, New York "Times" L. William Seidman, an accountant with a deserved reputation as a straight arrow, inside and outside government, presided over the Federal Deposit Insurance Corporation (FDIC) during the savings and loan fiasco...

...At the extreme were the outright crooks, lured by the opportunity to make free use of Federally insured deposits...

...The "Keating Five" included four Democratic Senators and one Republican...

...He says the pressures on accounting firms are "understandable," adding that, "as anyone who has spent years as a CPA doing work for private companies knows, the demands of the client can be difficult to resist...

...Full Faith and Credit is a valuable contribution to the ongoing struggle to make government act responsibly, honestly and intelligently...

...Seidman, a Reagan appointee to the FDIC, a supposedly independent agency, discloses that early in the '88 race he met several times with Richard C. Breeden, a member of the Vice President's staff who had been executive director of the regulatory task force...

...Seidman is not holier-than-thou in his criticism of the accountants...

...The collapse of Silverado in late 1988 cost the Federal Government about $1.5 billion...

...Next came the allegedly independent professionals working for S&L dollars —the lawyers, accountants, appraisers, business consultants, investment advisers, and other busy bees attracted to the honey pot...

...Seidman replied: "Not while I'm alive...

...I believe the right answer to all three questions is Yes...

...But the subject was immediately dropped, says Seidman, "at the urging of the Democratic speaker of the House of Representatives, Jim Wright [of Texas], who was heavily involved with many savings and loan executives...

...John H. Sununu, President Bush's chief of staff, assumed the role of hatchet man...

...But the Democratic attack never came...

...He blames "our friends in the Fourth Estate" for not doing a better job in bringing the multibillion-dollar ripoff to the attention and understanding of the public...

...The real issue is whether we want independent regulatory agencies to be truly independent, or merely political tools, open to the influence of the President and other politicians—and of the regulated interests in the private sector...

...As with the Mafia, hit men in government are sometimes rubbed out after they have done their job...

...The Bush campaign strategy for fighting off any Democratic attack on the Republican candidate's role in the S&L disaster was to have been a counterattack on the Democratic Congress...

...The law firm Kaye, Scholer, Fierman, Hays and Handler and the accounting firm Arthur Young helped Keating at Lincoln Savings defraud depositors and lay billions of dollars in debt on U.S...