 | |
| Type | Subsidiary |
|---|---|
| Industry | Savings and loan |
| Founded | 1925 in Los Angeles |
| Defunct | April 14, 1989 |
| Fate | Insolvency |
| Successor | Great Western Bank |
| Headquarters | Irvine, California |
Key people | Charles Keating |
| Parent | American Continental Corporation |
The Lincoln Savings and Loan Association of Irvine, California, was the financial institution at the heart of the Keating Five scandal during the 1980s savings and loan crisis.
Lincoln Savings and Loan Association was founded in Los Angeles as a California chartered savings & loan in 1925. [1]
Through the early 1980s, Lincoln was a conservatively-run enterprise, with almost half its assets in home loans and only a quarter of its assets considered at risk. [2] It had slow growth at best, and had shown a loss for several years until it made a profit of a few million dollars in 1983. [2]
Lincoln then became headed by Charles Keating, who as chairman of a housing construction company, American Continental Corporation, purchased Lincoln in February 1984 for $51 million. [3] [4] Keating fired the existing management. [2] Over the next four years, Lincoln's assets increased from $1.1 billion to $5.5 billion. [3] Such savings and loan associations had been deregulated in the early 1980s, allowing them to make highly risky investments with their depositors' money, a change of which Keating took advantage. [3]
Alan Greenspan sent a letter in February 1985 to officials of the Federal Home Loan Bank of San Francisco supporting an application for an exemption for Lincoln to a bank board rule forbidding substantial amounts of some investments, yet the exemption was not granted to Lincoln. [5]
When American Continental Corporation, the parent of Lincoln Savings, went bankrupt in 1989, [6] [7] more than 21,000 mostly elderly investors lost their life savings. Lincoln Savings was seized by federal authorities the day following American Continental's bankruptcy filing. [8] [9] [10] This total came to about $285 million, largely because such investors held securities backed by the parent company rather than deposits in the federally insured institution, a distinction apparently lost on many if not most of them until it was too late. [11] The federal government covered almost $3 billion of Lincoln's losses when it seized the institution. Many creditors were made whole, and the government then attempted to liquidate the seized assets through its Resolution Trust Corporation, often at pennies on the dollar compared to what the property had allegedly been worth and the valuation at which loans against it had been made. Charles Keating would be sent to prison for fraud.
At the time of the Federal seizure on April 14, 1989, Lincoln Savings was the 42nd largest savings & loan in the country with 29 branches throughout Southern California and assets of $5.4 billion and deposits of $4.4 billion but only $20 million in required capital on hand instead of the required $325 million in capital. [10] It took two years for the RTC to liquidate Lincoln Savings. In March 1991, Beverly Hills-based Great Western Bank paid the RTC $12.1 million for 28 offices and $1 billion in deposits. [12] [13]
Washington Mutual, Inc—abbreviated to WaMu—was a savings bank holding company and the former owner of WaMu Bank, which was the United States' largest savings and loan association until its collapse in 2008.
Charles Humphrey Keating Jr. was an American sportsman, lawyer, real estate developer, banker, financier, conservative activist, and convicted felon best known for his role in the savings and loan scandal of the late 1980s.
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The savings and loan crisis of the 1980s and 1990s was the failure of 1,043 out of the 3,234 savings and loan associations (S&Ls) in the United States from 1986 to 1995. An S&L or "thrift" is a financial institution that accepts savings deposits and makes mortgage, car and other personal loans to individual members.
Great Western Bank was a large retail bank that operated primarily in the Western United States. Great Western's headquarters were in Chatsworth, California. At one time, Great Western was one of the largest savings and loan in the nation, second only to Home Savings of America. The bank was acquired by Washington Mutual in 1997 for $6.8 billion.
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The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger savings and loan crisis of the late 1980s and early 1990s. The five senators—Alan Cranston, Dennis DeConcini, John Glenn, John McCain, and Donald W. Riegle, Jr. —were accused of improperly intervening in 1987 on behalf of Charles H. Keating, Jr., Chairman of the Lincoln Savings and Loan Association, which was the target of a regulatory investigation by the Federal Home Loan Bank Board (FHLBB). The FHLBB subsequently backed off taking action against Lincoln.
Gibraltar Savings and Loan Association was an American bank operating in California, Washington, and Florida. It was organized as a savings and loan and failed in 1989.
The Bank of New England Corporation was a regional banking institution based in Boston, Massachusetts, which was seized by the Federal Deposit Insurance Corporation (FDIC) in 1991 as a result of heavy losses in its loan portfolio and was placed into Chapter 7 liquidation. At the time, it was the 33rd largest bank in the United States, and its federal seizure bailout was the second largest on record. At its peak, it had been the 18th largest bank and had over 470 branch offices. The liquidation company was named Recoll Management Corporation and its bankruptcy estate has continued to exist to pay out claims against the company. As of 2016, most of what was once Bank of New England is now part of Bank of America.
Midwest Federal Savings and Loan was an American bank headquartered in Minneapolis, Minnesota. Starting in the mid-1960s, its headquarters were located at 801 Nicollet Mall in what is now called McGladrey Plaza. Midwest Federal was in business for ninety-nine years until its failure in 1989. Its collapse was due mostly to bad real estate loans. On April 22, 1991, the St. Paul Pioneer Press called the bank's failure the "largest financial disaster in Minnesota history" and was part of the savings and loan crisis of the 1980s. Midwest Federal had assets of US$3.5 billion, was liquidated by the government at a cost of US$1 billion to taxpayers. Midwest was US$1 billion in debt when it was seized by regulators in February 1989.
Bank United Corporation, headquartered in Houston, Texas, was a broad-based financial services provider and the largest publicly traded depository institution headquartered in Texas before its merger with Washington Mutual in 2001. Bank United Corp. conducted its business through its wholly owned subsidiary, Bank United, a federally chartered savings bank. The company operated a 155-branch community banking network in Texas, including 77 in the Dallas/Fort Worth Metroplex, 66 in the greater Houston area, five in Midland, four in Austin, and three in San Antonio; operated 19 SBA lending offices in 14 states; was a national middle market commercial bank with 23 regional offices in 16 states; originated mortgage loans through 11 wholesale offices in 10 states; operated a national mortgage servicing business serving approximately 324,000 customers, and managed an investment portfolio. As of June 30, 2000, Bank United Corp. had assets of $18.2 billion, deposits of $8.8 billion, and stockholder's equity of $823 million.
Valley National Bank of Arizona was a bank based in Phoenix, Arizona, founded in 1900 and acquired by Bank One in 1992. The bank was one of Arizona's leading financial institutions during the 20th century and the last major independent bank in Arizona at the time of its acquisition.
CenTrust Bank, A State Savings Bank was a Miami, Florida-based savings and loan. Its failure in 1990 was one of the largest and costliest failures of the savings and loan crisis.
American Savings and Loan Association was an American savings and loan based in Stockton, California. It was the largest thrift failure and the federal government's costliest resolution during the savings and loan crisis at an estimated cost of $5.4 billion.
Gibraltar Savings Association was a Houston, Texas based savings and loan. Its failure and resolution was one of the most expensive in the savings and loan crisis at an estimated cost of $2.875 billion.
HomeFed Bank was an American savings and loan association based in San Diego. It was founded by Charles K. Fletcher as Home Federal Savings and Loan Association in 1934 with $7,500, including $2,000 of his own and $7,500 from friends. At the time, new federal legislation in the Home Owners' Loan Corporation Act had created a new industry for mortgage finance. Home Federal's assets grew to $4 million within eight years. In 1983, it became a public company. It changed its name from Home Federal Savings and Loan to HomeFed Bank in 1989. That year, HomeFed achieved a company record $115.7 million in earnings.
Lincoln, established in Los Angeles in 1925, was acquired last year by Phoenix-based American Continental Corp. and its headquarters were moved to Irvine. The S&L has 25 branches throughout Southern California and, as of the end of last month, held $2.1 billion in deposits, up from $940 million the same period a year before.
Phoenix-based American Continental Corp., the nation's seventhlargest builder, announced Friday that it has agreed to acquire Monterey Park-based First Lincoln Financial Corp., parent of Lincoln Savings & Loan Assn., for about $50 million.Alternate Link via ProQuest.
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