Egads! The S&L scandal lives! - savings and loan crisis

Washington Monthly, Jan-Feb, 1992 by Christopher Georges

In the case of El Paso Savings, two examinersAlfred Beltran-Romero and Rick Benavidez-also found themselves on the wrong side of the OTS. According to agency sources and court documents filed by the pair in a suit against the OTS, they were ordered in January 1990 by superiors in Dallas to stop investigating the S&L even though they had uncovered evidence of fraud. After insisting on an investigation, the pair were labeled "problem examiners" and punished with poor work assignments, a short suspension from the agency, and a warning that they would be fired if they refused to cover up financial improprieties at the thrift. And finally, in September 1990, charged by the OTS with leaking confidential examination documents to a journalist, they became targets of an internal investigation. Beltran-Romero and Benavidez, who deny the charge, continue to work for the OTS as their case works its way through the courts.

Aside from a few annoying legal entanglements, the agency's strong-arming appears to have worked pretty well. The stories of the examiners' travails have traveled through the ranks of the OTS. "Nobody wants to stir up trouble," summed up one OTS examiner. "Everyone knows: You buck the system, you pay the price."

That play-it-safe attitude is only compounded these days, as Bush-even as he hails his S&L watchdogs-quietly starves them. Since 1989, his administration has trimmed the OTS staff from 3,200 employees to 2,700; another 11 percent drop is expected by 1992. The Midwest region alone has suffered a staff cut of more than 33 percent.

OTS spokesmen downplay the effects of the cuts, saying that because many thrifts are being closed, fewer examiners are needed. But because the thrifts examined these days are generally larger and more complex than in past years, it is also true that more people, and more time, are needed for each review. "We go into a $2 billion shop and we have five weeks to look," said one frustrated examiner. "Not long ago, I'd go into a $100 million shop and have three months."

Cutbacks like these make it harder for good examiners to do their jobs; they also give whistleblowers legitimate reason to fear that they might be the next ones cut. But more than that, they ensure that the once turbo-charged OTS becomes just another second-tier government operation, as the young, bright staff slip through the revolving door. "Whenever you have cutbacks like this and people see that there is no future for advancement," said one examiner, "the best people-the most employable people-get out."

Let the sunshine in

Not that we can expect the Bush administration to be worried if a few dozen righteous investigators pack it in to work for the local S&L. With billions of dollars of taxpayer funds invested in the cleanup, and with Congress and the administration staking huge sums of political capital on seeing that their solution to the crisis works, no one's inclined to acknowledge the new red flags. "It's a political hot potato," said one OTS examiner. "The feeling is the less reported, the better." This goes especially for the megathrifts that the government has spent billions of dollars to "save."