"A Legal Bank Robbery"

By MARGARET CARLSON

At first nobody noticed how much had disappeared because heists in high places occur without ski masks or guns. But now the House Banking Committee, the thousands of duped bondholders and the public have caught on: to the empty vault at California's Lincoln Savings and Loan, to the perfidy of its owner Charles Keating and to the complicity of the Government. Says Banking Committee member Jim Leach of Iowa: "Keating is at fault because he is a bank robber, but we in Washington made it, in part, a legal bank robbery."

Keating, the Phoenix businessman who is accused of using Lincoln as a private casino, is emblematic of the nation's $300 billion-plus S & L disaster. But he has no dearth of accomplices. There are the so-called Keating Five -- Senators Dennis DeConcini and John McCain of Arizona, John Glenn of Ohio, Donald Riegle of Michigan and Alan Cranston of California -- who received $1.3 million in contributions from Keating and went to bat for him against federal regulators. The five sank deeper into trouble last week when the Senate ethics committee appointed outside counsel to investigate. The FBI also expanded its Keating probe to include questions about the Senators' involvement.

Riegle, meanwhile, had to confess to several meetings with Keating that he forgot to tell the Senate ethics committee about until it came out in congressional testimony. One was a helicopter tour of Keating's real estate empire in 1987. Cranston's political future darkened during congressional hearings last week when some of his California constituents blamed "Cranston's corruption" for the loss of their savings.

Last week the spotlight also fell on M. Danny Wall, picked by the White House in July 1987 to replace Edwin Gray as chairman of the Federal Home Loan Bank Board. Gray, a onetime captive of the savings and loan industry, lost his job when he began to speak out about the extent of the S & L fraud.

In 1988 Wall removed the Lincoln investigation from the bank board's San Francisco office to Washington, postponing the closing of the savings and loan by two years. That delay will add $1.3 billion to the taxpayers' cost of repaying depositors and unloading Lincoln's washed-out investments. "My responsibility was to see that this was not a lynch mob after Keating," Wall explained to TIME last week. "The San Francisco office has a history of being hysterical, overzealous, swept away by smoke where there is no gun." Yet ; Wall's Washington audit eventually confirmed San Francisco's warning to the Senators that Lincoln was a "ticking time bomb." Wall's auditors discovered a whole ticking arsenal, in fact, but not for two long years.

Unlike the Senators who seek campaign contributions from the likes of Keating, Wall had nothing to gain but the continued esteem of the thrift industry for his consistently low estimates of the extent of the savings and loan debacle. He is a stolid former city planner from Salt Lake City whose only extravagance seems to be his natty suits and monogrammed shirts. As the top aide to Republican Senator Jake Garn of Utah when Garn was chairman of the Senate Banking Committee, Wall became a favorite of S & L owners. Says Senator Leach of Wall's 1987 appointment: "The industry got to choose outright its regulator."

As staff director of the Banking Committee in 1981, Wall drafted the industry's dream deregulation bill, the Garn-St. Germain Act. That law created a new breed of thrift operator. In came highflyers like Keating who shifted their depositors' money (now insured for $100,000 instead of $40,000) from unexciting residential mortgages to potentially more lucrative but indisputably riskier shopping malls, resort developments, energy-generating windmills. The new breed awarded themselves seven-digit salaries, private jets, hunting preserves and yachts on which to entertain members of Congress. Keating and his associates took $21 million from Lincoln even as it was heading into receivership. Named head of the Office of Thrift Supervision in August, Wall now directs the agency established to solve the problems Garn-St. Germain helped create.

Wall will defend himself this week before the House Banking Committee. But its chairman, Henry Gonzalez, has already called for his resignation. Last week even George Bush left Wall to twist in the wind: "If part of the savings and loan problem proves to be management or regulation people that aren't aggressive enough, would ((I)) make a change? . . . The answer is yes."

"Bush is a lawyer, so he knows I'm innocent until proven guilty," Wall replies. He is wrong, of course: Bush is not a lawyer, and Wall, although he seems to lack the venality of other players in the Keating affair, is not innocent. Like a number of other legislators and Government officials, Wall paid more attention to cosseting the people he regulated than to safeguarding the depositors and taxpayers who depended on his vigilance. Although Wall says | he now sees Keating's "half-truths and obfuscations," more than a billion was lost while he dithered over closing the vault.