Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, May 30, 1990 TAG: 9005300405
SECTION: EDITORIAL PAGE: A8 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
He happens to be the 34-year-old son of President Bush. But this is not a story of influence-peddling; he seems to have been careful not to trade on his family connections or other associations. Two weeks after his father won the Republican nomination for president in 1988, he resigned as a director of the Silverado Banking Savings and Loan Association. (Four months after his departure, Silverado collapsed.)
But young Bush didn't have to use connections. Like many another person without a prominent name, he was conveniently placed to realize personal gain from the cozy, no-questions-asked atmosphere that prevailed within the S&L community in the past decade.
During three years as a Silverado director, Bush sought and approved loans from people with whom he had other business dealings. One of those loans was for $106 million to a developer who lent Bush himself $100,000. The developer defaulted, one of the bad loans that forced Silverado under. As for the loan to young Bush, he didn't have to repay it.
Asked by the Senate Banking Committee why he hadn't told Silverado's board about his own business connections with borrowers, young Bush said it wasn't necessary. He didn't own a part of the borrowers' firm; they owned a share in his. Ergo, no conflict of interest.
And why, he also was asked, did he not have to repay that $100,000 loan? "I know it sounds a little fishy," he replied. "The loan was never meant to be repaid unless there was a success" - i.e., unless the plan had made money.
If it had, Bush would have profited. When it didn't, he lost no money. And because Uncle Sam was guaranteeing depositors' funds, it was all risk-free.
If it looks to you as if S&L insiders were playing games with taxpayers' money, you're not far wrong. Federal regulators say that under the quid-pro-quo lending system at Silverado, developers were supposed to use part of the loans they received to buy preferred stock in the Silverado holding company. Or they could buy an interest in the thrift's "loan pool."
Whether young Bush or anyone else at Silverado broke laws has not been determined. Go-for-broke dealings seem to have been commonplace in a time when federal regulations had been relaxed, yet deposit guarantees still shielded S&Ls from the consequences of bad loans. The rest of us will be paying the bill for a long time to come.
by CNB