Cranston’s Bill for Bondholders

Your editorial, “Who Is Alan Trying to Bail Out?” (Jan. 24), damning the Bondholders Protection Bill which I introduced Jan. 23, all too obviously was written by someone who not only never read the bill, but didn’t even make an honest effort to find out what it is all about.

Your editorial is guilty of outrageous inaccuracies and gratuitous aspersions about my motives. Even a casual reading of my bill (please see Page S 132, Congressional Record, Jan. 23) shows that it would not “make the U.S. Treasury vulnerable to claims for losses in any regulated industry,” that it would not protect people who “made unwise investments” and that it is not a “bailout of bondholders.”

* It is a one-time only proposal that deals exclusively with some 23,000 Californians, many of them widows and the elderly, who may have lost their life savings in apparently worthless bonds sold at Lincoln Savings & Loan.

* It does not bail out bondholders. It would enable them to obtain damages only if they are able to prove in court that government negligence contributed to their loss. (In the last Congress, no fewer than 17 bills were enacted waiving sovereign immunity and permitting citizens who had been wronged by the government to obtain redress by the government.)

* And my bill stipulates that the government’s liability would be reduced by the amount these people may collect from private sources--specifically, Lincoln Savings & Loan, its parent company American Continental Corp., and owner Charles Keating, all of whom are already being sued.

(To help assure that reimbursement comes primarily from these private parties rather than the government, I have urged Atty. Gen. Dick Thornburgh to make asset forfeitures that may result from criminal proceedings available to the bondholders, and I have asked him to help them track down assets that may be held abroad.)

I introduced my legislation for three reasons:

1. Because the Federal Home Loan Bank Board had responsibility for approval and supervision of the bond sale.

2. Because many of the bondholders had good reason to believe they were buying federally insured bonds since they were being sold at Lincoln S&L.;

3. And because information provided me by the Office of Thrift Supervision shows that the Federal Home Loan Bank Board failed to follow federal regulations for inspecting the bond sales and approved the sales despite doubts raised by their own regulators about the companies’ solvency.

These bondholders were let down by the negligence of federal regulators, and I feel strongly that the government is legally- and honor-bound to protect its citizens.

SEN. ALAN CRANSTON

D-California

Washington, D.C.