Bank Panel Chief Asks Bush to Fire S&L; Regulator : Thrifts: In a letter to the President, Rep. Henry B. Gonzalez cited testimony alleging that M. Danny Wall interfered with a Lincoln Savings & Loan investigation.

The chairman of the House Banking Committee on Monday called on President Bush to fire M. Danny Wall as the federal government’s chief thrift regulator for his alleged improper interference with a probe of Lincoln Savings & Loan of Irvine.

In a letter to Bush, Rep. Henry B. Gonzalez (D-Tex.) noted that the Banking Committee has heard testimony that Wall blocked efforts by federal regulators in San Francisco to collect evidence of misconduct at Lincoln in 1987. Testimony also showed that Wall met with Lincoln owner Charles H. Keating Jr. while the thrift was a target of the federal probe.

Gonzalez reminded Bush that government seizure of Lincoln last April created the biggest savings and loan failure in the nation’s history. It is estimated that insured depositors will receive $2 billion from the U.S. Treasury as a result of the action.

He also recalled that the President had assured the nation that it would be spared another savings and loan crisis under his Administration, and added: “I question that the assurance has meaning while Mr. Wall remains in office. In view of your commitment to not let those responsible for these costly failures remain in positions of authority in your Administration,” Gonzalez wrote, “I believe it would be reassuring to the American taxpayers who have been asked to pay for this regulatory failure if Mr. Wall steps aside.”

Gonzalez has long been a critic of Wall, director of the Office of Thrift Supervision, and has previously suggested that he step aside temporarily while the committee investigates his actions in the Lincoln case. However, Monday was the first time that the chairman had sought Wall’s permanent dismissal.

Gonzalez has been upset since members of the Senate Banking Committee demanded last August that Wall retain his position as part of a House-Senate compromise over legislation designed to bail out the ailing thrift industry.

Under the bill, the Office of Thrift Supervision was created as the successor agency to the Federal Home Loan Bank Board, which Wall had headed since July, 1987.

At a House Banking Committee hearing last Thursday, federal regulators from San Francisco testified that Wall had “shot them in the back” by blocking a timely federal takeover of Lincoln in 1987, when the thrift was found to be making risky loans.

Moreover, Wall has acknowledged that he met personally with Keating in 1987, about the same time that he was considering the recommendation of San Francisco regulators that Lincoln be seized. The two men knew each other before Wall took over at the FHLBB.

Wall and Keating have been subpoenaed to testify before the committee next week.

Gonzalez told Bush that Wall’s continued presence at the thrift supervision office is impeding the committee’s investigation of the Lincoln case. He noted that Wall had summoned two employees from the San Francisco office to a meeting at the agency’s Washington headquarters before their testimony.

“Even the most honest, straightforward witness finds it difficult to give the committee the full benefit of their knowledge while Mr. Wall has control over their future,” he said.

Meanwhile, it appeared that members of the House Banking Committee may be moving toward a decision to hear testimony from Sen. Alan Cranston (D-Calif.) and four other senators who intervened with the FHLBB in 1987 on behalf of Keating, who was a major contributor to their campaigns.

It would be unusual, but not unprecedented, for a House committee to request testimony from members of the Senate.

Committee sources said Rep. Toby Roth (R-Wis.) has decided to present the committee with a resolution requesting testimony from the five senators if Gonzalez does not arrange for them to appear voluntarily.

Julie Black, a spokeswoman for the committee, said Gonzalez opposes issuing a subpoena to the senators, as he has done with all of the other witnesses who have appeared before the committee. But she did not rule out the possibility of an informal arrangement under which the senators could speak to the committee.

Likewise, House Speaker Thomas S. Foley (D-Wash.) said he would oppose issuing subpoenas to the senators. “I consider it unusual in the extreme, and a practice that I think should be avoided,” he said. “(But) it doesn’t mean that members cannot appear, obviously.”

In a private meeting with Gonzales on Oct. 3, Cranston offered to cooperate with the House probe, but he did not volunteer to testify, according to a Cranston spokesman.

The five senators are also under scrutiny by the Senate Ethics Committee, which has asked them to respond to charges filed against them by Common Cause, the self-styled citizens lobby. Common Cause has accused them of bringing improper pressure to bear on the FHLBB on behalf of Keating.

Although the Ethics Committee has asked all five senators to respond to the charges in writing, sources cautioned that the panel has not decided to launch an investigation. “It is not a preliminary investigation,” emphasized a Senate aide.

Currently, according to these sources, committee employees are collecting information to be presented within the next few weeks to Chairman Howell Heflin (D-Ala.) and Vice Chairman Warren Rudman (R-N.H.), who then will decide whether to hold a meeting of the full committee to discuss the allegations raised by Common Cause.