Make Cons of Con Men

UP to now, the federal savings-and-loan debacle has been treated principally as a regulatory and fiscal problem. The leading issues have been the size of the bailout tab that will be handed to taxpayers, and the pinch the bailout will put on other federal programs. Increasingly, though, the S&L fiasco is also recognized as a law-enforcement priority. Thousands of thrift banks failed not just because of sluggish real estate markets in Texas, nor because thrift managers unwisely invested in junk bonds. Beyond these factors, many banks were creatively plundered by operators engaged in self-dealing, sweetheart deals, Ponzi schemes, the consumption of lavish perks, and outright thievery.

While the bailout agencies work frantically to stop the flow of red ink in troubled S&Ls and to sell off the enormous inventory of unfinished malls and apartment complexes taken over from bankrupt institutions, thrift regulators and the Justice Department are launching a major drive to prosecute operators who crossed the line from bad judgment to criminal conduct.

President Bush recently put his personal stamp on this campaign, when he spoke to an assembly of federal prosecutors and urged them to be aggressive in the pursuit of thrift bandits. Attorney General Dick Thornburgh has formed regional task forces and has appointed special officials to oversee fraud prosecutions. Last week the administration also announced that special investigative teams would devote accelerated attention to 100 unnamed thrifts where the costliest and most blatant frauds are thought to have occurred.

Unfortunately, any money recovered from crooked thrift operators will be insignificant in the overall cost of the thrift cleanup. Still, it is important to hold the white-collar looters accountable for their frauds, both in the interest of justice and to deter other executives in banks, insurance companies, or investment firms from treating other people's money as their own.

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