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Lincoln Savings and Loan Association of Irvine, California was the finacial Institution at the heart of the Keting Five scandal. It was headed by Charles Keating who as chairman of a home construction company, American Continental Corp., purchased Lincoln in February 1984 for $51 million and increased its assets from $1.1 billion to $5.5 billion by 1988.

Failure of Saving & Loan, the Keating Five

In 1972, Keating began to work for American Financial Corp., a company involved in insurance and banking. Four years later he moved to Phoenix, Arizona to run the real estate firm American Continental Corporation, a spin-off of American Financial Corp. In 1984, American Continental Corporation bought Lincoln Savings.

Such savings and loan associations had been deregulated in the early 1980s, allowing them to make highly risky investments with their depositors' money, a change of which Keating took advantage.

American Continental Corporation, the parent of Lincoln Savings, went bankrupt in 1989; more than 21,000 mostly elderly investors lost their life savings, in total about $285 million, largely because they held securities backed by the parent company rather than deposits in the federally insured institution, a distinction apparently lost on many if not most of them until it was too late. The federal government covered almost $3 billion of Lincoln's losses when it seized the institution. Many creditors were made whole, and the government then attempted to liquidate the seized assets through its Resolution Trust Corporation, often at pennies on the dollar compared to what the property had allegedly been worth and the valuation at which loans against it had been made.

See also

• Keating Five

References

1. ^ http://query.nytimes.com/gst/fullpage.html?res=950DE4D91230F931A15752C1A96F948260

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