WASHINGTON - A House panel hearing on redwood trees was an improbable place to find two top federal banking regulators. And it was clear Tuesday that both Federal Deposit Insurance Corp. Chairman Donna Tanoue and Office of Thrift Supervision Director Ellen Seidman preferred to be elsewhere.
But the two were forced by subpoena to sit before a task force of the House Resources Committee, where Chairman John T. Doolittle, R-Calif., accused the agencies of joining together "as part of a big-government agenda to acquire privately owned redwood trees."
The accusation stemmed from the failure of the United Savings Association of Texas in Houston in 1988, which cost the thrift deposit insurance fund more than $1.6 billion. The agencies have sued Maxxam Corp. of Houston and Charles Hurwitz, its chairman, for a combined $821 million, claiming that the company controlled the thrift and that the executive's "gross negligence" led to its closing.
Mr. Hurwitz had responded that the regulators filed the lawsuit in 1995 to pressure him to sell 63,000 acres of environmentally sensitive redwood forests in Northern California to the federal government. The land was owned by a Maxxam subsidiary. He charged that the agencies secretly planned to seize the trees as part of a settlement, or withdraw the suit if he agreed to sell them to the Interior Department for preservation.
Lawmakers blasted the agency executives on Tuesday, arguing that the regulators were part of a conspiracy by the Clinton Administration to promote a radical environmental agenda.
FDIC General Counsel William F. Kroener 3d responded that the charges were unfounded. He testified that Mr. Hurwitz repeatedly offered to settle the FDIC's claims in return for the Headwaters Forest, but that the agency turned him down, preferring a cash settlement.
"The facts simply do not support the allegation that the FDIC was part of some 'government conspiracy' to 'break the Headwaters Forest agreement' or force Mr. Hurwitz to relinquish these properties," Mr. Kroener testified. "The FDIC's suit against Mr. Hurwitz was filed to recover monetary damages to offset the loss to the taxpayers resulting from the failure" of United Savings.
But former FDIC Chairman William Isaac testified that the agency knew the lawsuit had little chance of success, and opened itself up to charges of a conspiracy by discussing the case with the Department of the Interior.
"I am very troubled by the evidence I have seen indicating that the litigation processes at the FDIC and OTS were politicized," said Mr. Isaac, who is chairman of the Secura Group consulting firm and a paid consultant to Mr. Hurwitz. "It appears that the regulators in the Maxxam case engaged in detailed discussions of government legal strategies and land-swap scenarios with environmental groups."
Ms. Tanoue replied that she had listened to Mr. Isaac's arguments, but found no reason to reverse the decisions made by the FDIC board before she joined the agency.
"This case involves one of the highest costs to the funds in the industry's history," Ms. Tanoue testified. "Our highest obligation is to pursue meritorious claims - and this is one of them."
Ms. Seidman was in a more difficult position because she will be the final judge in a related OTS case involving Maxxam that is being pursued as an administrative proceeding. She repeatedly asked to be excused from the hearing, arguing that she has intentionally stayed away from all discussion of the case so she can be impartial. After some lengthy discussion, Ms. Seidman was excused.
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