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Silverado: Neil Bush and the Savings and Loan Scandal.

Silverado: Neil Bush and the Savings & Loan Scandal

Among the financial ruins heaped upon the American public by the savings and loan debacle are the remains of a few institutions that have come to symbolize the unfortunate excesses of the 1980s. One of them is the Denver-based thrift that was aptly known as Silverado Banking.

Besides the staggering $1 billion cost to taxpayers, the demise of Silverado was further exploited by the presence of Neil Bush, the president's youngest son. As a member of the board of directors, the 29-year-old Bush gave Silverado first-family connections and social prestige. In the end, the Bush name attracted national headlines and congressional investigations, and, as a result, Silverado became synonymous with the entire S&L fiasco.

Watching it all unfold was Denver Post reporter Steven Wilmsen, who was nominated for a Pulitzer Prize for his investigative reports on the high-flying S&L. His story, based on extensive research involving legal depositions, congressional testimony and regulatory records, documents the malfeasance that ultimately shut the institution down.

This short and entertaining book depicts a brash breed of wheeler-dealers with a penchant for "go-go banking." The setting is in the wild west of Denver - then an oil boom town. If there ever was a perfect setting for a television series, this was it - as Wilmsen notably points out. "Dynasty," it seems now, was what these financial executives wished to recreate for themselves.

Encouraged by the bravado of Silverado CEO Michael Wise, real estate tycoon Bill Walters, dubbed "the Donald Trump of Denver," and mega-developer Ken Good pumped boatloads of capital into Silverado in a complex web of real-estate-for-loan swaps that would confuse even Rubik. The bigger the deal, the better. When the oil industry unexpectedly fell on hard times in the mid-1980s, Denver was no longer on a roll. Property values plummeted. Yet, Silverado continued to make real estate loans that had risk spelled out in capital letters. It didn't matter: volume was what counted and how it appeared on the books. Desperate times called for desperate measures.

Meanwhile, Neil Bush had moved to Denver to strike out on his own with an oil exploration firm. Although his company was unable to find any oil gushers, he did strike it rich through his business associations with Walters and Good, who handed out money like it was candy. It didn't take long for Bush to gain entrance into Denver's country club set. After all, he was, as Bush himself put it, "You know, the vice president's son."

By the time Bush was invited to join Silverado's inner circle, the S&L was dodging bullets. Fueled by numerous congressional mandates deregulating the thrift industry, Silverado was able to narrowly escape financial collapse. With smoke and mirrors, the bloated institution managed to fool everyone, including the regulators.

In one chapter, Wilmsen details the infiltration of greed run amok in the accounting firm hired to audit Silverado. Basically, they were hired to look the other way and were paid handsomely for it. When a conflict of interest arose involving Bush and his bankrollers, Walters and Good, the accountants overlooked it completely. "That such a frenzy of greed and irresponsibility should have occurred, of all places, in the accounting profession is mind-boggling," writes Wilmsen. For its audit of Silverado, Coopers & Lybrand, at the end of 1990, became the first major accounting firm in the country to be penalized by the Office of Thrift Supervision.

Even as the regulators moved in, the slick operation had greased the wheels of bureaucracy. Investigative insiders speculate that a key regulator delayed action against Silverado because of a close relationship with Silverado management. Political motives, too, cannot be overlooked when one considers the political fallout on the cusp of George Bush's 1988 presidential election.

The force, whatever it was, that kept the ailing thrift afloat as long as it did, eventually went bust, as did Silverado, when regulators finally took over and closed it down on December 9, 1988. The vast amounts of money that Silverado claimed to have simply vanished into thin air, and the scandal that ensued tarnished even the White House.

In the wake of Silverado's ill-fated demise, there are lessons to be learned - lessons of business ethics, banking reforms and corporate responsibilities. It appears that the financial whiz kids of the 1980s have learned it the hard way: if you're bankrupt in ethics, you'll soon be filing for bankruptcy.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Curzon, LaDonna H.
Publication:Mortgage Banking
Article Type:Book Review
Date:Jan 1, 1992
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