FSLIC) and the Office of Thrift Supervision (OTS) took over Lincoln. Subsequently, the Resolution Trust Corporation (RTC) proceeded to liquidate Lincoln's remaining assets and to begin the complex task of winding up its tangled affairs. Losses to depositors, investors, taxpayers and others which flowed from the financial collapse of Lincoln have been estimated to be in excess of two billion, six hundred million dollars. On July 8, 1993, Keating, who had been previously convicted of securities fraud in California, was convicted by a jury in Los Angeles of several counts of federal fraud. At the age of 69, he was sentenced to serve two serve two concurrent state and federal prison terms, which totalled more than 25 years and fined more than five billion dollars, collection of which was doubtful (Granelli, 1993, p. A 1).
Like other S and Ls, Lincoln operated before Keating took paid a low rate of interest limited by state laws, the three (percent) of the rule. After legal reserve requirements were met, the funds of the S & Ls were lent out as fixed rate, the six (percent) in the rule, 20 to 30 year residential mortgages, and the S & L's officers were home by three p. m. In the late 1970s, interest rates skyrocketed and became more volatile, making the S & Ls less attractive places to deposit money. The result was billions of dollars in massive withdrawals. Modest steps were taken by the Federal Reserve (Fed) in the late '70s to raise slightly the allowable interest rates which S & Ls could pay depositors, but the hemorrhage of withdrawals continued. The Reagan administration was convinced that banks and other financial institutions, including the S & Ls, were becoming uncompetitive because of excessive regulation. It, therefore, sponsored or supported various legislative enactments of the Congress in the early 1980s which substantially deregulated the S & L industry. These included the Depositary Institutions and Monetary Control Act...