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properties, thus broadening taxpayer exposure. By 1984, the bank was number two among thrifts in the country in dividends payed to its stockholders the biggest of whom, of course, was Dixon. And executives of Vernon and its parent company, Dixon’s Dondi Corp., raked in as much as $600,000 annually in bonuses, many of which were diverted to them from secret accounts from within the thrift. The thrift had made highprofile investments in Calfornia and Europe, and its explosion in assets, dividends, and deposits had given it national stature. HEN CAME THE oil bust of 1985. The interest accounts Vernon had folded into its loans were running out, and 80 percent of its investments, according to O’Shea, were in troubled deals. The Federal Home Loan Bank regulators to Texas to investigate fast-growing thrifts like Vernon. The time had come for “daisy chain” deals, so-named by regulators after a sexual practice in which several people have sex simultaneously. Say Vernon had $14 million tied up in a condo development gone bust. Rather than foreclose on the developer and thus take over the property, whose real worth amounted -to a fraction of $14 million Vernon would get another S&L to loan the developer the money to pay off the loan, plus enough to book itself hefty fees in its own right. Vernon, for its part, would perform the same service for the other bank on one of its bad loans, and Vernon itself would generate hefty fees. With the collapse in inflation and oil prices, the properties being flipped around continued to erode in value. But the loans would appear productive again and again, since both thrifts would throw in enough money for a year’s interest payments. Meanwhile, Dixon partook in other excesses. He bought himself a luxury home in California with Vernon money, hired prostitutes to keep Vernon boardmembers and hapless Texas bank regulators quiet, charged flamboyant European tours to his expense account, and donated so much Vernon money to the San Diego Catholic Church that he was placed on the San Diego University board of regents and granted an audience with the Pope \(to whom he gave a $40,000 Vernon-owned takes obvious pleasure in documenting these sordid details. The daisy chains were short-term solutions. The FHLBB and its chairman, Ed Gray, had begun to understand the solvency problems of thrifts like Vernon. By 1986, Vernon’s deposits had grown at an average rate of 300 percent anually, and it had invested this money in risky and now quietly unravelling deal. That year, Gray’s agency limited deposit growths to 25 percent per year a move that severely limited Vernon’s ability to attract new money to hide its losses. Further, Gray pushed Congress and the Reagan Ad /MY 80RRO14111 BilligNS Snif TEXAS SsL ministration to appropriate $15 billion in new funds for the Federal Savings and Loan Inbeen dwindling since industry problems began in 1984. Overextended thrift owners like Dixon feared, correctly, that if the FSLIC got that money, Gray would begin shutting down troubled institutions to minimize future losses. HIS IS WHEN S&Ls dramatically stepped up contributions to members of Congress through political-action committees to bear down on Gray, a one-time favorite of S&L owners who became, in their eyes, a heretic. Dixon, along with Charles Keating of Lincoln Savings, led the charge. O’Shea reports that Dixon began pressuring Vernon employees to donate personal money to PACS that distribute the cash to congressmen and senators friendly to the industry. At Dixon’s urging, the employees would then reimburse themselves by falsifying their Vernon expense accounts thus buying political influence with federally backed deposit money. By the time Jim Wright and Tony Coelho had become House speaker and House whip, respectively, in 1987, they had both been effectively bought by the S&L industry. As Speaker, Wright brought personal pressure to bear on Gray with regard to specific S&Ls, including Vernon, and the two were largely repsonsible for denying Gray the funds he needed for the FSLIC to begin shutting down insolvent thrifts. Already by 1986, however, Vernon was crawling with federal regulators. In April, the FHLBB, in a compromise move engineered by Dixon to avoid a federal takeover of Vernon, demanded the resignations of top Vernon officials and promised further scrutiny of the thrift’s dealings. At that point, Dixon resigned his post as president of Dondi Corp., Vernon’s holding company, and headed to Washington to lobby full time. \(Of course, he remained the majority owner of Soon after, a Vernon subsidiary along with other investors borrowed $1.3 million from Vernon Savings to purchase High Spirits, a vintage yacht. Dixon docked the yacht in Washington Harbor and set up shop as a lobbyist. In the end, however, he could not save his S&L as O’Shea shows, the po litical influence he and his colleagues like Keating bought only served to extend the crisis to extreme and ultimately absurd proportions. The Federal government finally took over Vernon in 1987, after Dixon’s most powerful political friends Wright and Coelho had left office in disgrace. Dixon, for his part, now sits in a federal prison, a scapegoat of sorts, since most of the bandits of the S&L era, including all of the politicians, walked free. ‘Shea’s book has generated much excitement for its chronicle of Dixon’s extravagences: the prostitutes, the luxury home, the Pope-schmoozing. If he overplays and sensationalizes these details a bit, it doesn’t fatally wound this fine biography of a major actor in the broadest financial scandal in history. Indeed, the most obscene and the best parts of the book focus on the details of the scandalous deals themselves. With President Bush, lording over a nowcompliant Congress, pushing to deregulate the national banking system in ways uncannily similar to the S&L deregulation, The Daisy Chain deserves to be read widely and closely and before the U.S. political system unleashes a new throng of Don Dixons eager to raid the money of its citizenery. \(TARIPN “Best Lodging Location for Fishermen & Beachgoers” Group Discounts P.O. 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