Inside Job: The Looting of America's Savings and Loans by Pizzo Stephen & Muolo Paul

Author:Pizzo, Stephen & Muolo, Paul [Pizzo, Stephen & Muolo, Paul]
Language: eng
Format: epub
Tags: Business
ISBN: 9780060986001
Amazon: 006098600X
Barnesnoble: 006098600X
Goodreads: 812711
Publisher: Harper Perennial
Published: 1989-01-01T00:00:00+00:00

CHAPTER 18

Dark in the Heart of Texas

Slowly, throughout 1984, the regulatory noose tightened around Texas. Ed Gray was proceeding with his regulation that would go into effect March 1985, limiting direct investments and placing a 25 percent annual growth limit on S&Ls. Regulators also began to demand that thrifts acquire more accurate appraisals. But during the heat of the debate that surrounded these moves, even as it became increasingly evident that Ed Gray wasn’t going to back down, no one would have guessed a thing was wrong at Vernon Savings and Loan. Vernon looked great, on paper. Trade journals routinely listed Vernon among the country’s soundest and most profitable institutions, and Vernon itself crowed that it was the most profitable thrift in America. Vernon looked so hot, in fact, that a month after California savings and loan commissioner Larry Taggart left that post in January 1985 he went to work for Dixon as a consultant. Taggart had no regrets for having presided over the deregulation of the California thrift industry, and he believed Texas thrifts’ recent problems were simply caused by the downturn in the oil economy. He viewed with alarm the frantic attempts by his former friend Ed Gray to tighten S&L regulations. He felt that, as someone who had been a regulator, he could help the industry by lobbying politicians in Washington to remain steadfast and unwavering in their commitment to thrift deregulation. And he set off to do just that.

With Taggart in Washington singing the company song, High Spirits docked in Washington keeping politicians happy, and a fleet of planes giving politicians rides home, Dixon must have believed his bases were covered and he had little to fear from the lackluster and politically impotent Ed Gray. Dixon continued to improve his bottom line at Vernon’s expense. He decided to abandon the Solano Beach house in favor of more elaborate quarters down the road in Del Mar, where he had one of Vernon’s subsidiaries buy a luxurious $2 million home. The house fronted a long expanse of beach. It was two stories, with rounded corner windows and verandas overlooking the Pacific. Tall palms sur-rounded the porch, and wide steps led to the fine white sand beach below.

Although the money for the purchase came from Vernon Savings, regulators said, Vernon’s board of directors was never consulted. Dixon then set up two bank accounts at Vernon Savings and filled them with Vernon money, which he used to pay the $561,874 in living expenses he incurred during his 18 months in the Del Mar house. Some of the items paid out of the accounts, according to regulators, included:

Flowers—$36,780

Pool service—$4,420

Car service—$23,845

Catering—$13,446

Pet services—$386

Graduation party—2,408

Telephone—$37,339

Utilities—$29,689

Cable TV—$1,794

Plants—$5,901

Political fundraiser for San Diego Congressman Bill Lowery—$7,238

Miscellaneous—$101,075

Petty cash—$44,095

A bottle of perfume—$110

Life was sweet in California, and the Dixons spent about 40 percent of their time at the Del Mar house, where they became known for their gracious dinner parties and where they kept an extra Rolls-Royce parked in the garage just for weekend guests. Their West Coast homes

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