In my recent column I tried to convey a bit of courage, competence, and craziness that Jim Cirona displayed and had to deal with as a top regional regulator during the savings and loan crisis.
I failed, however, to discuss an episode that epitomizes all these elements. The incident also eventually led to Cirona hiring me as the SVP and General Counsel of the Federal Home Loan Bank of San Francisco (FHLBSF). I will draw heavily on Bartlett Naylor’s “The Legend of Wild Bill and Black Bart” in recalling the tale.
I was the litigation director of the Federal Home Loan Bank Board (Bank Board) at the time of the incident that Naylor describes.
“[Black received an] emergency call late East Coast time on Good Friday from the FHLBSF about Consolidated [Savings Bank]. One of Consolidated’s top officers, Mr. Angotti, had threatened the FHLBSF’s examiner-in-charge and Consolidated employees were taking photos of the license plates of the cars driven by the FHLBSF examiners. The threat led the FHLBSF’s leaders to ask the Enforcement Division to bring an emergency enforcement action against Consolidated and the senior officer who made the threat. The Enforcement Division, however, refused to take any action against the threat. (This was so typical of the Enforcement Division that Black and the FHLBSF’s lawyers began to refer to the Division as the “land of the invertebrates.”) The Enforcement Division advised the FHLBSF to complain about Mr. Angotti’s threats to Consolidated’s CEO – Mr. Ferrante. The FHLBSF informed the Enforcement Division that the FBI had told the FHLBSF that Consolidated was a “mob shop” and that Mr. Ferrante had once been severely injured by an attempted mob hit. The FHLBSF decided that the Enforcement Division was hopeless…. [Black] scrambled and hired one of them law firms in Southern California and brought a civil suit and demand for a temporary restraining order (TRO) against Consolidated’s threats early the next week.”
So, we have Cirona’s team standing up to intimidation from what the FBI was warning them was a bona fide “mobbed up” S&L. We have the insanity of the Bank Board’s enforcement unit refusing to back up the FHLBSF. Our emergency response promptly led to a court issuing a TRO to back up the FHLBSF. The incident shows why the FHLBSF developed its reputation for competence, vigor, and courage under Jim’s leadership. It also begins to explain why Jim and I developed such a mutual respect.
But the thing about the Consolidated Savings Bank incident that is sweetest is what came next. Consolidated complained that we were cracking down on it because we were biased against Italian Americans.
Snap! We were busted. We sent back our admission to leading a conspiracy against Italian-Americans. The signatories were:
Frank Passarelli, the Bank Board’s Director of Examination and Supervision
Jim Cirona, President and CEO of the FHLBSF
Mike Patriarca, EVP and Director of Examination and Supervision of the FHLBSF
Bill Black, the Bank Board’s Litigation Director (and June Carbone’s spouse)