Harbor Bancorp & Subsidiaries - Page 11

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          held the documents so executed in escrow pending the final                  
          closing.                                                                    

          Changes in the Program                                                      

               Because of a pending change in the tax law setting forth               
          restrictive new arbitrage rebate rules on bonds issued after                
          December 31, 1985, there was considerable pressure for local                
          governments to issue multifamily housing bonds on or before                 
          December 31, 1985.  As the anticipated December 31, 1985, closing           
          date approached, principals of DLJ informed Mr. McCown that the             
          firm was financially unable to underwrite the large number of               
          tax-exempt bonds that were scheduled for closing on December 31,            
          1985.  Mr. McCown scrambled to find another underwriter.  (Drexel           
          had lessened its involvement in underwriting these types of                 
          securities by this time and was not a viable alternative.)                  
               Mr. McCown was on good terms with Arthur Abba Goldberg, vice           
          president of the investment firm of Matthews & Wright, Inc., a              
          Wall Street underwriter.  Mr. Goldberg told Mr. McCown that his             
          firm would underwrite the Bond transactions.  Mr. McCown then               
          informed Mr. Newman that the Matthews & Wright firm would do the            
          underwriting.  Mr. Newman had dealt with Matthews & Wright in the           
          past and agreed to the substitution of underwriters.                        
               Prior to being sold to the public, the Bonds needed to be              
          rated by a recognized rating agency, such as Standard & Poor's              
          Corp.  Because the rating agencies needed a period of time to               




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