Government investigators have discovered an elaborate web that connects the bankrupt investment banking firm of Drexel Burnham Lambert, many of Wall Street's best-known corporate raiders and some of the highest flying savings and loans.

Working closely together, those organizations bought each other's bonds, gave each other loans, traded securities back and forth, financed corporate takeovers, participated in real estate deals together and sometimes allegedly helped each other create phony profits and evade regulatory requirements, investigators said.

The network of companies that used Drexel to finance corporate takeovers is already well known, but the role of savings and loan associations is only now being understood as a result of investigations by the Securities and Exchange Commission, the Resolution Trust Corp. and the House Banking Committee.

The three federal investigations, the failure of some big thrifts, Drexel's bankruptcy filing last week and other legal proceedings are revealing new connections among the organizations.

"The whole Milken-takeover-junk bond thing was intertwined with the collapse of the thrift industry," said John Stoia, a California attorney representing bondholders who are suing Lincoln Savings and Loan, the thrift that has become a symbol of the S&L debacle.

Lincoln is also a symbol of how the junk bond and savings and loan crises intertwine.

When Phoenix real estate developer Charles Keating decided to buy a savings and loan back in 1983, he had no trouble finding the money. Keating went to Drexel's junk bond chief, Michael Milken, who engineered the sale of junk bonds that financed Keating's $50 million purchase of Lincoln. (The securities are called junk bonds because they carry a relatively high risk of default, as well as a high investment return.)

Soon after buying Lincoln, Keating virtually stopped making loans to families to buy homes and began using depositors' money to buy junk bonds from Drexel. By the time Lincoln went broke six years later, Keating had leveraged the original $50 million from Drexel into $454 million worth of junk bonds -- $374 million of them bought from Drexel and Drexel clients.

Lincoln helped finance such controversial takeovers as Robert Campeau's ill-fated purchase of Allied Stores and Federated Department Stores and the buyout of Eastern Air Lines, all of which are now in bankruptcy court. Records of Lincoln's holdings obtained by The Washington Post also show that Lincoln bought $50 million worth of bonds from Washington Redskins owner Jack Kent Cooke for a successful cable television deal. {Details on Page H9.}

Drexel secretly acquired 10 percent of Lincoln's parent company, American Continental Corp., without disclosing the investment to the SEC as required by law, according to documents made public when ACC filed for bankruptcy. Nor did Drexel ever obtain permission from federal thrift regulators, who must approve purchases of large stakes in S&L companies. Asked about the investment, Drexel officials said they could offer no explanation.

Using junk bond money from Drexel to finance a savings and loan and then using the savings and loan to buy junk bonds from Drexel was a sequence that was repeated two dozen times, records of Drexel's underwriting activities show.

Drexel raised more than $1.2 billion in junk bond capital for S&L clients and thus was able to create buyers for more than $10 billion worth of bonds issued by other clients. In at least one case, an S&L financed by Drexel junk bonds bought junk bonds issued by another Drexel S&L client, which in turn used the money to invest in more Drexel junk bonds.

Of the 10 thrifts that are the biggest investors in junk bonds, eight also raised money by selling junk bonds through Drexel. Three of the eight were thrifts owned by prominent corporate raiders who were long-time Milken associates: Revlon chief Ronald O. Perelman owns First Gibraltar Bank of Houston with $457 million invested in junk bonds; the Belzberg family controls Far West S&L of Newport Beach, Calif., with $667 million; and the Bass brothers of Texas have American Savings Bank of Stockton, Calif., with $493 million.

The primary focus of the federal investigations, however, is a group of S&Ls and other companies that had extensive business dealings with Drexel and each other. They include Lincoln; CenTrust Bank, a Miami thrift that failed earlier this month; San Jacinto S&L, which is owned by Southmark Corp., a bankrupt Texas real estate firm that issued junk bonds through Drexel; and Silverado Banking, a failed Denver thrift best known for having President Bush's son Neil on its board of directors.

Silverado is affiliated with MDC Holdings, a Colorado real estate company that issued junk bonds through Drexel. MDC has already settled an SEC complaint charging it falsely inflated its earnings through land transactions with Lincoln.

The House Banking Committee has issued subpoenas seeking to force Milken to testify about his transactions with savings and loans. Committee members plan to ask about such apparent conflicts of interests as Drexel's dealings with Columbia Savings and Loan of Beverly Hills, which is partially owned by Drexel, Milken and associates.

Kenneth Thomas, a Miami banking professor and consultant who specializes in S&L junk bond transactions, likened the relationships of the organizations to a bicycle wheel, with Drexel as the hub, the S&Ls financed with junk bonds issued by Drexel as the overlapping spokes, and hundreds of other businesses as the rim. In Thomas's analogy, there are business deals between the hub and the spokes, deals between two spokes, deals between spokes and the rim, deals that go from one spoke through the hub to other spokes, and deals that weave through the spokes like the streamers that kids put on their bike wheels.

In the case of CenTrust, Thomas said, Drexel had three conflicting roles. As CenTrust's investment banker, Drexel raised $150 million of the thrift's capital by selling junk bonds. As CenTrust's bond broker, Drexel sold the thrift almost $1 billion worth of junk bonds. And as a customer, Drexel borrowed $15 million on an unsecured loan. With Drexel in bankruptcy and CenTrust under control of the RTC, taxpayers could be stuck for the $15 million and have to cover CenTrust's junk bond losses.

"I don't think it's good public policy to have one person {Milken} or firm {Drexel} tied into both sides of the balance sheet where they can exert a substantial amount of influence on one of the biggest thrifts in the country," said Thomas, who also teaches at the Wharton School of the University of Pennsylvania.

Only about 200 of the nation's 3,000 savings and loans invested their depositors' money in junk bonds. Most of them bought the high-yield, high-risk bonds simply because it seemed to be a way to make more money than could be made investing in home mortgages. They put relatively small amounts of their depositors' money into the junk bond market and had no other dealings with Drexel or the other junk bond thrifts.

A few thrifts, however, made junk bonds a major part of their business. Some 25 S&Ls invested more than $100 million apiece in junk bonds, said Alex Sheshunoff, president of Sheshunoff & Co., a Texas firm that tracks the thrift industry.

Drexel aggressively recruited thrifts to buy junk bonds, using Columbia Savings and Loan "as bait," said Reed Nagle, president of SNL Securities, a Charlottesville investment banking firm that specializes in S&Ls. "Milken saw the thrift industry as a potentially large reservoir of bond funding." Nagle said. "He used Columbia as his test case and ran the portfolio in a way that guaranteed profits."

But investing in junk bonds has proven so risky that even Columbia -- long regarded as the most successful junk bond buyer in the business -- is in such severe financial trouble that Nagle, Thomas and Sheshunoff all expect it to fail. Thrift regulators have put severe restrictions on its operations, a disciplinary action that is often the first step toward a government takeover.

Sheshunoff said investments in junk bonds are closely correlated with another high-risk S&L practice -- paying professional "money brokers" to bring in deposits from around the country rather than depending on the savings accounts of local customers.

Virtually all the thrifts that were big junk bond buyers used brokered deposits to pay for the junk bonds, Sheshunoff said. In some instances, he said, "you could generate all the business with one phone call" because the same broker would provide both the deposits and the junk bonds to invest them in. Regulators are investigating whether such practices could violate banking rules against linking loans and deposits.

Using brokered deposits to buy junk bonds "is an abuse of the whole concept of deposit insurance," Sheshunoff said. "The principal purpose of the thrift industry was to provide financing for homeownership," he said; investing in junk bonds "wasn't what deposit insurance was for."

However, investing S&L deposits in junk bonds once had influential supporters, including Federal Reserve Chairman Alan Greenspan, who as a private economist paid by Lincoln testified against proposed federal limits in thrift investments.

Embarrassed by that testimony, Greenspan supported provisions of last year's S&L bailout bill that force thrifts to sell all the junk bonds by 1994. In the meantime, the law requires S&Ls to report their junk bond holdings based on the price the bonds could be sold for today, not the price paid for them, which could push some S&Ls into insolvency.

So far only one S&L failure has been blamed on junk bonds, but big junk bond holdings and big trouble go together, Sheshunoff's statistics show. Of the 10 S&Ls with the largest junk bond holdings, three have gone broke and are being run by the government. Three others have already been bailed out by the government and sold to new owners. And at least three more are in serious financial trouble.

The first thrift failure blamed on junk bonds was CenTrust, which was seized Feb. 5. CenTrust once had $1.2 billion invested in junk bonds, and after selling some of it to try to stay afloat it still had $922 million worth as of Sept. 30.

CenTrust had other problems as well. Chairman David Paul spent the thrift's funds on lavish parties -- including a $122,000 bash for which he flew in chefs from France -- a corporate yacht and $29 million worth of "Old Master" paintings, one of which turned out to be a fake, according to a federal lawsuit accusing him of bank fraud. The SEC is investigating CenTrust, and the Office of Thrift Supervision has turned evidence of potential criminal violations over to the Justice Department.

When Drexel filed for bankruptcy last week, CenTrust turned up on the list of Drexel's 10 largest creditors with a $15 million unsecured loan to the brokerage firm. In bankruptcy, unsecured creditors are last in the line to get paid.

Also likely to have trouble getting their money are the investors who bought $150 million worth of CenTrust's subordinated debt -- a form of junk bond -- that were sold by Drexel in May 1988. Drexel also helped sell $12 million worth of CenTrust junk bonds in 1985. All those bonds are virtually worthless now that the government has seized the thrift.

CenTrust also is closely tied to Lincoln. Two transactions between the thrifts are under investigation, both involving Drexel and a peculiar kind of stock that was sometimes used to sweeten Drexel's junk bond deals. When private companies sold junk bonds, they sometimes also gave buyers "restricted stock" that was not publicly traded. The stock was valued at pennies a share, but it potentially could be worth much more if the company later decided to sell shares to the public.

In December 1986, Drexel sold Lincoln 2.1 million shares of this kind of stock in Playtex Corp. for 20 cents a share. Four months later Lincoln sold the shares to its parent company, American Continental Corp., for $1 a share, a total of $2.1 million. In December 1987, ACC sold the stock to CenTrust for $6.94 a share, or $10.4 million. The following June, ACC bought the stock back for $10.60 a share, or $15.9 million, giving CenTrust a profit of $5.5 million -- more than 50 percent in six months.

Since there was no public market for the stock, its value was set each time by Drexel, which had a legal obligation to set a fair price. Because Drexel secretly owned part of ACC, it was not a disinterested party in the transaction. The series of transactions raises several questions with securities and banking regulators:

Why did ACC pay Lincoln five times as much as Lincoln paid for the stock only four months earlier? Was ACC trying to create a quick profit to bolster its S&L subsidiary? Or did ACC take advantage of Lincoln by paying only $1 a share for stock it sold for $6.94 a few months later? Why did ACC sell the stock and then buy it back six months later at a huge loss?

Similar questions are asked by regulators about a series of trades in restricted stock of Memorex NV, the recording tape and computer company that was another client of Drexel. With Drexel's approval, ACC and Lincoln arranged a series of transactions in which the value of the Memorex stock went from $2.8 million to $1 million to $2 million to $13.3 million in less than two years.

When the transactions were sorted out, Lincoln made $1 million, a Phoenix businessman whose land dealings with Lincoln are the subject of a federal racketeering suit made $1 million and ACC made $11.3 million.

Government regulators say the net result was to enrich ACC at the expense of Lincoln.

Keating's lawyers have argued in court papers and hearings that there was nothing improper about either the Memorex or Playtex deals. Keating himself has launched a public relations offensive, maintaining he is a victim of a vendetta by federal regulators who don't appreciate his sophisticated business practices.