Sunday, October 05, 2008

John McCain and the Keating Five

From Wiki:The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. The five senators, Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), John McCain (R-AZ), and Donald W. Riegle (D-MI), were accused of improperly aiding Charles H. Keating, Jr., chairman of the failed Lincoln Savings and Loan Association, which was the target of an investigation by the Federal Home Loan Bank Board (FHLBB).

The core allegation of the Keating Five scandal is that Charles Keating, who eventually served five years in jail for his mishandling of a saving and loan association (eerily similar to our current economic crisis), made contributions to senators and then called on them to resist the passage of regulation. As a result there was a slowdown in the finance industry and the real estate market that many consider a contributing cause of the economic recession in the 1990's. From 1982 to 1987 John McCain received $112,000.00 in contributions from Keating. In addition, McCain's wife and father in law, had invested over $350,000.00 in a Keating owned shopping center. McCain, his family and their babysitter had made nine trips at Keating's expense, sometimes aboard his private jet. Three of the trips were to Keating's luxurious retreat in the Bahamas. McCain did not pay anything for the trips until years after they were taken and the insinuation of impropriety first arose. Keating established similar relationships with four other senators.

The facts:
Regulators were concerned in the mid 1980's that risky investment practices were potentially exposing government insurance funds to huge losses. Charles Keating's savings and loan association, Lincoln, had become burdened with bad debt as a result of its past aggressiveness. As a result its investment practices were being investigated. For a time it seemed as though the government might seize Lincoln for being insolvent. Keating wanted five senators to intervene on his behalf.

On April 2nd, 1987, a meeting with the chairman of the FHLBB (Independent Federal Regulatory Body) and four of the Keating Five senators took place, including John McCain. The senators requested that no staff be present. One of the senators started the meeting with mention of "our friend at Lincoln" referring to Charles Keating. The chairman said he was unfamiliar with the details of that case, but offered to set up a meeting with the regulators in San Francisco that had oversight jurisdiction over Lincoln.

On April 9th, 1987, the Keating Five, including McCain met with three members of the San Francisco regulators. The regulators felt that the meeting was very unusual and that they were being pressured by a "united front." At this point the regulators explained Lincoln was under criminal investigation for many serious charges.

Lincoln was seized by the government in 1989. More than 21,000 elderly investors lost their life savings. A criminal investigation of Charles Keating followed that was expanded to include the five Senators, including John McCain.

John McCain was cleared of any criminal impropriety, but the Senate Ethics committee criticized him for poor judgment for when he met with regulators on behalf of Charles Keating. In 2002, John McCain said these two meetings were "the worst mistake of my life." The Senate Ethics committee did not pursue, for lack of jurisdiction, McCain's delayed re-imbursments to Keating for trips at the latter's expense. One of the San Francisco bank regulators felt that McCain had gotten off too lightly, saying that Keating's business involvement with Cindy McCain was an obvious conflict of interest.

There is more:
John McCain's first letter on behalf of Keating
John McCain's second letter on behalf of Keating
John McCain's third letter on behalf of Keating
John McCain's fourth letter on behalf of Keating
John McCain's fifth letter on behalf of Keating

In conclusion, can the American people really believe that John McCain, who admitted his judgment was compromised during the Keating Five scandal, is the man to clean up the current financial mess on Wall Street? Can we trust John McCain to implement the regulation we need?

The same John McCain who opposed Bush's tax cuts for the wealthiest Americans in 2000, because he felt they threatened the government surplus, and in 2008 supports them in spite of defecits and national debt that is spiraling out of control. The same John McCain who promised an honorable and positive campaign and then launched into attack advertisements about Britney Spears, Paris Hilton, and Moses, not to mention saying Obama called Sarah Palin a pig and wanted to teach sex education to Kindergarten children. The same John McCain who chose a clearly uninformed and unqualified Vice Presidential candidate at the age of 72 for purely political purposes. The same John McCain who, now down in the polls, is preparing to "change the conversation" away from the issues that matter to launch a nasty smear campaign against his opponent.

Can you trust John McCain?

Obama's pre-emptive strike against the smears:

The full documentary will be available at 12:00 EST tomorrow here at www.KeatingEconomics.com