Keating Five

History, it is said, is written by the victors.  Or alternatively by John McCain, who has proclaimed that his role in the 1989 Keating Five corruption and racketeering scandal -- which led to the Lincoln Savings and Loan (S&L) bailout, part of the larger United States S&L crisis of the late 1980's and 1990's -- is his "asterisk."  Excuse me?  His asterisk?  This writer begs to differ. 

But apparently the American corporate media agrees, judging by its all but collective failure to report on McCain's primary role in the one incident in American history where the exact same catalyst, government deregulation, led to a comparable financial shipwreck, albeit not on the same gargantuan scale as the present, historic economic collapse.

This is not to say that the S&L crisis was not big.  To the contrary, the immensity of the Lincoln Savings and Loan collapse, indeed of the entire S&L sector--and John McCain's role in it--is impossible to overstate.  At this point, a bit of historical context is in order. 

It all began when Charles Keating's American Continental Corporation purchased Lincoln in 1984.  In the span of five years, with Keating as chairman -- and with the S&L industry newly deregulated -- Lincoln's assets ballooned from 1.1 billion to 5.5 billion.  Much of this booty was the result of using customers' federally insured deposits to engage in high risk, highly speculative real estate and junk bond dealings. 

By 1986, Lincoln had $135 million in undisclosed losses, and they had surpassed the newly imposed cautionary 10 percent "direct investment" limit of institutional assets by $600 million dollars.  It doesn't take a financial wizard to recognize that this did not bode well for Lincoln's individual depositors -- or for the government's insurance fund, the Federal Depositor Insurance Corporation (FDIC). In 1989, the Federal Home Loan Bank Board (FHLBB), growing increasingly alarmed by Lincoln's use of FDIC-insured funds for commercial real estate deals, initiated a probe into Lincoln's free-wheeling investment practices. 

Once Keating got wind of the investigation, he decided to capitalize on his political investments, his estimated $1.3 million in campaign contributions to various U. S. Senators.  And John McCain, the deregulator's deregulator, was the recipient of the most cash, $112,000 -- which may not seem like much by today's standards, but it was a bundle back in the 1980's. 

And that doesn't include the other fringe benefits afforded to McCain, like private jet rides to Keating's opulent Bahamas estate, myriad fund raisers for McCain's House and Senate campaigns, or Cindy McCain's (and her father's) involvement with Keating in a "sweetheart" shopping mall deal in Arizona.  As the Feds closed in, Keating decided to call in his markers.

Keating orchestrated at least two April 1987 meetings between several San Francisco FHLBB board members, including its chairman Edwin Gray, and five U. S. Senators -- The Keating Five -- including the good John McCain. In spite of this blatant obstruction of justice, the San Francisco regulators found Lincoln guilty of unsound lending practices and recommended its seizure. The Keating Five exerted pressure and the takeover was delayed for 2 years. Gray was replaced. Meanwhile, Lincoln's customers were steered into extremely risky, uninsured investments, junk bonds held by Keating's American Continental Corporation, which ultimately went belly-up in April 1989. Lincoln was finally seized by the FHLBB that same month.

Meanwhile, more than 21,000 mostly elderly depositors lost their life's savings in the sordid affair, to the tune of $285 million, prompting an approximate $2 billion federal government bail-out. Keating was found guilty of fraud and racketeering and served 50 months of a 12-year prison sentence. McCain was cleared of any wrongdoing and chided for "poor judgment" by the Senate Ethics Committee. 

In the two decades since this disgraceful affair, McCain has maintained that he did not knowingly do anything wrong. All the money and graft did not influence his actions. 

Not so, according to Keating who is quoted in the 2003 book, Philosophical Dimensions of Public Policy.  When asked if his political donations amounted to quid pro quo, Keating reportedly said "I want to say in the most forceful way I can: I certainly hope so."

No such candor from John McCain. To let the senator from Arizona tell it, he was only helping Keating because he was one of the largest employers in his state. Besides that, Keating's accountants vouched for Lincoln's financial viability. Even Alan Greenspan authored a favorable report commissioned by Keating, McCain routinely deflects. How could anyone blame him for not knowing that Keating was looting Lincoln? (This is kind of like the Bush Administration's circular defense of the massive "intelligence failure" with regard to Saddam Hussein's nonexistent weapons of mass destruction.) 

At any rate, that is McCain's story, and he has been sticking to it for almost two decades now. Not that he has had to talk much about it in recent years. He has been too busy straight-talking about ethics and campaign finance reforms, not unlike the burglar who repents and becomes an anti-theft crusader. And lo and behold, so far it has worked. In perhaps the ultimate self-fulfilling prophecy, it would seem that McCain has succeeded in making The Keating Five mess his self-proclaimed asterisk. And who can blame him for trying to sanitize this most shameful chapter of his political career? But the so-called Fourth Estate's silence is another story altogether.

It is nothing less that mind-boggling that most of the media establishment, America's supposed "watchdog" is ignoring this crucial chapter of the McCain story. Really, when you think about it, it is obscene; and an objective history will judge them harshly. Particularly when one considers that this is the same media that acted as drum majors in the run-up to the Iraq War, and were enthusiastically embedded with the military in the delusional days of "shock and awe." Or were they in bed with the Bush Administration? 

This is the very same media that obsessed over Bill Clinton's sexual peccadilloes and savaged AL Gore for inconsequential things like visiting a Buddhist temple or kissing his wife too passionately after his acceptance speech at the Democratic National Committee...and who barely made a sound when the Supreme Court basically overturned an American Presidential election. And it is the same media that was basically complicit in the swiftboating of the decorated Vietnam veteran, John Kerry. 

The same press corps that has rendered the Democrats spineless and, for the last eight years, afraid to act as a true opposition party (and too fainthearted to raise the Keating Five in this election cycle) lest they too be savaged by the Republicans who, with a wink and a nod, constantly rail against the "liberal media" who have now apparently taken a vow of silence about John McCain's "asterisk."

In a clear-eyed, reasonable, straight-talking society, the Keating Five would be the lead of any John McCain biography, second only to the Hanoi Hilton. Some might even argue that the monumental racketeering scandal should take a back seat to nothing in the story of this man who would be president -- particularly at a time when this nation's economic infrastructure is literally crumbling. Count this writer in that number.  

• Keating Five - Abbie
  • Please note the words "Glenn and McCain's involvement... - sam
    • He was involved though - Abbie
      • They should also understand.... - sam
        • My post was about John McCain - Abbie
          • yes he was principal - Shera
            • Wrong. See post below. He tried to stop this... - sam
              • faux talk. - Shera
          • Actually, you are wrong about his role in this crisis.... - sam
            • faux talk - Shera

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Over the weekend, John McCain's top adviser announced their plan to stop engaging in a debate over the economy and "turn the page" to more direct, personal attacks on Barack Obama.

In the middle of the worst economic crisis since the Great Depression, they want to change the subject from the central question of this election. Perhaps because the policies McCain supported these past eight years and wants to continue are pretty hard to defend.

But it's not just McCain's role in the current crisis that they're avoiding. The backward economic philosophy and culture of corruption that helped create the current crisis are looking more and more like the other major financial crisis of our time.

During the savings and loan crisis of the late ྌs and early ྖs, McCain's political favors and aggressive support for deregulation put him at the center of the fall of Lincoln Savings and Loan, one of the largest in the country. More than 23,000 investors lost their savings. Overall, the savings and loan crisis required the federal government to bail out the savings of hundreds of thousands of families and ultimately cost American taxpayers $124 billion.

Sound familiar?

In that crisis, John McCain and his political patron, Charles Keating, played central roles that ultimately landed Keating in jail for fraud and McCain in front of the Senate Ethics Committee. The McCain campaign has tried to avoid talking about the scandal, but with so many parallels to the current crisis, McCain's Keating history is relevant and voters deserve to know the facts -- and see for themselves the pattern of poor judgment by John McCain.

The point of the film and the web site is that John McCain still hasn't learned his lesson.

And this time, McCain's bankrupt economic philosophy has put our economy at the brink of collapse and put millions of Americans at risk of losing their homes.

Watch the video to see why John McCain's failed philosophy and poor judgment is a recipe for deepening the crisis:

http://my.barackobama.com/keatingvideo

It's no wonder John McCain would rather spend the last month of this election smearing Barack's character instead of talking about the top priority issue for voters.

It's long (13 minutes) but information every voter should know.