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Tilting at Windmills

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September 15, 2008

TIME TO TALK ABOUT THE KEATING FIVE?.... It's apparently considered impolite during the presidential campaign to talk about parts of John McCain's political career that he doesn't like, but given recent events, McCain's role in the Keating Five scandal, by any reasonable measure, does have a renewed salience right now.

Major bank failures? Financial fraud and greed? Political ineptitude? We're seeing these factors play out now in the financial industry, but we saw the same thing 20 years ago, in the biggest scandal of McCain's career. Time's Joe Klein has the audacity to bring up McCain's record during the presidential campaign.

[T]he mortgage crisis was a perfect metaphor for Republican financial governance: Investment banks like Lehman -- R.I.P. -- took loans to invest money in ... bad loans. In this case, the loans were bad mortgages. This is called throwing good money after bad.

Actually, John McCain has excellent experience -- a ringside seat -- in the vagaries of this experiment in greed and anarchy. He was a member of the Keating Five. This was the signature scandal of the Savings and Loan crisis, twenty years ago. It concerned the insider help that five Senators gave Charles Keating and his Lincoln Savings and Loan, in return for contributions and gifts. The deregulation of S&Ls -- community banks dedicated to local mortgages (like George Bailey's bank in "It's A Wonderful Life") -- enabled slick operators like Keating to make reckless loans in new areas where they had no expertise. The final tab to the taxpayers was $165 billion.

McCain wasn't the worst offender in the scandal. He was included in the Five to make it bipartisan (the other four were Democrats). But he knew Keating, partied with him, made inquiries on his behalf. He once told me that his role in the scandal was harder on him, in some ways, than being a prisoner of war "Because my honor was called into question."

After an experience like that, you might think Senator Honorable would have devoted himself to preventing other such crises -- to making sure the Big Wall Street Casino was operating according to rules that wouldn't screw the small investors and, more to the point, the taxpayers. But he walked the anti-regulatory party line... McCain, after his political near-death experience, could have made the responsible regulation of markets one of his great causes. He didn't. And today he said, once again, "The fundamentals of our economy are strong." I hope he's right, but it's entirely possible that he knows as much about our economy as Sarah Palin knows about The Bush Doctrine.

Now that Klein has broached the subject, and explained its relevance to current events, maybe some other news outlets might want to consider taking another look at the biggest scandal of McCain's career, which heretofore has been a verboten subject in the campaign.

If anyone needs a refresher, the Boston Globe ran a great piece on the controversy back in February.

Steve Benen 4:41 PM Permalink | Trackbacks | Comments (33)

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Maybe Obama is waiting to see the results of the Rezko plea bargain. But, if you want to talk about scandals, go for it.

Posted by: Mike K on September 15, 2008 at 4:44 PM | PERMALINK

what an impressive response, mike k! really salient and detailed and demonstrating your impressive command of the facts.

i honestly don't know how clowns like you learned how to type.


joe klein has awaken from a stupor in recent weeks, though as far as i'm concerned, he still owes us years on probation.

for example, until a few weeks ago, joe klein actually believed that john mccain was Senator Honorable. the fact that mccain hadn't learned a thing from the keating five scandal doesn't seem to have penetrated joe klein's consciousness until now....

Posted by: howard on September 15, 2008 at 4:50 PM | PERMALINK

Finally! Glad someone is bringing up the K5.Everyone should at least know he is one of the 5.

Posted by: Don on September 15, 2008 at 4:56 PM | PERMALINK

Wow, is there NOTHING he won't use the POW defense for?!? (This question is rhetorical, as Sarah Palin might say.)

Look, the Repugs are going to throw Rezko at Obama--in fact they already have--whether he brings up the S&L scandal or not. So yeah, GO FOR IT. The parallel to today's scandal is actually relevant, in addition to being politically useful.

Posted by: gradysu on September 15, 2008 at 4:57 PM | PERMALINK

About time.... Can it be that the moribund, starry-eyed traditional press is finally, uh, doing its job?

Posted by: SF on September 15, 2008 at 5:00 PM | PERMALINK

"The final tab to the taxpayers was $165 billion"

But if it happened 21 years ago, using McCainologic, you have to double that figure every 7 years. So in real 2008 dollars the figure is closer to a trillion dollars (920 billion).

I know I'm stretching it here, but hey, Sarah can see Russia from Alaska.

Wow, John linked to a trillion dollar debacle!

Posted by: Tom Nicholson on September 15, 2008 at 5:01 PM | PERMALINK

No, gradysu, the answer to your rhetorical question is that there is NOTHING that Camp McCain won't answer with the POW defense.

The most recent previous example was that it's why he never learned to use a computer!

Why is this POW-related disability an asset for a presidential candidate?

Posted by: on September 15, 2008 at 5:03 PM | PERMALINK

McCain wasn't the worst offender in the scandal. He was included in the Five to make it bipartisan - Joe Klein

McCain received $112K in donations and private jet trips to the Bahamas, for which he
cosponsored a resolution sought by Keating that would allow further risky loans. I think Joe Klein needs to back up his assertion a bit.

Furthermore, McCain seems to be pushing for even more easing of regulations even after today's news of current bank failures.

Posted by: Danp on September 15, 2008 at 5:06 PM | PERMALINK

I've been wondering why the S&L scandal has been seemingly off limits during this campaign. Interesting that Klein has raised it seemingly for the first time. Next, we'll have to see if any Obama surrogates start bringing it up. I'll bet that's next as I'm sure we'll hear more mentions of it during interviews. Then, hopefully, Obama will start airing some ads on the issue.

I also think that raising this is "fighting fair." It is absolutely a pertinent issue to what is going on today. Let McCain explain how the issues are different. Or how it's ancient history. Or some other BS. The point is to keep talking about it.

Posted by: Homer on September 15, 2008 at 5:06 PM | PERMALINK

Maybe Obama is waiting to see the results of the Rezko plea bargain. But, if you want to talk about scandals, go for it.

If there was anything with Rezko of pure substance, Obama would have been put to the flame by now. The media moved on. I think this piece highlights the fact that we are bringing Senator McCain's judgement into question since he runs his campaign based on judgement and experience. And the Keating Five issue brings up Senator McCain in regards to public policy - price tag to the taxpayer 165 billion dollars / free pass for a flawed politician to continue his poltical career.

The Rezko issue is the only connection people can dig up on Obama during his entire career that is could be considered a politcal skeleton in his closet, and really, it's turned out that there is no real story there - price tag to the taxpayer - zero dollars / wasting your time on this story.

Posted by: Mick on September 15, 2008 at 5:09 PM | PERMALINK

Poor John McCain. His honor was called into question. Obviously any talk of McCain's "honor" at this point is just so much black comedy, but I'm starting to wonder if he ever really had any. I'm one of the many liberals who used to at least respect the man, so I'm really curious about this. Either he did have some actual integrity that he's completely shredded in this campaign, or he was a fraud from the start.

Either way, one does get the impression that he still somehow believes himself an honorable man, so this seems like a great way for Obama to attack him. I've always figured one of the best strategies for Obama is to piss McCain off, let him show his hot temper, and there probably isn't a better way to do that than to publicly and repeatedly question his honor.

Posted by: Stephen Stralka on September 15, 2008 at 5:12 PM | PERMALINK


(I love writing that.)

Well, this is actually a much bigger deal than you might think. Why? Because after 2000 John McCain's signature accomplishment -- which Joe Klein himself took note of AND eviscerated last week -- was to position himself not simply as a maverick, but as a CHANGED AND HUMBLE MAN.

"I've learned from my mistakes," John McCain has said time and again, endearing himself to millions.

Well guess what. HE WAS LYING HIS ASS OFF.

That's right: John McCain played everybody for suckers, and some of those suckers (like Joe Klein) are feeling a little prickly about it....

Mark my words, this is a bigger deal than it looks like. This is John McCain being EXPOSED as a liar. Not being ACCUSED of lying, but being DEFINED as a liar.


And, I may say, quite well deserved.

Posted by: The Phantom on September 15, 2008 at 5:13 PM | PERMALINK

John M:

The past is history. I know I made mistakes with Keating. He and I were such good buddies and I am forever grateful for the help he gave Cindy. How else do you think we own 6, uh 8 houses today?
Time for Change we can believe in folks.

Posted by: Tom Nicholson on September 15, 2008 at 5:14 PM | PERMALINK

The reason why the Keating 5 is not being up is because 4 out of the 5 were democrats, and McCain was found guilty only of poor judgement in the situation and not of anything criminal or unethical.
For all of you folks calling for bringing up the Keating 5. If this were such a gold mine, any idea why Rove didn't raise the issue in 2000?

Posted by: optical weenie on September 15, 2008 at 5:15 PM | PERMALINK

optical weenie, maybe you don't think there was anything unethical....

more to the point, in republican circles, being friendly to owners of capital is never a crime, unlike fathering a black child out of wedlock, so rove picked the charge that would work....

Posted by: howard on September 15, 2008 at 5:19 PM | PERMALINK

If this were such a gold mine, any idea why Rove didn't raise the issue in 2000? -optical weenie

Don't think for one second he wasn't prepared to. He just didn't need to. McCain crashed and burned (ooo a pun) before it was necessary.

Posted by: doubtful on September 15, 2008 at 5:19 PM | PERMALINK

Now, I don't know the details of the K5 very well, but what I have heard is that McCain was essentially exonerated. Like Klein says, he was a token Republican. Thus, bringing it up would be guilt by association much like the Rezko thing.

You may decide that it's worth doing, however distasteful, to give them a taste of their own medicine and all, but it should be pointed out that that is what this argument would be. Just sayin'.

And consider: the guilt by association thing works against Obama a whole lot better than it does against McCain. It's easier to make a narrative stick to him because he's unknown, b/c of latent prejudice - whatever you want to call it - he definitely suffers more from that sort of attack. So if you open up guilt by association with McCain, expect the bad guys to come back twice as hard with the Ayers/Rezko BS.

This is how McCain is able to be neck-deep in lobbyists without anyone seeming to care much at all. He's got the honor narrative going way back in the media on public subconscious. My personal opinion is that direct attacks against that honor will be more effective. YMMV.

Posted by: Roq on September 15, 2008 at 5:23 PM | PERMALINK

If this were such a gold mine, any idea why Rove didn't raise the issue in 2000? -optical weenie

Neil Bush?

There are several ways in which the Bush family plays into the Savings and Loan scandal, which involves not only many members of the Bush family but also many other politicians that are still in office and still part of the Bush Jr. administration today.  Jeb Bush, George Bush Sr., and his son Neil Bush have all been implicated in the Savings and Loan Scandal, which cost American tax payers over $1.4 TRILLION dollars (note that this is about one quarter of our national debt).

Posted by: Danp on September 15, 2008 at 5:25 PM | PERMALINK

SO, look back on the vote and find out if McCain did indeed vote to bailout the Lincoln and other savings and loans with taxpayer money.

If McCain did so, then you can accurately accuse him of taxing the poor to pay for the rich, reverse progressivity in taxes. Once you have that fact, then the charge is much more serious from a Republican standpoint, for that then disgraces his policies and all the policies his economic advisors support.

Posted by: Matt on September 15, 2008 at 5:36 PM | PERMALINK

Keating was a great contributor to McCain and the S & L market failure. It should be pointed out to the electorate that McCain's current adviors and benefactors are major contributors to the current market failure.

Posted by: Brojo on September 15, 2008 at 5:42 PM | PERMALINK

The secondary theme of this article is regulation vs. deregulation. Deregulation lets ALL the foxes into all the hen houses. Here is my list of


1988 S&L deregulation under guidance of George Bush 41

2002 Deregulation of electric industry in California. Enron shows how well that went.

2006 Housing Mortgage industry is deregulated; mortgage brokes can be trusted. How's that working out. Here is a SICK fact about 1 mortage bank: Their brokers had to ACCEPT 75 % of All applicants.

2008 Fanni, Freddie, Bear, Lehman, and that's just the begining of the list. How did that laisse-faire attitude work for the PROs? Not too good.

Somebody PLEASE put up some Deregulation Highlights

Posted by: barkleyg on September 15, 2008 at 5:42 PM | PERMALINK

Lets not forget how close McCain is to Phil Gramm who brought about the Gramm Leach Bliely act that deregualated the banks. And how he has lobbyists for Fannie and Freddie as advisers.

For the trolls, sure Clinton signed it, it was what the Republicans wanted 'free markets' and he gave them the rope they lobbied so hard for.

Posted by: Jet on September 15, 2008 at 5:46 PM | PERMALINK

Well, here is the Glass Steagall timeline


I would put up a hyperlink but WaMo abrogates them [or used too]

Posted by: Jet on September 15, 2008 at 5:48 PM | PERMALINK

Jan 1981: Sen. Garn becomes chair of Senate Banking, Housing, and Urban Affairs Committee with fellow deregulation advocate M. Danny Wall as majority staff director. American Banker exults that "lobbyists here view Mr. Wall's promotion as a gift swept to shore by the [gop] tide last election day."

1982: Sen. Garn coauthors Garn-St. Germain Depository Institutions Act, which deregulates savings and loan industry.

1984: S&Ls start crashing in Texas as oil boom peters out. More than 1,000 thrifts nationwide will fail between 1986 and 1995; debacle will cost $500 billion, including $124 billion in taxpayer money.

Highlights from motherjones URL I posted above =)

Posted by: Jet on September 15, 2008 at 5:53 PM | PERMALINK

For Che Che

Feb 6, 1989: President George H.W. Bush bails out S&L industry; among those helped is his son, Jeb, as government takes over most of a $5 million second mortgage on his Miami office building.
Posted by: Jet on September 15, 2008 at 6:08 PM | PERMALINK

Posters upthread who have noted that John McCain was something of a bit player in the Keating Five affair are correct. It is also true that Senate Democrats, wishing to keep the scandal from being directed solely at Democrats (who held the Senate majority at the time) disregarded a recommendation by the Senate Ethics Committee counsel to drop McCain from the committee's investigation. In doing this, they also disregarded the counsel's recommendation to do the same for Sen. John Glenn, whose role in the Keating business was similar to McCain's. The Senators ultimately cited as having abused their office in the Keating Five scandal were Alan Cranston of California, Don Riegle of Michigan and McCain Arizona colleague, Dennis DeConcini.

However, though McCain's role in the Keating business was exaggerated at the time by the Democrats for partisan reasons, it was inappropriate. McCain did not do anything but attend a meeting with regulators about Keating, but the meeting itself was improper; regulators already taking heat from other members of Congress for their efforts to check abuses by savings and loan operators could not but feel pressured simply by being summoned by a group of Senators to a private session. McCain shouldn't have gone anywhere near that meeting.

The above is basically McCain's own account. He has written extensively about his role in the Keating Five scandal, and explicitly taken responsibility for conduct that produced what he describes as the darkest period of his life. He reacted the public humiliation suffered in the Keating affair by turning hard against the abuse of public power for private purposes, specifically for the purposes of large campaign contributors like Keating.

That period of his life, it appears, has ended. Keating became, for the most part, a non-issue in McCain's political career because he had acknowledged his unethical and inappropriate conduct and repented of it. This year, however, McCain is running a campaign in which unethical and inappropriate -- not to say dishonorable -- conduct is a daily occurrance.

There is every reason to think that, at some point after the campaign is over, he will issue public apologies and express due contrition. This is what he did after the end of his first marriage, after the Keating Five affair, and after his waffling over the Confederate flag's display at the South Carolina state capitol. What McCain is doing now is worse and more consequential than anything he did in any of those earlier episodes, though, and after-the-fact contrition really doesn't cut it anymore.

In this context, it is certainly appropriate to bring up the Keating Five scandal. In light of the campaign John McCain is running now, he can't really claim past ethical transgressions on his part are just old news.

Posted by: Zathras on September 15, 2008 at 6:10 PM | PERMALINK

I was a POW and, besides, they didn't teach us finance at the Naval Academy!

So, that's why I had to get divorced and marry a rich financial whiz like Cindy!

Posted by: John McCain on September 15, 2008 at 7:51 PM | PERMALINK

"He once told me that his role in the scandal was harder on him, in some ways, than being a prisoner of war 'Because my honor was called into question.'"

John "Zinger" McC^nt is confused. What he means is his Reputation was called into question. His honor he lost by chasing after fellow officers' wives, flying back over a bombed target to see how many gooks he killed, and dumping his first loyal wife for a beer heiress.

Honor is what you know about yourself.

Reputation is what others think of you.

Posted by: Lance on September 15, 2008 at 7:56 PM | PERMALINK

The claim that John McCain was essentially exonerated in the Keating 5 scandal is another lie which I would love to hear coming straight out of John McCain's mouth. We should also always bring up that McCain failed to report his Keating bribes to either the Congress or the IRS. He ended up amending his disclosure reports and his tax returns. So you also have concealment of income.

The reason that McCain did not get in more trouble in the Keating 5 scandal is that most of his bad deeds occurred when he was a member of the House of Representatives. In the meantime, he had been elected to the Senate and when the whole thing broke, it was the Senate Ethics Committee that investigated him. They did not have a mandate to fully go after him for his behavior in the House of Representatives. This is called skating on a technicality.

Also, we need always remember that McCain's wife Cindy and her Dad had substantial investments with Keating so they were personally profiting off the S&L looting. This was in addition to the bribes.

The personal bribes and the wife's investments with Keating actually make McCain's behavior worse than the other members of the Keating 5.

Posted by: Mary on September 15, 2008 at 8:53 PM | PERMALINK


Jesus, the Keating Five?

This would be an extreme waste of voter's time.

We've got serious issues and we have two tickets with very different approaches.

Democrat pundits will NEVER win in a fight about character as individual identity. Not because they don't have moral ground to stand on, but because they've always lost the initiative on that strategy at this point in the campaign.

Forget it.

Point out the lies. Hit back when it makes sense. But above all, talk in stark simple terms about why McCain's solutions to America's problem SUCK.

Ask your wingnut friend who hasn't been able to replace his lost job "Did 8 years of cutting taxes for the wealthy and corporations increase your spending power and job security? Huh? Do you really want to give it another 4 years to work? Can you afford that bro?"

Ask your swing voting friend the following "Do you think taxing the ever dwindling health care benefit your company provides as income will help you with your health care expenses? Does that make sense to you? That's the cornerstone of McCain's plan."

Posted by: lobbygow on September 15, 2008 at 9:59 PM | PERMALINK

If McCain's POW experience 40 years ago counts in his favor, then his involvement in this scandal 20 years ago should count against him.

Posted by: croatoan on September 15, 2008 at 10:04 PM | PERMALINK

I see Zathras is still a bit player in the clown parade. Not interested in facts, just the recitation of the Palin/McCain spin (she has to go on top, she's the one with executive experience).

Boring, boring, boring. Without even the "I dropped bombs on more people than I can count" sociopathy to spice things up.

Better trolls please.

Posted by: the on September 15, 2008 at 11:18 PM | PERMALINK

Indeed McCain and Palin are soulmates. Palin enmeshed in Troopergate scandal, and the repugs squashing it. Govt. employees will not honor subpoenas issued.

McCain is one of the original Keating Five in the S&L scandal.

 McCain wanted the auditors to let Lincoln continue making real estate loans without carrying out credit checks, a clear violation of the law. This is also the practice that has led to the current U.S. economic crisis. When asked by his aides about the meeting, McCain whistled through his teeth rather than answer their questions.

How can McCain bring us out of corporate bailouts when he acts on behalf of the very men who cause them?

Both corrupt politicians!

 Oh yeah, soulmates all the way through.

Posted by: one4REALchange on September 16, 2008 at 11:55 PM | PERMALINK



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