Wednesday, September 17, 2008

Keating 5 and Its Contemporary Relevance

We witnessed a banking scandal in the 80s and 90s commonly called the S&L Crisis. Obviously this shouldn't be confused with the SNL crisis in the mid/late 90s (that it stopped being funny). Anyways, the basic problem was that 700+ local savings banks went belly-up because deregulation and "imprudent" real estate lending combined to create substantial vulnerability.

One of the most facinating parts of the S&L Crisis was the Keating 5 Scandal.

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. They were accused of substantially and improperly interfering with the FHLBB in its investigation of Lincoln Savings.
Basically, Charles Keating ran a bank which failed due to his corrupt mismanagement. He was being investigated for that misconduct. He gave $1.3M (a huge deal back then) to various US Senators. He then called on them to help him resist regulators and avoid punishment for his role in the crisis.

I am sure you are shocked, yes shocked, to hear that John McCain was one of the Senators who accepted money and tried to defend a corrupt bank CEO who took advantage of dergulation to hurt people for his own gain. McCain leaked crticial details of the investigation, pleaded with regulators to let Keating off lightly, and was ultimately crticiszed by the Senate Ethics Committee for his behavior.

In the years since, McCain has chaired the Senate Commerce Committee. I think they don't have much to do with regulating the bank sysyem but they do impact related regulation. McCain was in the Senate when major deregulation occured and didn't do much to stop it. Here we are again and a Senator with a history of supporting deregulation and corruptly assisting the people gave him money and helped him with investments as they avoided prosecution for hurting working people, this candidate is talking tough about regulation. Every shred of historical evidence about McCain and banking scandals says the guy is creepy, guilty, and has poor judgement. Steer clear America. We can't afford another banking collapse nor ought we let those responsible off.


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