John McCain and Charles Keating

The Keating 5 scandal

The current economic crisis demands that
we understand John McCain's attitudes
about economic oversight and corporate
influence in federal regulation. Nothing
llustrates the danger of his approach more
clearly than his central role in the savings
and loan scandal of the late '80s and
early '90s.

John McCain was accused of improperly
aiding his political patron, Charles Keating,
chairman of the Lincoln Savings and Loan
Association. The bipartisan Senate Ethics
Committee launched investigations and
formally reprimanded Senator McCain for
his role in the scandal -- the first such
Senator to receive a major party nomination
for president.

At the heart of the scandal was Keating's
Lincoln Savings and Loan Association,
which took advantage of deregulation
in the 1980s to make risky investments
with its depositors' money. McCain
intervened on behalf of Charles Keating
with federal regulators tasked with
preventing banking fraud, and championed
legislation to delay regulation of the savings
and loan industry -- actions that allowed
Keating to continue his fraud at an incredible
cost to taxpayers.

When the savings and loan industry collapsed,
Keating's failed company put taxpayers on
the hook for $3.4 billion and more than
20,000 Americans lost their savings. John
McCain was reprimanded by the bipartisan
Senate Ethics Committee, but the ultimate
cost of the crisis to American taxpayers
reached more than $120 billion.

The Keating scandal is eerily similar to
today's credit crisis, where a lack of
regulation and cozy relationships between
the financial industry and Congress has
allowed banks to make risky loans and
profit by bending the rules. And in both
cases, John McCain's judgment and
values have placed him on the wrong
side of history.

CREDIT: http://keatingeconomics.com/