The Keating Five

It’s more than likely that you’ve already heard what the attacks are all the character attacks are on Obama – Rev. Wright, Tony Rezko, and William Ayers. The Obama campaign’s comeback is to play teh Keating Five card – a giant round of ammunition that will hurt the McCain campaign in a big way. The card has been played yesterday, with Obama’s campaign being forced to bring up issues that have little to do with the election just to combat the gutter politics that the McCain campaign has brought to the party.

But who are the Keating Five? And what does it have to do with McCain. The savings and loan crisis, spread from the 1980s to the early 1990s, whereby savings and loan institutions (essentially mortgage companies) had been giving out a significant amount of loans at low fixed interest rates (due to a housing market boom, which at a peak in 1980 had $1.2 trillion in mortgage loans in the US market) as market values rose. But so too did national interest rates. To pay back the money that the savings and loan companies had borrowed in the first place (now at higher interest rates than the mortagages originally given) for earlier mortgages, companies would have to give money back from mortgage repayments beyond the interest, thus taking away potential (and eventually all) profits that company stood to make.

Then came the Tax Reform Act of 1986, whereby with new laws, it was better for group-owners (people pooling money to buy property) of properties that were not quite so profitable to sell them, because they could not be written off for tax. This eventually saw the end of the housing boom, while all these low-rate mortgages were out there not covering the then-current interest rates of repayment. The market value of properties began to fall, as the Reform Act began a rush to sell properties.

All the while, savings and loan companies had very little oversight after deregulation of the market (sound familiar?) and began to engage in some dodgey lending to make up shortfalls (also sound familiar?). Illegalities, like fraud and bad bookkeeping, took place, combined with other factors that were going on at the time, led to the eventual failure of 747 savings and loan companies, with a bailout required of the government (again, familiar?) to the tune of $160.1 billion, or $124.6 billion in today’s money. All under a Republican watch.

During the crisis, the company Lincoln Savings and Loan Association was investigate because its parent company had gone to the wall, and thus more than 20,000 customers of LSLA with a lifetime of savings (mostly elderly people) lost everything. The head of LSLA, Charles Keating, had made some $1.3 million worth of political donations to senators Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), John McCain (R-AZ), and Donald W. Riegle (D-MI). Through the investigation, Keating seemingly called on these senators, as payment for the $1.3 million, to “help” him with investigators.

In 1991, it was eventually decided by the Senate Ethics Committee that Alan Cranston, Dennis DeConcini, and Donald Riegle had interfered with the investigation, while John Glenn and John McCain we cleared, but told they had exercise ‘poor judgement’ in their conduct and accepting of the money. It looked bad for them all, and only Glenn and McCain would go on from this as politicians.

So no one has brought this up, really, since then. At least not nationally. Perhaps in McCain’s immediate reelection bid it figured. But not in the 2000 nor in the 2008 primaries did it come up. And it hadn’t come up until now. It didn’t need to either – but with McCain’s campaign going down the dirty road first, it’s only fair to fight fire with fire. Obama’s campaign has put up the website Keating Economics which hosts a video that explains the whole thing (with some spin of course).It’s quite a traditional Republican move in a way – but new age and for the Democrats. Where the Republicans would have a fear-evoking advert on the TV, this is a fear-evoking website (the black background, the green fonts, the pictures of McCain and Keating, etc.). I don’t like that Obama’s team has had to resort to this, but look what happened to John Kerry in 2004 when he tried to avoid the dirt politics.

But if anything, this type of attack is more relevant than the one that Palin launched on Obama yesterday, and more than what a Rev. Wright attack would be. This one is about an investigation McCain was subject to, associated with the economy and tied into ethical questions. McCain and Palin are lying about Obama’s ties to William Ayers. While neither are actually completely relevant to the race, if either one had to happen, it would be the attack on McCain for the Keating Five.



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