John McCain should never be president. One of the senior regulators who dealt with the Keating Five talks about what it was like to deal with McCain during the savings and loan crisis and concludes that Senator McCain was the worst of the five members of Congress whose reputations were sullied by their involvement with Charles Keating in the 1980's Lincoln savings and loan crisis. He got off with a rebuke.
William Black, senior regulator during the unraveling of the savings and loan mess, and now a professor at the University of Missouri, was interviewed today on NPR's "Here and Now."
Bill Black, according to NPR, was in the room when John McCain and his four colleagues tried to pressure regulators to back off. Charles Keating had just told McCain & Co. to "get Black. Kill him dead!" Black thinks McCain's role in trying to prevent regulators from getting the whole story is very relevant to his role as presidential candidate. Of course, as the NPR interviewer reminded Black, one of the Keating Five Democrats, Dennis DiConcini, has said that McCain got a free ride and was the most culpable. Black agrees and describes meetings with the group.
"He was the most culpable in a number of ways. He was the only one ... who had a personal financial stake in the dispute. His wife and his father-in-law stood to lose a significant amount of money if we had enforced the direct-investment rule.* The entire purpose of the meeting was to pressure us not to take any course of action against Lincoln's massive violation of rule to the tune of over $600 million."
The pressure continued in a second meeting.
"The senators pushed us not to take to take action against Lincoln Savings for their massive violation of the direct-investment rule... Let me emphasize that there was a lot of experience by the time of these meetings in April 1987 with what happened when you had a substantial amount of direct investment. Every single saving and loan that had done so had failed. This stuff was financial cyanide. For example, we told them that we had looked at 52 of the largest loans by Lincoln Savings and there wasn't even the very first thing you'd do when making a loan: do a credit check! Zero for 52. We thought that would be devastating to the senators. Instead, they attacked us! It was the most amazing thing you could imagine! They had really drunk the Kool-Aid.
"I'll tell you the biggest thing Senator McCain -- then Representative McCain -- tried to do. The administration attempted to give Charles Keating control over the federal agency regulating savings and loans. There were three presidential appointees and there were to be two members chosen by Charles Keating. Senator McCain was not only aware of that effort but supportive of it. Had that occurred, the savings and loan crisis, instead of being $125 billion to $150 billion would have been over a trillion dollars. It would have probably still been our worst political scandal in history. It was incredibly close ..."
The current crisis in the financial system is "slightly different but with the same dynamic."
"It's ironic that there is this call for a [form of] Resolution Trust Corporation particularly from Senator McCain because this is what the last Resolution Trust Corporation said about Senator McCain in paragraph 119 of its racketeering complaint against Charles Keating: 'The improper use of political influence protracted the examination process and afforded Keating additional time in which to exacerbate the fraud.' The political influence they're referring to, of course, is the Keating Five."
There really is good reason to question -- aside from anything else -- John McCain's personal judgment.
"...This was someone -- Charles Keating -- who was really easy to figure out. And, unlike the other senators, Senator McCain was a close personal friend for years. Charles Keating was a guy who was arrogant, nasty, openly bigoted, bragged about using his political power to create these kinds of interventions. And that's who Senator McCain had the judgment to be a close personal friend of -- and to help him in an effort that cost an extra $2 billion.
"And now, [the Republicans] have gutted again the accounting rules. They've gutted the rules on underwriting. They've deregulated. They've put the worst possible supervisors in who didn't believe in regulation and wanted to destroy it. The head of the office of Thrift Supervision ... went to a press conference with a chainsaw to emblemize how much he hated regulation and was going to destroy it. Well, he succeeded and with it he destroyed hundreds of billions of dollars of taxpayer money. When you allow substantial accounting fraud, you will create financial bubbles because that's what a Ponzi scheme does."
Professor Black puts Joe Lieberman in the same basket with John McCain.
"... One of the leaders in fighting against effective supervision of securities fraud, for example, was Senator Lieberman. ..."
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*The direct investment rule "limits the amount of brokered deposits to 5% of deposits at FSLIC insured institutions failing to meet their net worth requirements. Bank Board also limits direct investment (equity securities, real estate, service corporations, and operating subsidiaries) to the greater of 10% of assets or twice the S&L's net worth, provided the institution meets regulatory net worth." (FDIC)