McCain Carrying a Load of Ethical Baggage

Henry Srebrnik, [Charlottetown, PEI] Guardian

If Republican vice-presidential candidate Sarah Palin can spout silly nonsense about Barack Obama and Bill Ayers, it’s only fair that Obama in return should hammer away at another piece of history, the ‘Keating Five’ scandal of the late 1980s.

In recent campaign speeches, Palin has criticized Obama’s association with Ayers, a founder of the Weather Underground, a 1960s radical offshoot of the New Left student movement that engaged in a number of bombings at the time.

Palin said that Obama sees America as so imperfect “that he’s palling around with terrorists who would target their own country.”

But Obama, who was all of eight years old when these crimes were committed, barely knows Ayers, who is today a professor at the University of Illinois at Chicago. Both have been involved with school reform in Chicago and were members of the board of an anti-poverty group, the Woods Fund, between 1999 and 2002.

In fact, Chicago Mayor Richard Daley has declared that he, too, has worked with Ayers. “I don’t condone what he did 40 years ago but I remember that period well. It was a difficult time, but those days are long over.”

Rahm Emanuel, a Chicago Democratic Congressman, warned that “If we are going to go down this road,” he would remind voters that, two decades ago, “John McCain was associating with Charles Keating.”

During the 1980s, Senator McCain received $112,000, and free vacations for his family, from Charles Keating, the head of Lincoln Savings & Loan. Such savings and loan banks had been deregulated in the early 1980s, allowing them to make highly risky investments with their depositors’ money. Keating took advantage of this change.

McCain, a personal friend of Keating’s, voted repeatedly against congressional efforts to tighten regulation of savings and loans, and in 1987, when he learned that Keating’s bank was the target of a federal investigation, McCain met with regulators in an effort to get them to back off.

Keating ended up defrauding his customers and when his bank collapsed in 1989, some 23,000 people were victimized and many lost their life savings, largely because they now held securities issued by another Keating-owned company, American Continental Corporation, which had declared bankruptcy, rather than federally insured bank deposits.

Keating went to prison, and the Senate Ethics Committee reprimanded McCain for “poor judgment.” (Four other U.S. senators were also involved; they became known collectively as the “Keating Five.”)

William Black, who was a deputy director of the Federal Savings and Loan Insurance Corporation at the time, indicated that McCain’s chief error was in underestimating the importance of regulation and relying too heavily on slanted advice from bankers and lobbyists.

Black, now an associate professor of law and economics at the University of Missouri-Kansas City, added that McCain’s campaign still remains heavily influenced by lobbyists working in his campaign.

When it comes to the economy, the so-called maverick John McCain, who bragged until recently that he was fundamentally a deregulator, is part of the problem, not the solution.