Time to talk about the Keating Five?

TIME TO TALK ABOUT THE KEATING FIVE?…. It’s apparently considered impolite during the presidential campaign to talk about parts of John McCain’s political career that he doesn’t like, but given recent events, McCain’s role in the Keating Five scandal, by any reasonable measure, does have a renewed salience right now.

Major bank failures? Financial fraud and greed? Political ineptitude? We’re seeing these factors play out now in the financial industry, but we saw the same thing 20 years ago, in the biggest scandal of McCain’s career. Time’s Joe Klein has the audacity to bring up McCain’s record during the presidential campaign.

[T]he mortgage crisis was a perfect metaphor for Republican financial governance: Investment banks like Lehman — R.I.P. — took loans to invest money in … bad loans. In this case, the loans were bad mortgages. This is called throwing good money after bad.

Actually, John McCain has excellent experience — a ringside seat — in the vagaries of this experiment in greed and anarchy. He was a member of the Keating Five. This was the signature scandal of the Savings and Loan crisis, twenty years ago. It concerned the insider help that five Senators gave Charles Keating and his Lincoln Savings and Loan, in return for contributions and gifts. The deregulation of S&Ls — community banks dedicated to local mortgages (like George Bailey’s bank in “It’s A Wonderful Life”) — enabled slick operators like Keating to make reckless loans in new areas where they had no expertise. The final tab to the taxpayers was $165 billion.

McCain wasn’t the worst offender in the scandal. He was included in the Five to make it bipartisan (the other four were Democrats). But he knew Keating, partied with him, made inquiries on his behalf. He once told me that his role in the scandal was harder on him, in some ways, than being a prisoner of war “Because my honor was called into question.”

After an experience like that, you might think Senator Honorable would have devoted himself to preventing other such crises — to making sure the Big Wall Street Casino was operating according to rules that wouldn’t screw the small investors and, more to the point, the taxpayers. But he walked the anti-regulatory party line… McCain, after his political near-death experience, could have made the responsible regulation of markets one of his great causes. He didn’t. And today he said, once again, “The fundamentals of our economy are strong.” I hope he’s right, but it’s entirely possible that he knows as much about our economy as Sarah Palin knows about The Bush Doctrine.

Now that Klein has broached the subject, and explained its relevance to current events, maybe some other news outlets might want to consider taking another look at the biggest scandal of McCain’s career, which heretofore has been a verboten subject in the campaign.

If anyone needs a refresher, the Boston Globe ran a great piece on the controversy back in February.