Jonnathan Alter - Explained The Real Significance of the Keating Five Scandal To Today's Crisis

We keep on bring up the Keating 5 scandal to smear John McCain, but Jonathan Alter did a great job of explaining the real signicance of it to the present day. McCain, of course, was one of the Keating Five senators who delayed regulators efforts to close Lincoln Savings & Loan, which deepened the S&L crisis of the 1980s. In response to this McCain re-invented himself as a champion for campaign finance reform.

Alter raised a great point on KO that McCain drew the wrong lesson from the crisis by focusing on campaign finance reform and regulation, rather than financial regulation. The S&L crisis was not directly caused by campaign contributions. Rather, financial institutions were not adequately regulated following deregulation designed to allow S&L's to compete with banks.

Fast forward to the present day, and McCain's knee jerk reaction is to once again draw the wrong conclusion by blaming the crisis on a corrupt Washington. Indeed, on 60 Minutes, McCain still argued that the repeal of the Glass-Steagalls Act, and deregulation helped grow the economy. The truth is that deregulation faciliated the current financial crisis.

Thus, either McCain is truly confused or misinformed about how the economy works by blaming campaign finance rules. Or, worse, McCain knows he full of it, and is just providing a scapegoat to protect his friends in the financial industry so that no new regulations are actually imposed on them, since the focus of a McCain administration will be on campaign contributions, which fits with McCain's "Government is the Problem" meme.

when I have more time.

Rec'd!

McCain's solution to this crisis will be similar to the Keating Five scandal, campaign finance reform. This will fit with his theme that government is the problem, not the solution.

By doing this, this detracts from the need for stringent financial regulations, because the problem is not due to lack of regulations (as McCain said on 60 minutes), but because we are not adequately tracking campaign contributions. Also, this helps detract from the central role of Phil Gramm, which lead to the current economic disaster.

Thus, I predict that the McCain campaign will return to its narrative that the big problem is a corrupt Washington, rather than the lack of adequate regulation and enforcement in the financial industry.

Neil bush as well.

Caricatures and hit the nail on the head regarding McCain's faulty reasoning. In a nutshell, McCain has experience, but he just did not learn the right lessons.

special SEC deregulation in 2004 for five financial firms, three of which have failed or merged in recent weeks. Those McCain advisers would have done in 2004 what McCain did in the 1980s: intercede with regulators on behalf of individual firms the same way McCain interceded with regulators on behalf of his friend Charles Keating's Lincoln Savings and Loan.

The Keating scandal was that McCain and 4 other members of Congress interceded to weaken further already weak "deregulated" restraints on Keating, leading directly to a bailout at great cost to taxpayers. This year's scandal may be that top aides to McCain interceded to weaken further already weak "deregulated" restraints on Goldman Sachs, Morgan Stanley, Lehman, Bear Stearns, and Merrill Lynch, leading to tens of billions and potentially hundreds of billions of dollars in taxpayer bailouts.

Bloomberg News is reporting today that the chief beneficiaries of Paulson's $700 billion bailout plan would be Goldman Sachs and Morgan Stanley. They are the last two firms left of five who in 2004 got special dispensation to lever up to 40-1 ratios of assets to capital. See the links in http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x7151098 .