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The Real McCain, part 2 (The Keating Five)

(Being the second of an irregular series about the John McCain the press will not let you see. I am not trying to break new ground here. I’m just trying to spread the word about the John McCain that is hiding in plain sight, the man that you will not hear about while we debate whether Barack Obama is a terrorist at heart, or whether he does or does not pledge allegiance to the flag).

John McCain is widely known as an advocate of campaign finance reform. The press, ever his slavish admirer, has made sure we see him that way. We have lately seen, however, that his fealty to his own reforms is weak (about which more in later posts). This is not really surprising, however, if we look into the origins of his attachment to the issue. It was not a belief in campaign finance reform that led him to take up the issue, it was a desire to efface his role in the Keating Five scandal. In fact, it was his role in that scandal that led him to adopt his straight talk persona as a PR strategy. In his own words:

I was in a hell of a mess. And I decided right then that not talking to reporters or sharply denying even the appearance of a problem wasn’t going to do me any good. I would henceforth accept every single request for an interview from any source, prominent or obscure, and answer every question as completely and straightforwardly as I could. I was confident that the facts were on my side, and if the facts were disseminated broadly in the media would they spare me from a terrible fate. And they wouldn’t be disseminated broadly unless I talked to the press constantly, ad infinitum, until their appetite for information from me was completely satisfied. It is a public relations strategy that I have followed to this day, and while it has gotten me in trouble from time to time, it has on the whole served both my interest and that of the public well.

We can accept his characterization of his actions as PR strategy, without crediting his claim that he always answers as “completely and straightforwardly” as possible.

So, who were the Keating Five, and what was the nature of the scandal?

In early 1987, at the beginning of his first Senate term, McCain attended two meetings with federal banking regulators to discuss an investigation into Lincoln Savings and Loan, an Irvine, Calif., thrift owned by Arizona developer Charles Keating. Federal auditors were investigating Keating’s banking practices, and Keating, fearful that the government would seize his S&L, sought intervention from a number of U.S. senators.

At Keating’s behest, four senators–McCain and Democrats Dennis DeConcini of Arizona, Alan Cranston of California, and John Glenn of Ohio–met with Ed Gray, chairman of the Federal Home Loan Bank Board, on April 2. Those four senators and Sen. Don Riegle, D-Mich., attended a second meeting at Keating’s behest on April 9 with bank regulators in San Francisco.

Regulators did not seize Lincoln Savings and Loan until two years later. The Lincoln bailout cost taxpayers $2.6 billion, making it the biggest of the S&L scandals. In addition, 17,000 Lincoln investors lost $190 million.

In November 1990, the Senate Ethics Committee launched an investigation into the meetings between the senators and the regulators. McCain, Cranston, DeConcini, Glenn, and Riegle became known as the Keating Five.

Bill Muller of the Arizona Republic provides some background:

Charlie Keating always took care of his friends, especially those in politics. John McCain was no exception.

In 1982, during McCain’s first run for the House, Keating held a fund-raiser for him, collecting more than $11,000 from 40 employees of American Continental Corp. McCain would spend more than $550,000 to win the primary and the general election. In 1983, during McCain’s second House race, Keating hosted a $1,000-a-plate dinner for McCain, though he had no serious competition and coasted into his second term.

When McCain pushed for the Senate in 1986, Keating was there with more than $50,000. By 1987, McCain had received about $112,000 in political contributions from Keating and his associates.

In a nutshell, Charlie Keating was John McCain’s Ken Lay. Keating was far more closely connected to McCain than to any of the other five.

The meeting bought time for Keating, time during which an expected criminal prosecution was sidetracked when a crime friendly regulator was named to head the Federal Home Loan Bank Board. When the inevitable hit the fan, however, word leaked out about the meetings. McCain initially tried to stick to his story that he was merely trying to make sure that a constituent was being treated fairly (a line very much reminiscent of the one he is currently taking about his more recent dealings with regulators regarding Paxon).

In spinning his side of the Keating story, McCain adopted the blanket defense that Keating was a constituent and that he had every right to ask his senators for help. In attending the meetings, McCain said, he simply wanted to make sure that Keating was treated like any other constituent.

Keating was far more than a constituent to McCain, however.

On Oct. 8, 1989, The Republic revealed that McCain’s wife and her father had invested $359,100 in a Keating shopping center in April 1986, a year before McCain met with the regulators.

The paper also reported that the McCains, sometimes accompanied by their daughter and baby-sitter, had made at least nine trips at Keating’s expense, sometimes aboard the American Continental jet. Three of trips were made during vacations to Keating’s opulent Bahamas retreat at Cat Cay.

McCain also did not pay Keating for the trips until years after they were taken, when he learned that Keating was in trouble over Lincoln. Total cost: $13,433.

When the story broke, McCain did nothing to help himself. When reporters first called him, he was furious. Caught out in the open, the former fighter pilot let go with a barrage of cover fire. Sen. Hothead came out in all his glory.

”You’re a liar,”’ McCain snapped Sept. 29 when a Republic reporter asked him about business ties between his wife and Keating. ”That’s the spouse’s involvement, you idiot,” McCain said later in the same conversation. ”You do understand English, don’t you?”

He also belittled the reporters when they asked about his wife’s ties to Keating. ”It’s up to you to find that out, kids.”

And then he played the POW card.

”Even the Vietnamese didn’t question my ethics,” McCain said.

Eventually, each of the Senators involved was reprimanded to varying degrees. The facts, of course, are murky, and except for the hapless regulators who attended, there is no record of what happened. The regulator at the crucial second meeting felt that McCain’s calculated professions of innocent intent didn’t ring true:

[McCain said] ”I don’t want any part of our conversation to be improper.”

Black said the comment had the opposite effect for the regulators. It made them nervous about what might really be going on.

”McCain was the weirdest,” Black said. ”They were all different in their own way. McCain was always Hamlet . . . wringing his hands about what to do.”

In one contemporaneous account, an Arizona reporter (this is in the days before McCain was a media darling), affixed prime culpability on McCain. Tom Fitzpatrick of the Arizona Phoenix News Times, pointed out that McCain had taken more money from Keating than any of the other Five, that his political fortunes had been tied to that of Keating almost from his first days in politics, (his personal fortunes as well), and that McCain had simply been incredibly effective in turning attention to his fellow senators:

You, the closest of them to Keating and the deepest in his debt, have chosen the path of the hard sell. You may even make it out of the pot, but to many, your protestations of innocence taste like gall.

You are determined to bluff your way. You will stick to your story that you were acting to help a constituent and intended to do nothing improper. The very fact you attended the meeting makes you guilty, just as every man who entered the Brinks vault went to prison.

You insist that an accounting firm Keating hired told you Lincoln was sound. Alan Greenspan, who Keating also hired, wrote a report saying it was sound. Why shouldn’t you believe the people Keating hired? You were, after all, fellow employees.

Perhaps you might silence your own conscience about all this someday.

Just keep telling everyone that it was your wife’s money invested in that shopping center with Keating and that you knew nothing about it. Keep saying that cynical newspaper people don’t understand that every move you make has always been for the enrichment of Arizona . . . the education of our Native Americans on the reservations . . . for the love of the elderly in Sun City and Green Valley.

Keep telling them that it wasn’t that you were bought off but that Charlie Keating got special help only because he was one of the biggest employers in the state.

Just keep sitting there and staring into the camera and denying that Keating bought you for
money and jet plane trips and vacations.

So what if he gave you $112,000? Just keep smiling at the cameras and saying you did nothing wrong.

Maybe the voters will understand you took those tiring trips to Charlie’s place in the Bahamas in their behalf. Certainly, they can understand you wanted to take your family along. A senator deserves to travel on private jets, removed from the awful crush of public transportation.

You sought out a master criminal like Keating and became his friend. Now you’ve discarded him. It shouldn’t be surprising that you are now in the process of selling out your senatorial accomplices.

You’re John McCain, clearly the guiltiest, most culpable and reprehensible of the Keating Five. But you know the power of television and you realize this is the only way you can possibly save your political career.

Whether or not he was the most culpable, he was the most adroit in turning the situation to his advantage. He realized that he could rehabilitate himself by loudly proclaiming himself the reformed sinner. This being America, blessed with an American press that is all too easy to mesmerize, it wasn’t necessary to actually be rehabilitated, it was sufficient that he tell everyone that he was. Business as usual could go on, as is illustrated by the Paxon story and his current, incredibly cynical attempts to manipulate the campaign finance system he helped to create. Indeed, McCain is a case study in modern politics. Perception is everything. It is not necessary to actually be honest, or independent minded, or moderate in order to be perceived as such, so long as you are able to get a compliant American press to tell the American press that you have those qualities.

Next installment (probably): The maverick

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