Keating Five

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The Keating Five were five United States Senators accused of corruption in 1989, igniting a major political scandal as part of the larger Savings and Loan crisis of the late 1980s and early 1990s. The five senators, Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), John McCain (R-AZ), Donald W. Riegle (D-MI), were accused of improperly aiding Charles H. Keating, Jr., chairman of the failed Lincoln Savings and Loan Association, which was the target of an investigation by the Federal Home Loan Bank Board (FHLBB).

After a lengthy investigation, the Senate Ethics Committee determined in 1991 that Alan Cranston, Dennis DeConcini, and Donald Riegle had substantially and improperly interfered with the FHLBB in its investigation of Lincoln Savings. The Committee recommended censure for Cranston and criticized the other four for "questionable conduct."

All five of the senators involved served out their terms, but only Glenn and McCain ran for re-election (and were subsequently re-elected).

Contents 1 Circumstances 2 Corruption allegations 3 Conclusion 4 Aftermath 5 See also 6 Notes 7 References

[edit] Circumstances

Following the deregulation of the banking industry in the 1980s, savings and loan associations (also known as thrifts) were given the flexibility to invest their depositors' funds in commercial real estate. (Previously, they had been restricted to investing in residential real estate.) Many savings and loan associations began making risky investments. As a result, the FHLBB, the federal agency that regulates the industry, tried to clamp down on the trend. In so doing, however, the FHLBB clashed with the Reagan administration, whose policy was deregulation of many industries, including the thrift industry. The administration declined to submit budgets to Congress that would request more funding for the FHLBB's regulatory efforts.

In 1989, the Lincoln Savings and Loan Association of Irvine, Calif., collapsed. Lincoln's chairman, Charles Keating, was faulted for the thrift's failure. Keating, however, told the House Banking Committee that the FHLBB and its former chief Edwin J. Gray were pursuing a vendetta against him.

[edit] Corruption allegations

Gray testified that several U.S. senators had approached him and requested that he ease off on the Lincoln investigation. It came out that these senators had been beneficiaries of $300,000 (collective total) in campaign contributions from Keating. McCain received $112,000 by 1987 from Keating and Keating's relatives and employees to McCain's Senate campaign, more than any of the other Senators. ^[1] In September 1987 National Thrift News was the first media outlet to break the story.^[2] In October 1989 The Arizona Republic reported that in addition to campaign contributions, 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 Corporation (parent of Lincoln) jet. Three of the trips were made during vacations to Keating's opulent Bahamas retreat at Cat Cay. McCain also did not pay Keating for some of the trips until years after they were taken, after he learned that Keating was in trouble over Lincoln. ^[3] Lincoln Savings and Loan's collapse is said to have cost taxpayers $3.4 billion ^[4].

This allegation set off a series of investigations by the California government, the United States Department of Justice, and the Senate Ethics Committee. The ethics committee's investigation focused on five senators: Alan Cranston (D-CA); Dennis DeConcini (D-AZ); John Glenn (D-OH); John McCain (R-AZ); and Donald W. Riegle, Jr. (D-MI), who became known as the "Keating Five".

[edit] Conclusion

After months of testimony revealed that all five senators acted improperly to differing degrees, the senators maintained they were following the status quo of campaign funding practices. In August 1991, the committee concluded that Cranston's, DeConcini's, and Riegle's conduct constituted substantial interference with the FHLBB's enforcement efforts and that they had interfered at the behest of Charles Keating. The Ethics Committee concluded that Glenn's and McCain's involvement in the scheme was minimal.^[5] The committee recommended censure for Cranston and criticized the other four for "questionable conduct." However, the report did not address the startling reality that a private U.S. citizen accused of improprieties had called a meeting of five U.S. senators with an agenda dedicated to aiding his financial fortunes, and all five of them actually showed up and allowed him to direct proceedings.

[edit] Aftermath

As it happened, Cranston, who was nearly 80 years of age, had already decided not to run for re-election in 1992. DeConcini and Riegle continued to serve in the Senate until their terms expired, but they did not seek re-election in 1994. DeConcini was appointed by President Bill Clinton in February, 1995 to the Board of Directors of the Federal Home Loan Mortgage Corporation. ^[6]

Glenn did choose to run for re-election in 1992 and it was anticipated that he would have some difficulty winning a fourth term in the Senate. However, Glenn handily defeated Lieutenant Governor R. Michael DeWine for one more term in the Senate before retiring in 1999.

The scandal was followed by a number of attempts to adopt campaign finance reform—spearheaded by U.S. Sen. David Boren (D-OK)—but most attempts died in committee. A weakened reform was passed in 1993. Substantial campaign finance reform was not passed until the adoption of the McCain-Feingold Act in 2002.

After 1999, the only member of the Keating Five remaining in the U.S. Senate was John McCain, who is the Republican candidate in the 2008 U.S. presidential election. Before McCain was named the presumptive nominee, The New York Times ran an article on January 28, 2008 revisiting the scandal in addition to some other allegations of inappropriate behavior by McCain. Robert S. Bennett, whom McCain had hired to represent him in this matter, defended McCain's character and was one of many people who criticized the piece. Bennett, who was the special investigator during the Keating Five scandal that The Times revisited in the article, said that he fully investigated McCain back then and suggested to the Senate Ethics Committee to not pursue charges against McCain because of "no evidence against him."

[edit] See also

• Savings and Loan crisis

[edit] Notes

[edit] References

• Robert Williams, Political Scandals in the USA, Page 103, Edinburgh University Press, 1998, ISBN 1853311898
• Robert North Roberts, Marion T. Doss, From Watergate to Whitewater: The Public Integrity War, Page 141, Greenwood Publishing Group, 1997, ISBN 0275955974
• Jim Rutenberg, Marilyn W. Thompson, David D. Kirkpatrick and Stephen Labaton. "For McCain, Self-Confidence on Ethics Poses Its Own Risk", The New York Times, February 21, 2008. Accessed February 21, 2008.