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The Keating Five

By Marsha Gellerman

Charles H. Keating Jr., was the figure at the heart of the 1980's savings and loan scandal. The Keating Five, refers to five United States Senator's, Alan Cranston - Democrat, California, Dennis DeConcini - Democrat, Arizona, Donald Riegle - Democrat, Michigan, John Glen - Democrat, Ohio and most importantly, because of the 2008 Presidential election, John McCain - Republican, Arizona. These Senators took massive contributions from Keating, and lobbied for favorable treatment for the "savings and loan" industry.

It's worth noting that Cindy McCain was a business partner of Charles Keating. Mrs. McCain announced on the Today Show during 2008 that she would never release her tax records, even if she became the First Lady, therefore, we will never know how much she and John McCain profited from her involvement with Charles Keating. The Senators known as the Keating Five collectively received over a million dollars from Keating in both favors and political contributions.

The Senators and Alan Greenspan, who was an economic consultant at the time, for Keating's American Continental Corporation, (Keating did not own this company, but ran this division of American Financial Corporation,) met with regulators investigating several banks, including Lincoln Savings, a subsidiary of American Continental. Their favorable reports on these banks, proved to be wrong, as Lincoln Saving and numerous other banks that Alan Greenspan touted, failed.

When American Continental Corporation went bankrupt in 1989, at least 21,000 investors lost 285 million dollars. Deposits at Lincoln Savings was backed by it's parent Corporation and not the FDIC and therefore, the life savings of many elderly people were lost.

(With the bailout package that was just signed into law, if you make a deposit at a FDIC insured bank, the United States government insures your deposit, for 250 thousand dollars. Since its parent corporation and not the FDIC backed Lincoln Savings deposits, the deposits at Lincoln Savings were not insured.)

In 1996, after several lawsuits, counter-lawsuits, trials and retrials, Keating plea bargained Federal charges down to bankruptcy fraud and was sentenced to four years, time already served. As part of his plea bargain, all other Federal charges against Keating and his son Charles Keating III were dropped.

As far as the five Senators involved, in 1992, the Senate Ethics Committee held hearings to judge the involvement of all five in interfering with the regulatory investigation of the Federal Home Loan Bank Board - FHLBB - into the actual financial standing of Lincoln Savings.

It was determined that Cranston, DeConcini and Riegle had "substantially and improperly" interfered with the FHLBB investigation. They finished out their terms and were not re-elected.

Senators John Glen and John McCain were cleared of the charges, but were censured for exhibiting "improper judgment." Both were re-elected.

The Savings and Loan Scandal or Crisis, depending on how you looked at it, involved the failure of 747 banks and cost the American government, 124 billion dollars. The S&L failure directly led to budget shortfalls, higher taxes, the 1990-92 recession and cost George Bush Sr. his re-election to a second term as President. The battle cry then, as it is now, is - it's the economy stupid!

You'd think we'd learn by now.

Very timely! I came across mention of the "Keating Five" in the news headlines today, and was puzzled because the only Keating I knew of was the razor-tongued former primer minister of Australia. Thanks for this article!

Hi Nick - You're welcome. Association with Keating has plagued John McCain's political career. Even I didn't realize that Cindy McCain had financial ties to Keating until I research this. To add fuel to the fire, Keating's children picked up depressed properties for pennies on the dollar because of the S&L failure and made multi million dollar profits.

Wow, great writeup. I only wish you had mentioned that back then, as it is now, the problem occured because of no oversight, and no regulation. McCain even after all of this debacle in his past, still calls for deregulation. The market needs regulators, if there is a way to profit from shady business, these higher-ups will do it because all they see is money, and look past the importance of making smart decisions for the people, but for their own pockets.

Hi Lip - No, the problem wasn't lack of oversight. The S&L's were being investigated by the Federal government at the time. The problem was a bunch of greedy, influential Senators, who'd been bought off. They were responsible of exerting pressure on that particular agency to drop the investigation and mark these banks as solvent, with no problems with their deposits or financing.

There are a ton of bank regulations that seem to be "on holiday" at the moment. Enforcing existing regulations would be a great start.

The upcoming weeks are going to be very interesting; I am looking forward to learning more about investigations in the Republican Congress. There are all sorts of expectations via Republican Representative Kenneth Stanton (Ken) Calvert; I wonder how much he will share about faulty electronic voting machines; how many Congressmen were aware of this problem in 2000 and how many used the voting system glitch to get re-elected.

I can't prove this, but it's been insinuated that Diebold, the manufacturer of voting machines, sold votes to both the Dems and Republicans and that is the reason why Kerry didn't protest the 2004 election results and conceded so quickly. The GOP knew about this, but Kerry didn't until after the results were in.

Thank you for this interesting information. In the past week or so I have been reading everything I can find about the economic history. I'm not sure it's doing me any good financially (at present I am getting poorer by the day) but at least it gives me some focus. Oh! my other focus is trying to think what I can do to salvage some value from my assets. But haven't thought of anything yet...

Hi Pat and Trish - Expect the market to go between 8,500 and 8,800. In five to seven years, you might be able to recoup your money, depending on what your investments are. It sucks. If you can wait that long - hold on.

I thought both candidates ignored the question last night - what can the older person, ready to retire, do in this economic time? The only real answer is, "You're screwed."

If your assets are real estate; that's easy, try rent-to-own; you will be surprised as to how many people will apply; occupy and not buy ~ your assest generates cash vs deterioration from being empty.

Hey JazLive - Depends. If it's a large city like NY. Chances are your assets will not cover the cost of purchasing rental property - IF - the banks will loan you the money.

For smaller cities, the real estate is affordable, but one bad tenant can cause you to lose 3 months rent before you can evict them.

However, that's assuming you have money. Many seniors are broke. It's heartbreaking to watch elderly people shop in the cat food isle of the supermarket. Or seeing waitresses who will never see 65 again. We don't take care of the elderly in this country and discriminate against older people in hiring.

Location, location, locations ~ have to remembers that. My ex-spouse and I own property in Philadelphia. We do not own the land ~ just the structures; here in the Southeast families own plenty of acres ~ some have houses on them. My response is for those who "own property". The current market to obtain loans for purchasing property is very restricted ~ so "owners who are trying to sell can do "lease-to-own" contracts ~ many will apply; very few will actually buy ~ this keeps the property occupied as well as an in-flow of income to the "property owner".

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