Tuesday, October 7, 2008

William Ayers and Obama - McCain and the Keating Five

Senator McCain and Governor Palin have gone on record in their speeches to the public that Senator Obama’s character is in question because of his association with Mr. Ayers whose was a member of the Weatherman, a group of individuals that committed crimes against the government from 1970 through 1974. Mr. Ayers was accused of these crimes during the time that Senator Obama was a child in grade school. Mr. Ayers was never convicted of any crimes and now serves on the faculty of the University of Illinois at Chicago.

Mr. Ayers and Senator Obama live within a few blocks of each other and served on the board of a charity organization - Woods Fund of Chicago between 1999 and 2002. Mr. Ayers, in addition to donating two hundred dollars to Senator Obama’s campaign during Barack Obama’s days as a State Senator, did hold a fund-raiser of sorts at his house for Senator Obama.

If there is a connection to corruption, or some other dastardly deed in the association between Senator Obama and Mr. Ayers, I don’t see it. It seems to me that a valiant attempt to smear Senator Obama is being attempted under that flimsiest of circumstances by the Republican presidential candidate when he himself is far more closely associated with a man that was convicted of crimes that did far more horrendous damage to the country than anything William Ayers is purported to have done.

The fact of the matter is Senator McCain did go to the offices of the regulators for the Savings and Loans financial industry and had conversations with those individuals regarding Keating and others. There is no question that he attended meetings that were focused on requesting changes to the regulations that governed the Savings and Loans. Senator McCain was cleared of any direct wrongdoing in the Keating Affair, but remanded for exercising poor judgment.

The Senate Ethics Committee exonerated John Senator McCain in 1991 from any wrongdoing in the Keating affair; however, he was found to have practiced questionable judgment. Did John Senator McCain learn a lesson from his involvement in the Savings and Loan debacle to become the anti-corruption stalwart that his campaign portrays him to be? Or does John Senator McCain still practice questionable judgment when it comes to his campaign contributors, and, if so, what could this mean for the U.S. economy?

The Savings and Loan debacle of the 1980s was one of the worst economic crises in the country's history; it caused the recession of the early -90s, an enormous deficit in the federal budget, and cost taxpayers an estimated $300 billion. The deregulation of the banking industry in the early 1980s allowed financial institutions to use federally insured deposits for previously prohibited high-risk investments. Loopholes created by deregulation were manipulated by loosely knit networks of industry high-flyers who used their savings and loans as personal piggy banks, and left taxpayers responsible for paying back the depositors. Bank regulators found that the majority of thrift failures in the Savings and Loan debacle, over 1,000 institutions, were the direct result of management misconduct, insider abuse, and outright fraud.

A key factor that contributed to the Savings and Loan debacle was political interference with bank regulators whose recommended actions against troubled institutions were consistently ignored. Corrupt Savings and Loan executives were frequent contributors to political campaigns, and used their political influence to stall the efforts of regulators, and continue their operations despite insolvency, which dramatically increased the cost of the eventual bailout. Charles Keating was a prominent figure in the S and L debacle. His CA based Lincoln Savings and Loan utilized banking techniques that were common throughout thrifts involved in the Savings and Loan debacle. The scandal that was coined the Keating 5 was emblematic of the political pressure that prevented bank examiners from doing their job, and exacerbated the crisis to monumental proportions.

Charles Keating was the founder of the Cincinnati, OH law firm Keating, Muething and Klekamp, which handled security work for Marvin Warner, and Home State Savings, responsible for another costly securities fraud case in the Savings and Loan debacle. In 1972, he left law to work for Carl Linder's conglomerate, American Financial Corporation, and, in 1976, moved to Phoenix, AZ, and bought the homebuilding division of Linder's empire, which he renamed American Continental Corporation. In 1984, he bought the CA based Lincoln Savings and Loan, and within 3 years involved the thrift with large investments in junk bonds, real estate projects, and other high risk ventures that benefited the American Continental Corporation. In 1986, San Francisco bank examiners noticed serious discrepancies in the financial records of Lincoln Savings and Loan. The political strings Charles Keating pulled in an effort to prevent a serious investigation resulted in the Keating 5 scandal.

Charles Keating was a large donor to political campaigns, and supported over 36 state and national candidates in their run for public office. He frequently used his political connections to influence legislation, and to prevent the Bank Board from adopting regulations that would harm his assets. In March 1987, Senators John Senator McCain (R-AZ), Dennis DeConcini (D-AZ), Alan Cranston (D-CA), and John Glenn (D-OH), all benefactors of Keating's campaign contributions, held a highly unusual meeting in DeConcini's office with the Chairman of the Bank Board, Edwin Gray, to inquire about the bank examination of Lincoln Savings and Loan.

There is a difference between Senator Obama and Ayers and Senator McCain and Keating... people lost everything as a result of the Lincoln Savings and Loan crash. The Lincoln Savings and Loan debacle is a precursor to the current bailout/buyout of the Real Estate industry fiasco. Is it possible that Senator McCain’s assertion that deregulation is the answer to saving our jobs and fixing the economy more of the same that we experienced in 1989?

Did Senator McCain learn anything from his previous position to deregulate financial institutions – it sure does not look that way?

McCain was forced to distance himself from his former campaign co-chairman, and chief economic advisor, former Senator Phil Gramm, due to his calloused remarks about the sub-prime mortgage crisis that many claim he had a direct role in creating. The sub-prime market crisis has been linked to the Gramm-Leach-Bliley Act of 1999, legislation sponsored by Gramm, which repealed provisions in the Glass-Steagall Act, enacted in the midst of the Great Depression, that paved the way for the formation of major financial conglomerates of banks, security firms, and insurance companies. Phil Gramm was the Chairman of the Senate Committee on Banking, Housing, and Urban Affairs until he left the Senate in 2002. He has gone on to serve as the Vice Chairman of the Swiss investment bank, UBS, and in 2008 disclosed that he worked as a lobbyist for UBS, and attempted to influence legislation related to the sub-prime mortgage crisis while he simultaneously worked on McCain's campaign.

Gramm formerly resigned from the campaign in July, 2 months after the McCain campaign's public purge of staff with conflicts of interest, however, his economic advice remains influential. In a Sept. 14 Washington Post article with the headline "A Nation of Exaggerators"-, one of McCain's current economic advisers, Donald Luskin, stated that he agreed with Gramm's "mental recession"- comment, and felt that the gloomy outlook even McCain has adopted is uncalled for. Despite McCain's staff shake-up in May, his campaign is still riddled with staff who have lobbied on behalf of financial institutions connected to the sub-prime mortgage crisis. McCain's campaign manager, Rick Davis, responsible for drafting the campaign's conflict of interest policy, made headlines in mid Sept. for the continued monthly fee of $15,000 mortgage giant Freddie Mac paid to his lobbying firm Davis Manafort Inc.Newsweek reported that Davis had personally approached Freddie Mac in 2006 to arrange for a new consulting agreement that would allow payments to his firm to continue. Deputy Campaign Manager, Christian Ferry, is, also, a consultant for Davis Manafort.

In looking at the relationship between Mr. Ayers and Senator Obama, it seems to me that there is nothing that even remotely compares, in terms of criminality, to the association that Senator McCain had with Mr. Keating. Senator McCain seems to surround himself with questionable individuals who have been and still are key factors in the decision-making processes of Senator McCain.You be the judge, is Senator McCain barking up the wrong tree in a vain attempt to distract the voters from the real issues?

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