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?

I Failed Economics 101

The first time that I enrolled in Economics I failed because first of all, I wasn’t interested in economics, and secondly; I didn’t think that it applied to me. I actually didn’t know then what I know now – it does apply to me. Trying to make ends meet in your household requires that you get involved with economics, or you will not be living in your own house much longer. Knowing just the basics is enough to tell me that Congress is the last place that I would go to looking for help if I were in trouble financially.

In my house I pay the mortgage, the light bill, the telephone bill… you know the drill. I also have incidentals that I must pay – stuff that comes up suddenly. In a given month, after paying what I must pay, I try to save a few dollars for that emergency that comes up. Emergencies are – the water heater failing, the muffler fell off the car, or I had to have an operation. You have to have a few bucks saved to carry you through until you are better. When you are living from paycheck to paycheck you can’t respond favorably to a crisis, in fact, situations just as I have described are what take most of us out of our comfort zone.

The government is in the same situation and you have but to look under that rug to see that I am not wrong. All of the telltale signs are there. They can’t balance the budget because they are spending a gross amount of money fighting two wars. The tax base is shrinking every month as more and more workers are losing their jobs, so they don’t have any money. China and the Arabs own us because we have borrowed so much money to finance the war and all the other things that emerge as a result of those wars. If you don’t believe me, ask your Congressman to give you a list of all the programs that are being shorted support in the National Budget. Check with the GAO… they are the people that keep track of where we are spending the money.

Borrowing seventy billion dollars is not bad if you have a plan to get yourself out of debt with the money. Ideally, you want to pay off your debts and have a little left over so that you don’t go back in the hole. Is that the case with the bailout… oops buyout? No! It is not the case. I tell you that the real problem with our economy is that we don’t have cash flow. Others are telling you that we have a problem because we don’t have liquidity. What is the difference between liquidity and cash flow?

Liquidity, in economic terms, is: capable of covering current liabilities quickly with current assets. That would be the savings thingy… okay. If you don’t have cash, you can’t do anything without having to put everything else in a strain. The recovery strategy must take into consideration how to maintain cash flow. In the bailout/buyout scheme we are led to believe that if we give the cash to the people that flubbed the cash flow thing to begin with everything will be alright. In other words, the bank will have more money to loan to the people who will in turn default on the loan because they and their neighbors are losing their jobs and there is no cash flow.

Get my drift? You can’t absorb all of the delinquent loans by giving the banks more money and taking away the bad debt. That is not how you solve the liquidity problem.
Cash Flow – 1: a measure of an organization's liquidity that usually consists of net income after taxes plus noncash charges against income. 2: a flow of cash; especially: one that provides solvency

In this economy, it now works from the bottom up. ‘Joe Six Pack’ gets paid on Friday. He buys a case of beer from the liquor store, dip and potato chips from the 711, fills up his gas tank and heads home. His buddies got paid and they stop by the Meat Market for hamburger, the cleaners for their dry cleaning and what have you before continuing on over to have a cookout with their friends.

That ladies and gentlemen was a small example of cash flow. It is miniscule, but represents my point. Cash flow originates with ‘Joe Six Pack’ getting paid on Friday. He pays his mortgage – the bank gets cash! He pays his car note – the bank gets cash! He buys a case of beer – the retailer gets cash! The name of the game is ‘trickle up’ economics because the money is no longer flowing down as it did before big business out-sourced all of the jobs. Take a good look at the ISM Index and you will know without a doubt that we are in deep, er!!! you know what I mean!

The ISM Index is, for those of us that have never heard of it, the government’s pulse indicator for gauging the output of our manufacturers – the goods they are producing/manufacturing. It is also a good indicator as to whether the manufacturing community will be hiring. It does not lie! I am sorry, but I have to tell you that it is about to flat line. Yeah! We are not producing a darn thing that will make a difference when it comes to generating enough jobs to support the economy. You see, all of those fifty to sixty thousand dollar jobs went overseas to people willing to work for a fraction of that amount. You know - the sweat factories in places like in Myanmar.

I wish that I was wrong about this one, but I don’t think so! I jumped through hoops trying to tell everybody to say no to the 'big tax cut’. Everybody laughed at me as they went to the bank. Some of those same people have moved on to smaller, less pretentious dwellings because they don’t have that fat income tax refund anymore, nor do they have a job.