I figured we could start looking at McCain's economic expert, Phil Gramm, and ask the question as to why McCain would chose such a man as his economic guru.
McCain was caught up in the Keating Five scandal, and was lucky to escape without major political damage. Now , for those who don't remember the details of that scandal, let's get you up to speed.
It all started in March 1987. Charles H Keating Jr., the flamboyant developer and anti-porn crusader, needed help. The government was poised to seize Lincoln Savings and Loan, a freewheeling subsidiary of Keating's American Continental Corp.
As federal auditors crawled all over Lincoln, Keating was not content to wait and hope for the best. He'd spread a lot of money around Washington, and it was time to call in his chits.Now Keating had a job for DeConcini. He wanted him to organize a meeting with the regulators. The message: Get off Lincoln's back. Eventually, DeConcini would set up a meeting between five senators and the regulators. One of them was John McCain.
McCain knew Keating well. His ties to the home builder dated to 1981, when the two men met at a Navy League dinner where McCain was the speaker.
By 1987, McCain had received about $112,000 in political contributions from Keating and his associates.
McCain had also carried a little water for Keating in Washington. While in the House, McCain, along with a majority of representatives, co-sponsored a resolution to delay new regulations designed to curb risky investments by thrifts like Lincoln.
Despite the dust-up, McCain attended not one but two meetings with the regulators. McCain later explained that he thought it was the right thing to do, because Keating was a constituent.
McCain would live to regret it.
''Did you lean on regulators for Charlie Keating?''
''Did you get campaign contributions in exchange for your cooperation?''
''Why did you protect Keating?''
Together, the five senators had accepted more than $300,000 in contributions from Keating, and their critics added a new term to the American lexicon:
Keating Five.
As the S&L failure deepened, the sheer magnitude of the losses hit the press. Billions of dollars had been squandered. The Keating Five became shorthand for the kind of political influence that money can buy. The five senators were linked as the gang who went to bat for an S&L bandit.
S&L ''trading cards'' came out. The Keating Five card showed Charles Keating holding up his hand, with a senator's head adorning each finger. McCain was on Keating's pinkie.
As the Keating investigation dragged through 1988, McCain dodged the body blows. Most landed on DeConcini, who had arranged the meetings and had other close ties to Keating, including $50 million in loans from Keating to DeConcini's aides.
But McCain made a critical error.
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.
On that score, McCain admitted he had fouled up. He said he should have reimbursed Keating immediately, not waited several years. His staff said it was an oversight, but it looked bad, McCain jetting around with Keating, then going to bat for him with the federal regulators.
Meanwhile, Lincoln continued to founder.
In April 1989, two years after the Keating Five meetings, the government seized Lincoln, which declared bankruptcy. In September 1990, Keating was booked into Los Angeles County Jail, charged with 42 counts of fraud. His bond was set at $5 million.
During Keating's eventual trial, the prosecution produced a parade of elderly investors who had lost their life's savings by investing in American Continental junk bonds.
'THE ULTIMATE SURVIVOR'
In November 1990, the Senate Ethics Committee convened to decide what punishment, if any, should be doled out to the Keating Five.
Robert Bennett, who would later represent President Bill Clinton in the Paula Jones case, was the special counsel for the committee. In his opening remarks, he slammed DeConcini but went lightly on McCain, the lone Republican ensnared with four Democrats.
''In the case of Senator McCain, there is very substantial evidence that he thought he had an understanding with Senator DeConcini's office that certain matters would not be gone into at the meeting with (bank board) Chairman (Ed) Gray,'' Bennett said.
''Moreover, there is substantial evidence that, as a result of Senator McCain's refusal to do certain things, he had a fallout with Mr. Keating.''
McCain, the ultimate survivor, had dodged another missile.
Among the Keating Five, McCain received the most direct contributions from Keating. But the investigation found that he was the least culpable, along with Glenn. McCain attended the meetings but did nothing afterward to stop Lincoln's death spiral.
Lincoln's losses eventually were set at $3.4 billion, the most expensive failure in the national S&L scandal.
In the end, McCain received only a mild rebuke from the Ethics Committee for exercising ''poor judgment'' for intervening with the federal regulators on behalf of Keating. Still, he felt tarred by the affair.
''The appearance of it was wrong,'' McCain said recently. ''It's a wrong appearance when a group of senators appear in a meeting with a group of regulators, because it conveys the impression of undue and improper influence. And it was the wrong thing to do.''
McCain noted that Bennett, the independent counsel, recommended that McCain and Glenn be dropped from the investigation.
''For the first time in history, the Ethics Committee overruled the recommendation of the independent counsel,'' McCain said. ''I'm sure it had nothing to do with the fact that I was the only Republican of the five and the Democrats were in the majority (in the Senate).''
But McCain owns up to his mistake:
''I was judged eventually, after three years, of using, quote, poor judgment, and I agree with that assessment.''
http://www.wmsa.net/People/john_mccain/ariz-republic_chap_V_1999.htm
So McCain misses the hand of justice, by a hair.
Now, when the American economy is in dire straights, and McCain freely admits he's no real expert on the topic, who does he turn to ?
After Keating, you would think he learned a very important lesson - as did the American public.
And yet he turns to exactly the type of person that nearly cost him his political career.
I've posted before that Gramm and his wife had direct ties to Enron - and made a ton of money from that association, and helped set the stage for the abuses.
She was a member of the Enron's board's Audit Committee.
Gramm thinks the system works just fine. After all, she pocketed an estimated $2 million as an Enron director.
http://dir.salon.com/story/tech/feature/2004/01/28/wendy_gramm/
He did the same thing with the sub-prime market, and tables legislation that was it's genesis.
The Gramm-Leach-Bliley Act .
That act opened the doors for abuse on the market, with deregulation.
Gramm lobbies for UBS.
For his work, Gramm and two other lobbyists collected $750,000 in fees from UBS’s American subsidiary.
Gramm then JOINS the Swiss Bank UBS :
Phil Gramm joins UBS Warburg
Texas Republican, who fought corporate reform act, to advise clients on corporate finance issues.
October 7, 2002
So it came as a relief Tuesday when UBS, the European bank hit hardest by the credit crunch, announced that it would sell $15 billion of subprime mortgage debt and cut 5,500 jobs as part of a massive cleanup.
Now UBS is digesting a net loss of $10.9 billion and write-downs on mortgage-backed securities of $19 billion in the first quarter, bringing the total to about $38 billion since the beginning of the crisis.
http://www.iht.com/articles/2008/05/06/business/ubs.php
38 Billion in losses ( ten times Keating's toll) , and the first loss in company history - and the biggest loss of all banks touched by this.
So this begs two questions:
1) After Keating, how bad is McCain's judgment to willingly choose a man who (together with his wife) have benefited from two of the largest financial rip offs in American history, after nearly losing his political career over his associations with Keating , and probably the third largest financial scandal in American history ?
“People like that appeal to me.”
–John McCain, on Charles Keating, in his memoir, “Worth Fighting For”
2) Why isn't this on every TV screen being talked about, and the headline in every major newspaper ?
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