Keating’s legacy, from John McCain to a camp classic
Charles Keating, who died this week, is best-known as the poster boy for the savings and loan crisis of the 1980s. More than 1,000 banks failed, and taxpayers spent a quarter-billion dollars bailing them out.
Here are a few of his more colorful legacies:
1. Keating gave birth to John McCain as-we-know-him. By making McCain a figure of shame.
Keating’s status as the king of the S&L swindlers rests on his sponsorship of the “Keating Five“: a group of five U.S. Senators whose campaigns he supported financially– and who in turn attempted to dissuade regulators from investigating Keating’s shenanigans. The sole Republican in the group was John McCain, then a relatively new U.S. Senator. McCain later called the episode “my asterisk” — and became better-known as a bi-partisan crusader for campaign-finance reform.
2. Also on Keating’s payroll in the 1980s: Alan Greenspan.
As a private economist, Alan Greenspan took on a consulting job for Keating in 1984. His job: Drafting a report to regulators, arguing that Keating’s bank, Lincoln Savings and Loan, be exempted from certain rules because it was well-run.
3. He was good for a shameless quote.
From the New York Times obituary: “Mr. Keating, a 6-foot-5-inch beanpole who walked with a swagger, never minced words about buying political influence. Asked once whether his payments to politicians had worked, he told reporters, ‘I want to say in the most forceful way I can: I certainly hope so.’”
4. He did like to peddle shame.
In the late 1950s and early 1960s, Keating was a huge anti-pornography crusader. He sponsored a hilarious infomercial The Atlantic called “The Reefer Madness of porn.”
5. We can thank him, in part, for financial tools that later blew up in 2008.
Roy Smith teaches finance at NYU. And he spent much of the 1980s at Goldman Sachs. “You have to remember that the S&L crisis actually spawned two of the financial industry’s most lucrative product streams,” he says. “One was the securitization of mortgages into mortgage-backed securities. Hello! Those things that blew up in 2008…”
They were created for sale to savings and loans. “The other was the derivatives business.”
Smith says it took more deregulation, time, and financial creativity for both products to cause problems.
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