...I was personally paying income tax when this "S&L bailout" went through.--java
Page last updated at 12:15 GMT, Monday, 6 October 2008 13:15 UK
Obama highlights McCain scandal
The campaign video which attacks John McCain over his links to Charles Keating
US Democratic presidential candidate Barack Obama has attacked John McCain's links to a 1980s financial scandal.
He also accused his Republican rival of being more focused on running a smear campaign than on fixing the US economy.
It comes after Mr McCain's running mate Sarah Palin accused Mr Obama over the weekend of associating with terrorists.
Mr Obama once served on a charity board with an ex-member of US-based militant group Weather Underground, Bill Ayers, now a University of Illinois professor.
He has denounced Mr Ayers' radical past.
Mr McCain spent the weekend in Arizona preparing for Tuesday's presidential debate but Mrs Palin, governor of Alaska, held several rallies.
She told supporters in Colorado and California that the time had come to take "the gloves off" - suggesting that Mr Obama's character may be the subject of further attacks.
Judgement claim
In a new internet video being e-mailed to supporters, the Obama campaign launched its own attack on Mr McCain over his connections to tycoon Charles Keating, who was convicted of securities fraud after his savings and loan scheme collapsed.
Senator McCain and his operatives are gambling that he can distract you with smears rather than talk to you about substance Barack Obama |
Mr McCain was one of five senators - known as the Keating Five - to be investigated by a Senate ethics panel over their intervention with banking regulators on behalf of Keating.
He was found to be less involved with Keating than the other senators but was criticised for "poor judgement".
Mr McCain has himself described the affair as "the worst mistake of my life", and one which led him to sponsor legislation on campaign finance reform.
In an email to supporters, Obama campaign manager David Plouffe said: "The McCain campaign has tried to avoid talking about the scandal, but with so many parallels to the current crisis, McCain's Keating history is relevant and voters deserve to know the facts - and see for themselves the pattern of poor judgement by John McCain.''
The Obama campaign has set up a special website where viewers can see the short internet video and a 13-minute documentary on Mr McCain's involvement in the Keating scandal.
Speaking at a rally in North Carolina on Sunday, Mr Obama also questioned Mr McCain's campaign tactics, suggesting he was seeking to turn the focus away from the current economic crisis.
"Senator McCain and his operatives are gambling that he can distract you with smears rather than talk to you about substance," he said.
"They'd rather try to tear our campaign down than lift this country up. It's what you do when you're out of touch, out of ideas and running out of time."
That message is echoed in a new campaign advert, to be broadcast on cable TV from Monday, which seeks to portray Mr McCain's response to the financial crisis as fumbling and unreliable.
The commentary says: "Erratic in a crisis. Out of touch on the economy."
Meanwhile, singers Bruce Springsteen and Jay-Z took part in concerts over the weekend, organised by the Obama campaign, aimed at encouraging new voters to register.
Monday is the deadline for voter registration in more than a dozen states, including Pennsylvania, Virginia, Michigan, Ohio, Indiana and Florida.
Voter turnout could be vital in deciding the outcome of the 4 November presidential election.
Citizen McCain
Born: Aug. 29, 1936
Resides: Phoenix, Ariz.
Full biography
Web site: johnmccain.com
Party: Republican
Current Office: U.S. Senator
Birthplace: Panama Canal Zone
Wife: Cindy L. Hensley
Family: 7 children
Political Experience:
- Senator, U.S. Senate, 1986-
- Presidential Candidate, 2000
- U.S. House of Rep., 1982-1986
by Dan Nowicki and Bill Muller - Mar. 1, 2007 10:52 AM
The Arizona Republic
- Chapter 1: Who is John McCain?
- Chapter 2: At the Naval Academy
- Chapter 3: Prisoner of war
- Chapter 4: Back in the USA
- Chapter 5: Arizona, the early years
- Chapter 6: The Senate calls
- Chapter 7: The Keating Five
- Chapter 8: Overcoming scandal, moving on
- Chapter 9: McCain becomes the 'maverick'
- Chapter 10: The 'maverick' runs
- Chapter 11: Chapter 10: The 'maverick' and President Bush
- Chapter 12: The 'maverick' goes establishment
CHAPTER VII: THE KEATING FIVE
As a war hero and U.S. senator, John McCain has been chronicled in pictures.
There are grainy mug shots of a young McCain, printed in U.S. newspapers after his jet was shot down over North Vietnam. There are black-and-white images of his return, grinning and waving.
In happier times, there is McCain holding his newborn daughter while his wife, Cindy, smiles from her hospital bed.
But it is an innocent vacation picture that carries the reminder of the scandal that threatened his political career.
In the picture, taken in the Bahamas, McCain is seated on a bandstand while wearing an outrageous straw party hat. Next to him on the dais sits Charles Keating III, son of developer Charles H Keating Jr.
McCain calls the Keating scandal "my asterisk." Over the years, his opponents have failed to turn it into a period.
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 examined Lincoln, Keating was not content to wait and hope for the best. He had spread a lot of money around Washington, and it was time to call in his chits.
One of his first stops was Sen. Dennis DeConcini, D-Ariz.
The state's senior senator was one of Keating's most loyal friends in Congress, and for good reason. Keating had given thousands of dollars to DeConcini's campaigns. At one point, DeConcini even pushed Keating for ambassador to the Bahamas, where Keating owned a luxurious vacation home.
Now Keating had a job for DeConcini. He wanted him to organize a meeting with regulators to deliver a message: Get off Lincoln's back. Eventually, DeConcini would set up a meeting with five senators and the regulators. One of them was McCain.
McCain already knew Keating well. His ties to the home builder dated to 1981, when the two men met at a Navy League dinner where McCain spoke.
After the speech, Keating walked up to McCain and told him that he, too, was a Navy flier and that he greatly respected McCain's war record. He met McCain's wife and family. The two men became friends.
Charlie Keating always took care of his friends, especially those in politics. McCain was no exception.
In 1982, during McCain's first run for the House, Keating held a fund-raiser for him, collecting more than $11,000 from 40 employees of American Continental Corp. McCain would spend more than $550,000 to win the primary and the general election.
In 1983, as McCain contemplated his House re-election, Keating hosted a $1,000-a-plate dinner for him, even though McCain had no serious competition. When McCain pushed for the Senate in 1986, Keating was there with more than $50,000.
By 1987, McCain had received about $112,000 in political contributions from Keating and his associates.
McCain also had 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 such as Lincoln.
Reluctant participant
Despite his history with Keating, McCain was hesitant about intervening. At that point, he had been in the Senate only three months. DeConcini wanted McCain to fly to San Francisco with him and talk to the regulators. McCain refused.
Keating would not be dissuaded.
On March 24 at 9:30 a.m., Keating went to DeConcini's office and asked him if the meeting with the regulators was on. DeConcini told Keating that McCain was nervous.
"McCain's a wimp," Keating replied, according to the book Trust Me, by Michael Binstein and Charles Bowden. "We'll go talk to him."
Keating had other business on Capitol Hill and did not reach McCain's office until 1:30. A DeConcini staffer already had told McCain about the "wimp" insult.
When he arrived, Keating presented McCain with a laundry list of demands for the regulators.
McCain told Keating that he would attend the meeting and find out whether Keating was getting treated fairly but that was all.
The first meeting, on April 2, 1987, in DeConcini's office, included Ed Gray, chairman of the Federal Home Loan Bank Board, as well as four senators: DeConcini, McCain, Alan Cranston, D-Calif., and John Glenn, D-Ohio.
(Years later, McCain recalled that DeConcini started the meeting with a reference to "our friend at Lincoln." McCain characterized it as "an unfortunate choice of words, which Gray would remember and repeat publicly many times.")
For Keating, the meeting was a bust. Gray told the senators that as head of the loan board, he worried about the big picture. He didn't have any specific information about Lincoln. Bank regulators in San Francisco would be versed in that, not him. Gray offered to set up a meeting between the senators and the San Francisco regulators.
The second meeting was April 9. The same four senators attended, along with Sen. Don Riegle, D-Mich. Also at the meeting were William Black, then deputy director of the Federal Savings and Loan Insurance Corp., James Cirona, president of the Federal Home Loan Bank of San Francisco, and Michael Patriarca, director of agency functions at the FSLIC.
In an interview with The Republic, Black said the meeting was a show of force by Keating, who wanted the senators to pressure the regulators into dropping their case against Lincoln. The thrift was in trouble for violating "direct investment" rules, which prohibited S&Ls from taking large ownership positions in various ventures.
"The Senate is a really small club, like the cliche goes," Black said. "And you really did have one-twentieth of the Senate in one room, called by one guy, who was the biggest crook in the S&L debacle."
Black said the senators could have accomplished their goal "if they had simply had us show up and see this incredible room and said, 'Hi. Charles Keating asked us to meet with you. 'Bye.'"
McCain previously had refused DeConcini's request to meet with the Lincoln auditors themselves. In Worth the Fighting For, McCain wrote that he remained "a little troubled" at the prospect, "but since the chairman of the bank board didn't seem to have a problem with the idea, maybe a discussion with the regulators wouldn't be as problematic as I had earlier thought."
McCain concedes that he failed to sense that Gray and the thrift examiners felt threatened by the senators' meddling.
'Always Hamlet'
The five senators, including McCain, seemed like a united front to Black.
"They presented themselves as a group," Black said, "and DeConcini is the dad, who's going to take the primary speaking role. Both meetings are in his office, and in both cases it's we want this, with no one going, 'What do you mean we, kemo sabe?'"
According to nearly verbatim notes taken by Black, McCain started the second meeting with a careful comment.
"One of our jobs as elected officials is to help constituents in a proper fashion," McCain said. "ACC (American Continental Corp.) is a big employer and important to the local economy. I wouldn't want any special favors for them. . . .
"I don't want any part of our conversation to be improper."
Black said the comment had the opposite effect for the regulators. It made them nervous about what might really be going on.
"McCain was the weirdest," Black said. "They were all different in their own way. McCain was always Hamlet . . . wringing his hands about what to do."
Glenn, a former astronaut and the first American to orbit the Earth, was not as tactful.
"To be blunt, you should charge them or get off their backs," he told the regulators. "If things are bad there, get to them. Their view is that they took a failing business and put it back on its feet. It's now viable and profitable. They took it off the endangered species list. Why has the exam dragged on and on and on?"
DeConcini added: "What's wrong with this if they're willing to clean up their act?"
Cirona, the banking official, told the senators that it was "very unusual" to hold a meeting to discuss a particular company.
DeConcini shot back: "It's very unusual for us to have a company that could be put out of business by its regulators."
The meeting went on. McCain was quiet. DeConcini carried the ball. The regulators told the senators that Lincoln was in trouble. The thrift, Cirona said, was a "ticking time bomb."
Then Patriarca made a stunning comment, according to transcripts released later.
"We're sending a criminal referral to the Department of Justice," he said. "Not maybe, we're sending one. This is an extraordinarily serious matter. It involves a whole range of imprudent actions. I can't tell you strongly enough how serious this is. This is not a profitable institution."
The statement made DeConcini back off a little.
"The criminality surprises me," he said. "We're not interested in discussing those issues. Our premise was that we had a viable institution concerned that it was being overregulated."
"What can we say to Lincoln?" Glenn asked.
"Nothing," Black responded, "with regard to the criminal referral. They haven't and won't be told by us that we're making one."
"You haven't told them?" Glenn asked.
"No," said Black. "Justice would skin us alive if we did. Those referrals are very confidential. We can't prosecute anyone ourselves. All we can do is refer it to Justice."
After the meeting, McCain was done with Keating.
"Again, I was troubled by the appearance of the meeting," McCain said later. "I stated I didn't want any special favors from them. I only wanted them (Lincoln Savings) to be fairly treated."
Black doesn't completely buy that argument. If McCain was concerned about Keating asking him to do things that were improper, why go to either meeting at all?
Black said McCain probably went because Keating was close to being the political godfather of Arizona and McCain still had plenty of ambition.
"Keating was incredibly powerful," Black said. "And incredibly useful."
McCain's reservations aside, Keating accomplished his goal. He had bought some time, though the price was very high.
Short-lived reprieve
A month later, the San Francisco regulators finished a yearlong audit and recommended that Lincoln be seized. But the report was virtually ignored because of politics on the bank board.
Gray was being replaced as chairman by Danny Wall, who was more sympathetic to Keating.
The audit, which described Lincoln as a thrift reeling out of control, sat on a shelf.
In September 1987, the investigation was taken away from the San Francisco office, away from Black and Patriarca. In May 1988, it was transferred to Washington, where Lincoln would get a new audit.
It was a win for Keating. A battle, not the war.
Back in San Francisco, Black was fuming.
"Clearly, we were shot in the back," he would say later.
Despite the reprieve, Keating's businesses continued to spiral downward, taking the five senators with him. Together, the five had accepted more than $300,000 in contributions from Keating, and their critics added a new term to the American lexicon: "The Keating Five."
The Keating Five became synonymous for the kind of political influence that money can buy. As the S&L failure deepened, the sheer magnitude of the losses hit the press. Billions of dollars had been squandered. The five senators were linked as the gang who shilled 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 investigation dragged through 1988, McCain dodged the hardest 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.
He had 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 no ordinary constituent to McCain.
On Oct. 8, 1989, The Arizona 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 the trips were made during vacations to Keating's opulent Bahamas retreat at Cat Cay.
McCain also did not pay Keating for some of the trips until years after they were taken, after he learned that Keating was in trouble over Lincoln. Total cost: $13,433.
When the story broke, McCain did nothing to help himself.
"You're a liar," McCain said when a Republic reporter asked him about the business relationship between his wife and Keating.
"That's the spouse's involvement, you idiot," McCain said later in the same conversation. "You do understand English, don't you?"
He also belittled reporters when they asked about his wife's ties to Keating.
"It's up to you to find that out, kids."
The paper ran the story.
In his 2002 book, McCain confesses to "ridiculously immature behavior" during that particular interview and adds that The Republic reporters' "persistence in questioning me about the matter provoked me to rage."
"I don't know how (The Republic journalists) would have reported the story had I been more civil and understanding or just more of a professional during the interview," McCain wrote.
At a news conference after the story ran, McCain was a changed man. He stood calmly for 90 minutes and answered every question.
On the shopping center, his defense was simple. The deal did not involve him. The shares in the shopping center had been bought by a partnership set up between McCain's wife and her father. (The couple also had a prenuptial agreement that separated Cindy McCain's finances and dealings from his.)
But McCain also had to explain his trips with Keating and why he didn't pay Keating back right away.
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.
"I was in a hell of a mess," McCain later would write.
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 trial, the prosecution produced a parade of elderly investors who had lost their life's savings by investing in American Continental junk bonds.
Verdict: 'Poor judgment'
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."
Among the Keating Five, McCain took 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 was the most expensive failure in the national S&L scandal. Taxpayers lost more than $2 billion on the bailout. McCain also looked good in contrast to DeConcini, who continued to defend Keating until fall 1989, when federal regulators filed a $1.1 billion civil racketeering and fraud suit against Keating, accusing him of siphoning Lincoln's deposits to his family and into political campaigns.
In January 1993, a federal jury convicted him of 73 counts of wire and bankruptcy fraud in the collapse of American Continental and Lincoln. Keating was sentenced to 12 years and seven months in prison but served just 50 months before the conviction was overturned on a technicality. In 1999, at age 75, he pleaded guilty to four counts of fraud. He was sentenced to time served.
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. "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. For his part, DeConcini is critical of McCain's role in the affair. The two senators never were particularly cozy, and the stress of the public scrutiny worsened their relations.
In his memoir Senator Dennis DeConcini: From the Center of the Aisle, he praises the decision to keep McCain on the hook.
"It became clear to me, and it was later confirmed by Ethics Committee members, that Bennett was attempting to dismiss the charges against McCain, and in order to appear nonpartisan, he included Glenn in this effort," DeConcini wrote with co-author Jack August. "Thanks to the three Democrats on the committee and perhaps with the help of Senator (Jesse) Helms (R-N.C.), however, the charges remained in place for all the senators under investigation. So all of us had to attend the 23-day public hearing, which was indeed a trial, before the six-member Senate Ethics Committee."
In the book, DeConcini reiterates his allegation that McCain leaked to the media "sensitive information" about certain closed proceedings in order to hurt DeConcini, Riegle and Cranston. It's a fairly serious charge. The Boston Globe revisited the Keating Five leaks in 2000. The story paraphrased a congressional investigator, Clark B. Hall, as personally concluding that "McCain was one of the principal leakers." The newspaper also reported that McCain, under oath, had denied involvement with the leaks.
McCain owns up to his mistake this way:
"I was judged eventually, after three years, of using, quote, poor judgment, and I agree with that assessment."
Latest Disgrace
By: Spencer Ackerman Monday October 6, 2008 10:03 amSo here it comes: the scary black man who wants to kill U.S. troops.
Not a word of this is true, obviously. It's basically self-refuting to see the McCain campaign clip off Obama's full Afghanistan comments from August -- "We've got to get the job done there and that requires us to have enough troops so that we're not just air-raiding villages and killing civilians, which is causing enormous problems there" -- which is an obvious call to bolster troop levels. The concern about civilian casualties were echoed by such America-haters as Hamid Karzai and George Bush, as even this Nedra Pickler (!) factcheck points out.And to their ranks, let's add Gen. McClellan McKiernan, from his press conference at the Newseum last week, when he discussed the counterproductivity of civilian casualties to counterinsurgency in Afghanistan. This is a transcript from my voice recorder:
[Shows a slide of himself at a meeting of Afghan villagers] The picture in the bottom center, if I could dwell on that for just a second, yes, that's myself with my back turned to you, at a province that doesn't need to be named, and it has to do with civilian casualties. It's an episode -- and I'd like to dwell on civilian casualties with you for a minute. We take great measures to try to avoid civilian casualties. But when a mistake is made and inadvertently there is a loss of civilian life unintentionally, we try to make sure that we get out with the truth as quickly as we can. We have a hard time beating the insurgent to the story because he's not concerned with the truth. But in this particular case I went to this location and talked with a group of tribal elders in an area where we think we inadvertently caused some civilian casualties. And to tell you what an incredible sort of population lives in Afghanistan, that fellow sitting in the middle of the picture there, he lost seven members of his family. Yet he came and talked to me that day, allowed me to apologize to him, allowed us to have a shura, allowed us to talk, and at the end of the day he professed that he did not want the Taliban back in power, that he supported the presence of international forces. I don't think that would happen in our country, in the United States of America. I don't think someone that lost seven members of their family would come sit down with somebody in the military and even have a discussion. But it tells you about the resiliency of that population. But I hope you ask me something else about civilian casualties, because that's something we try to go to great lengths to avoid in that country. ...
[Reporter asks question about civilian casualties]... First of all, it's important that ISAF, that the military, try to come out with the truth as quickly as possible. But we inherently play catch-up to anybody that reports a number or an event. We do try at least to get a truthful accounting in the media. It's very difficult to come up with numbers in Afghanistan after there's been a military operation. A lot of that's cultural, because people generally are taken away and buried quite quickly in that culture, so it's not like you can exploit a site for a period of time and come up with an accurate number, so a lot of it's based on estimates. And then finally I won't go into specifics on rules of engagement, but I'll say that principles such as positive identification of targets to the best of our ability, the concept of proportionality, precise planning considerations on type of weapons and use of weapons -- all of that is factored in, all of that is attempted to be disciplined in units before they even come to the theater. But when you fight a counterinsurgency, by the nature of an insurgency, where the enemy mixes in with the population, it is virtually impossible to completely avoid civilian casualties in that kind of environment.
McCain's new slogan really ought to be Dishonor Before Death.
By Harold Meyerson
Monday, October 6, 2008; A15
"There's no question that we have to change the subject here," a senior Republican operative told The Post's Michael D. Shear in a story published Saturday.
The "subject" in question is the economy and how to fix it. As Americans have taken their eye off the ball -- that is, off John McCain's sterling qualities of character and command -- by focusing on the economy, Barack Obama has surged into the lead nationally and in many key battleground states.
So long as the candidates talk about that pesky economy, McCain's handlers have realized, McCain will continue to swoon. Thus the campaign has announced that it will go on the attack again on the momentous topics of Obama's ties to the Rev. Jeremiah Wright and Bill Ayers, the onetime Weatherman who has been a University of Illinois education professor for nearly two decades.
Campaigning on Saturday in Colorado, Sarah Palin accused Obama of "palling around with terrorists" by associating with Ayers, citing as her source a New York Times story from that morning. In fact, the story concluded that the Obama-Ayers "relationship" consisted of both men attending the board meetings of two Chicago organizations and that there had been no contact between the men, other than bumping into each other on the sidewalk (they live in the same neighborhood), since Obama went to the U.S. Senate in January 2005.
The story of Obama's interaction with Ayers is drenched in irony, since it is basically a tale of Obama being co-opted into Chicago's civic establishment. In 1995, Obama, then a young lawyer with political ambitions but as yet no office, was recruited to chair the board of a school reform organization funded and established by the Annenberg Foundation -- a group that distributes the wealth of the estate of Walter Annenberg, Richard Nixon's ambassador to Britain. It was only then that Obama met Ayers, who already was a board member and a figure in Chicago's education-policy elite. (Mayor Richard Daley, that known radical, told the Times that he had consulted Ayers on education issues for years.)
Go join your city's establishment, and see what it gets you.
But if the McCain people want to rummage through presidential candidates' associations, real or imagined, to turn up figures who threaten to pull down this proud republic, they should begin in-house. Chief among those to whom responsibility attaches for the financial crisis that is plunging the nation into recession is former Texas senator Phil Gramm, McCain's own economic guru.
Gramm was always Wall Street's man in the Senate. As chairman of the Senate Banking Committee during the Clinton administration, he consistently underfunded the Securities and Exchange Commission and kept it from stopping accounting firms from auditing corporations with which they had conflicts of interest. Gramm's piece de resistance came on Dec. 15, 2000, when he slipped into an omnibus spending bill a provision called the Commodity Futures Modernization Act (CFMA), which prohibited any governmental regulation of credit default swaps, those insurance policies covering losses on securities in the event they went belly up. As the housing bubble ballooned, the face value of those swaps rose to a tidy $62 trillion. And as the housing bubble burst, those swaps became a massive pile of worthless paper, because no government agency had required the banks to set aside money to back them up.
The CFMA also prohibited government regulation of the energy-trading market, which enabled Enron to nearly bankrupt the state of California before bankrupting itself.
The problem with this exercise, of course, is that Gramm's relationship to McCain is not comparable to the relationships that Ayers or Wright have with Obama. The idea that either Ayers or Wright would have any impact on the workings of an Obama administration is nonsensical. But Gramm and McCain do have an enduring political and economic alliance. McCain chaired Gramm's short-lived presidential campaign in 1996; Gramm is co-chair of McCain's current effort. McCain has not repudiated reports that Gramm is on the shortlist to become Treasury secretary if McCain is elected, even after Gramm labeled America "a nation of whiners."
If we are to believe his managers, McCain will charge into tomorrow night's debate seeking to "change the subject" from the economy to Obama's dangerous liaisons. It's not, however, likely to be a winning tactic. Obama will argue that in a time of deepening economic crisis, the public deserves a debate in which the candidates focus on their ideas for recovery rather than tendentious attacks on their rival's presumed associates. If pressed, though, he can mention that it is McCain's senior economic adviser who has diminished American solvency and power beyond the wildest dreams of anti-American terrorists.
Read more from Harold Meyerson on washingtonpost.com's new opinion blog, PostPartisan.
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