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Wednesday, September 17, 2008
Flashback: a few bank failures ago...
A Huffpo commenter caught this one, from way back on September 6th, before AIG and WaMu went in the drink. It was the 11th bank failure in the U.S.: Nevada's Silver State bank... From the AP:
Nevada State Bank of Las Vegas will take over the insured deposits of Silver State -- which had $2 billion in assets and $1.7 billion in deposits at the end of June. AP reports that "[Silver State's] branches will reopen Monday as offices of Nevada State Bank in Nevada and National Bank of Arizona in Arizona."

"John McCain's son, Andrew," who is also CFO of his mom's beer distributorship, "sat on the boards of Silver State Bank and of its parent, Silver State Bancorp, starting in February but resigned in July citing 'personal reasons.' Andrew McCain also was a member of the bank's audit committee, responsible for oversight of the company's accounting," according to AP.

Taxpayers got off relatively cheaply bailing out Andrew's former colleagues.
The failure -- which was caused by "poor-quality loans primarily related to real estate development" -- will cost the FDIC deposit insurance fund between "$450 million [and] $550 million
Andrew is McCain's adopted son from his first marriage, btw. According to The Street:
Andrew McCain, the adopted son of Republican presidential nominee Sen. John McCain, was on Silver State's board for five months before he stepped down in July.

As of June 30, Silver State had total assets of $2 billion and deposits of $1.7 billion. Nevada State Bank agreed to purchase the insured deposits for a premium of 1.3%. At the time of the bank's closing, there were approximately $20 million in uninsured deposits held in roughly 500 accounts that potentially exceeded the insurance limits.

Silver State also had around $700 million in brokered deposits that weren't included in the takeover. The FDIC will pay the brokers directly for the amount of their insured funds.
No wonder the FDIC is running out of cash...

So why does this sound so familiar? Maybe because Republicans have been running this scam for decades. There's Jebbie and Neil Bush:

Between 1981 and 1989, when George Bush finally announced that there was a Savings and Loan Crisis to the world, the Reagan/Bush administration worked to cover up Savings and Loan problems by reducing the number and depth of examinations required of S&Ls as well as attacking political opponents who were sounding early alarms about the S&L industry. Industry insiders were aware of significant S&L problems as early 1986 that they felt would require a bailout. This information was kept from the media until after Bush had won the 1988 elections.

Jeb Bush defaulted on a $4.56 million loan from Broward Federal Savings in Sunrise, Florida. After federal regulators closed the S&L, the office building that Jeb used the $4.56 million to finance was reappraised by the regulators at $500,000, which Bush and his partners paid. The taxpayers had to pay back the remaining 4 million plus dollars.

Neil Bush was the most widely targeted member of the Bush family by the press in the S&L scandal. Neil became director of Silverado Savings and Loan at the age of 30 in 1985. Three years later the institution was belly up at a cost of $1.6 billion to tax payers to bail out.

The basic actions of Neil Bush in the S&L scandal are as follows:

Neil received a $100,000 "loan" from Ken Good, of Good International, with no obligation to pay any of the money back.

Good was a large shareholder in JNB Explorations, Neil Bush's oil-exploration company.

Neil failed to disclose this conflict-of-interest when loans were given to Good from Silverado, because the money was to be used in joint venture with his own JNB. This was in essence giving himself a loan from Silverado through a third party.

Neil then helped Silverado S&L approve Good International for a $900,000 line of credit.

Good defaulted on a total $32 million in loans from Silverado.

During this time Neil Bush did not disclose that $3 million of the $32 million that Good was defaulting on was actually for investment in JNB, his own company.

Good subsequently raised Bush's JNB salary from $75,000 to $125,000 and granted him a $22,500 bonus.

Neil Bush maintained that he did not see how this constituted a conflict of interest.

Neil approved $106 million in Silverado loans to another JNB investor, Bill Walters.

Neil also never formally disclosed his relationship with Walters and Walters also defaulted on his loans, all $106 million of them.

Neil Bush was charged with criminal wrongdoing in the case and ended up paying $50,000 to settle out of court. The chief of Silverado S&L was sentenced to 3.5 years in jail for pleading guilty to $8.7 million in theft. (Keep in mind that you can get more jail time for holding up a gas station for $50.)

And of course, there's the gold standard of S&L scams, featuring none other than Andrew's dad, John McCain, who got caught up in a little thing called the "Keating Five":

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.

One of his first stops was Sen. Dennis DeConcini. The Arizona lawmaker 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 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.

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. John 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, during McCain's second House race, Keating hosted a $1,000-a-plate dinner for McCain, though he had no serious competition and coasted into his second term. 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 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 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 the Hill and did not reach McCain's office until 1:30. A DeConcini staffer had already told McCain about the wimp comment.

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.

''Keating gave me the clear impression that he expected me to do more,'' McCain said later. ''He had several specific requests.''

When Keating questioned his courage, McCain invoked his POW experience. He told Keating that he didn't spend 5 1/2 years in the Hanoi Hilton to be called a coward.

The two argued, then Keating stormed out.

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.

(For a full airing of McCain's cynicism in the 1980s version of Teapot Dome, click here.)

And there are also the financial ties between Keating and one Cindy Hensley McCain, something Mac apparently doesn't like being asked about...

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.

...When the story broke, McCain did nothing to help himself. When reporters first called him, he was furious. Caught out in the open, the former fighter pilot let go with a barrage of cover fire. Sen. Hothead came out in all his glory.

''You're a liar,''' McCain snapped Sept. 29 when a Republic reporter asked him about business ties 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 the reporters when they asked about his wife's ties to Keating.

''It's up to you to find that out, kids.''

And then he played the POW card.

''Even the Vietnamese didn't question my ethics,'' McCain said.

The paper ran the story a few days later. At a news conference, McCain was a changed man. He stood calmly for 90 minutes and answered every question.

But wait! There's even more...

From a December 1989 Newsday story:

The Senate Ethics Committee will seek a detailed study of a real estate partnership involving developer Charles Keating Jr. and the wife of Sen. John McCain (R-Ariz.), according to Senate sources.

Involved is an investment by Cindy McCain and her father, James Hensley, in a $15-million Phoenix, Ariz., shopping center. The $359,000 investment, made through a Hensley company subsidiary in which Cindy McCain had 41 percent ownership and her father 51 percent, makes them the largest single investors in the project originally financed, built and managed by Keating. The investment by the senator's relatives was made in 1986 after Keating was already in a bitter feud with federal regulators alarmed over his operation of Lincoln Savings and Loan.

And that's some straight talk for you, my friends.


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