A little truthiness: who caused the subprime crisis?
McClatchy does us all a service, by setting the record straight:
As the economy worsens and Election Day approaches, a conservative campaign that blames the global financial crisis on a government push to make housing more affordable to lower-class Americans has taken off on talk radio and e-mail.
Commentators say that's what triggered the stock market meltdown and the freeze on credit. They've specifically targeted the mortgage finance giants Fannie Mae and Freddie Mac, which the federal government seized on Sept. 6, contending that lending to poor and minority Americans caused Fannie's and Freddie's financial problems.
Federal housing data reveal that the charges aren't true, and that the private sector, not the government or government-backed companies, was behind the soaring subprime lending at the core of the crisis.
Subprime lending offered high-cost loans to the weakest borrowers during the housing boom that lasted from 2001 to 2007. Subprime lending was at its height from 2004 to 2006.
Federal Reserve Board data show that:
More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.
The "turmoil in financial markets clearly was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004 and extending into 2007," the President's Working Group on Financial Markets reported Friday.
Furthermore, though they have become the whipping banks of the right:
Fannie, the Federal National Mortgage Association, and Freddie, the Federal Home Loan Mortgage Corp., don't lend money, to minorities or anyone else, however. They purchase loans from the private lenders who actually underwrite the loans.
And...
This much is true. In an effort to promote affordable home ownership for minorities and rural whites, the Department of Housing and Urban Development set targets for Fannie and Freddie in 1992 to purchase low-income loans for sale into the secondary market that eventually reached this number: 52 percent of loans given to low-to moderate-income families.
To be sure, encouraging lower-income Americans to become homeowners gave unsophisticated borrowers and unscrupulous lenders and mortgage brokers more chances to turn dreams of homeownership in nightmares.
But these loans, and those to low- and moderate-income families represent a small portion of overall lending. And at the height of the housing boom in 2005 and 2006, Republicans and their party's standard bearer, President Bush, didn't criticize any sort of lending, frequently boasting that they were presiding over the highest-ever rates of U.S. homeownership.
Between 2004 and 2006, when subprime lending was exploding, Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent, according to data from Inside Mortgage Finance, a specialty publication. One reason is that Fannie and Freddie were subject to tougher standards than many of the unregulated players in the private sector who weakened lending standards, most of whom have gone bankrupt or are now in deep trouble.
During those same explosive three years, private investment banks — not Fannie and Freddie — dominated the mortgage loans that were packaged and sold into the secondary mortgage market. In 2005 and 2006, the private sector securitized almost two thirds of all U.S. mortgages, supplanting Fannie and Freddie, according to a number of specialty publications that track this data.
In 1999, the year many critics charge that the Clinton administration pressured Fannie and Freddie, the private sector sold into the secondary market just 18 percent of all mortgages.
Fueled by low interest rates and cheap credit, home prices between 2001 and 2007 galloped beyond anything ever seen, and that fueled demand for mortgage-backed securities, the technical term for mortgages that are sold to a company, usually an investment bank, which then pools and sells them into the secondary mortgage market.
About 70 percent of all U.S. mortgages are in this secondary mortgage market, according to the Federal Reserve.
But what about the infamous Community Reinvestment Act (the CRA)? Isn't THAT Carter-era abomination to blame for the subprime crisis? Why, no...
Congress created the CRA in 1977 to reverse years of redlining and other restrictive banking practices that locked the poor, and especially minorities, out of homeownership and the tax breaks and wealth creation it affords. The CRA requires federally regulated and insured financial institutions to show that they're lending and investing in their communities.
Conservative columnist Charles Krauthammer wrote recently that while the goal of the CRA was admirable, "it led to tremendous pressure on Fannie Mae and Freddie Mac — who in turn pressured banks and other lenders — to extend mortgages to people who were borrowing over their heads. That's called subprime lending. It lies at the root of our current calamity."
Fannie and Freddie, however, didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.
What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.
These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.
As much as I love the folks at McClatchy, I said the exact same thing a month ago, in this fantabulous video:
The Dow keeps plummeting, (below 8,000 -- losing nearly half its value this year...) along with the global markets. It's a crisis that it seems no entity, no agency of government can stop. General Motors' stock fell below FIVE DOLLARS for the first time in 60 years. FIVE... Jesus... analysts are projecting that the big three U.S. auto makers cannot all survive. At least one will go away completely, or be absorbed by another company... President Bush is making noises about doing something, but honestly, events have overtaken him, and everybody else... World finance chefs are holding an emergency meeting. Good luck with that.
BTW one astute blogger posted a chart plotting McCain's poll numbers against the S&P 500.
Fascinating. Clearly, this guy is going to need more than Bill Ayers to get back into the race. Or not:
As Pollster’s Steve Lombardo says, “The economic situation has virtually ended John McCain’s presidential aspirations and no amount of tactical maneuvering in the final 29 days is likely to change that equation.”
Meanwhile, Barack Obama slams McCain for "stoking anger and division" at a time like this ... Italy's Silvio Berlusconi walks back from his suggestion that world markets simply be closed.
The Dow got hammered again today. Nothing the Fed or the feds are doing is working... and with credit in seizure, J.D. Powers fears the global automobile market may completely implode by next year. So what's the problem? This from a good old fashioned conservative:
"The crisis we are entering is not due to a lack of credit. The core of the problem was our dependency on credit in the first place. A lack of credit is a symptom of our dependency on it. It is a crisis of Consumer Capitalism, the idea that Consumption can be the major source of growth in an economy. We must somehow transition to Producer Capitalism again. We have an entire economy, almost worldwide, based upon debt and consumption. It could not last because over time every dollar of debt created creates less and less GDP growth in the economy. Therefore, more and more debt must be created just to keep the same rate of economic growth. We are now literally consuming our economy to its death. The efforts to "get liquidity going" and the like, while maybe easing conditions in the very short term, weeks, are only going to make the collapse greater. It is simply adding more kindling to the bonfire of debt that is already raging."
Thursday's seizure and sale is the latest historic step in U.S. government attempts to clean up a banking industry littered with toxic mortgage debt. Negotiations over a $700 billion bailout of the entire financial system stalled in Washington on Thursday.
Washington Mutual, the largest U.S. savings and loan, has been one of the lenders hardest hit by the nation's housing bust and credit crisis, and had already suffered from soaring mortgage losses.
Washington Mutual was shut by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. This followed $16.7 billion of deposit outflows at the Seattle-based thrift since Sept 15, the OTS said.
"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.
Customers should expect business as usual on Friday, and all depositors are fully protected, the FDIC said.
Apparently, news leaks forced an early announcement. Usually, these things are done on Friday, so the auditors can spend the weekend going through the books. The bank has $307 billion in assets and $188 billion in deposits. What's also on tap here? Mega consolidation of U.S. banks:
... The largest previous U.S. banking failure was Continental Illinois National Bank & Trust, which had $40 billion of assets when it collapsed in 1984.
JPMorgan said the transaction means it will now have 5,410 branches in 23 U.S. states from coast to coast, as well as the largest U.S. credit card business.
It vaults JPMorgan past Bank of America Corp to become the nation's second-largest bank, with $2.04 trillion of assets, just behind Citigroup Inc. Bank of America will go to No. 1 once it completes its planned purchase of Merrill Lynch & Co.
Will Neil Cavuto be forced to walk back from his "lending to minorities caused the housing crisis" gaffe? Recall that on Sept. 18, Neil interviewed California Congressman Xavier Becerra (D-CA) and gave the now standard Republican talking point that the problem isn't Wall Street speculators and investment banks, it's Fannie Mae and Freddie Mac and their insidious practice of lending money to minorities to make them feel like homeowners... Neil? You're up:
CAVUTO: I just wonder, you know, with Congress holding all these hearings -- and you're right, there are a lot of them planned -- does anyone hold hearings on what you guys knew or didn't know or whether -- or whether you were ignorant or not? I mean, does anyone look at -- I know the buck stops with the president -- but at least it stops by you guys. What were you doing?
BECERRA: Well, we were trying to get answers from the administration. Unfortunately, it didn't seem like they were giving us a complete picture of what was going on. We can only know what the administration tells us about their administration of the government. But you're right.
CAVUTO: All right, but let me ask you -- but, Congressman, when -- when you and many of your colleagues were pushing for more minority lending and more expanded lending to folks who heretofore couldn't get mortgages, when you were pushing homeownership --
BECERRA: Neil, who did that?
And later...
CAVUTO: -- I'm just saying, I don't remember a clarion call that said, "Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster."
It would be nice if Cavuto was some sort of lone wolf, but it's actually a rather standard talking point on the right, that the real problem goes back to the days when do-gooders like Andrew Cuomo were running HUD, creating things like the "Community Reinvestment Act" and forcing poor, helpless banks to stop red lining black neighborhoods and denying home loans to qualified black applicants. Poor fools. Little did they realize they'd be left holding the bag for Phil Gramm and John McCain's deregulation of the securities markets.
The truth of the matter is, Fannie and Freddie are a drop in the bucket compared to the Wall Street "banks" that bundled bad mortgages and sold them as derivatives -- bad mortgages that went, not to "poor people" as Larry Kudlow and others charge, or to "minorities" alone, but to millions of perfectly white middle class Americans, and not a few people trying their hand at "house flipping." And the bad mortgages wouldn't have infected the entire system had they not been immediately sold off, chopped up, and turned into lucrative, air-thin derivative securities that were sold at inflated values to make people like Kudlow richer.
But that's too complicated for people like Neil, who like their politics simple, neat, and racist. Oh, and it's also a clever way to argue that the problem wasn't deregulation, it was overregulation...
So will Neil be disciplined by his bosses at Fox? When Sarah Palin gives a press conference...
Ben Bernanke and Hank Paulson go to Capitol Hill today to argue on behalf of Paulson's Goldman Sachs economic rescue plan (and his own unlimited power grab...)
Team McCain is breathing a sigh of relief that Friday's debate will be on foreign, rather than domestic and economic, policy. The reason: Mac has become a veritable economic gaffe machine as he tilts at the windmills of Wall Street in search of an escape from his own policy past.
Of course, he hasn't been going great guns on foreign policy, either, telling "60 Minutes" this weekend that he essentially endorses Sarah Palin's dangerously dimwitted view that the U.S. could well wind up at war with Russia over a NATO'd Georgia (not to mention saying she's "absolutely" ready to be president...)
Meanwhile, more bad news for the GOP. Voters in new polling blame them, surprise surprise, for the economic meltdown and the Wall Street bailout, including voters in the crucial swing state of Nevada. A new Suffolk University poll finds:
The poll shows that the toss-up state of Nevada remains just that, with Sens. John McCain and Barack Obama statistically tied at 46 percent and 45 percent, respectively.
When likely voters were asked who they figure is responsible for the current financial state on Wall Street, 41 percent blamed the Republicans, 16 percent tagged the Democrats, 27 percent said neither, and 16 percent couldn't decide who to blame.
And a new CNN poll finds voters across the U.S. tagging the GOP with the blame for the present crisis by a 2 to 1 margin.
By the way, did you hear the one about the McCain campaign manager who was paid $30,000 a month to lobby on behalf of Fannie Mae and Freddie Mac against stepped up regulation? Guess who Rick Davis was lobbying? John McCain!
The Obama campaign just finished a conference call for reporters to discuss the new ad, "Article," which hits John McCain on his love of deregulation, and his plan to do to healthcare what his and Phil Gramm's policies have already done to the financial markets. Watch the ad:
Ever since McCain's article from the September/October edition of Contingencies Magazine was first re-posted by New York Times columnist Paul Krugman on Friday, Democrats have been chomping at the bits to ram it down McCain's throat. After all, what better way to deflate the idea that the Republican nominee, after years of pursuing deregulatory policies, all the sudden was a champion of government oversight? Or, for that matter, what better way to drive home the notion that McCain would put one's health care - not to mention Social Security - at play in a clearly erratic market.
Here’s what McCain has to say about the wonders of market-based health reform:
Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation.
So McCain, who now poses as the scourge of Wall Street, was praising financial deregulation like 10 seconds ago — and promising that if we marketize health care, it will perform as well as the financial industry!
The full McCain article is available as a PDF file here. The McCain response, according to one reporter on the call, is as follows:
"REZKO REZKO REZKO BILL AYERS BILL AYERS REZZZZZKOOOOOO!!!!!!" (cough ... sputter ... sigh...)
Every so often, a member of the "conservative movement" offers us a clarifying moment, that illustrates the fundamental differences between the values and ideas of the two major political parties. (Phil Gramm declaring Americans "whiners" for not appreciating how well the economy is doing ... for rich people like him; John "seven homes" McCain declaring that "the fundamentals of the economy are strong," while Rome is literally burning all around him, being just two examples.) This morning on "Morning Joe," CNBC host, GOP booster, laissez-faire economics guru and John McCain sympatico Larry Kudlow, offered up such a moment.
Asked to explain the current crisis on Wall Street and Main Street, Kudlow declared that it's not the fault of the investment banks and hedge fund guys who packaged, bought and sold subprime mortgages for sport and profit, driving up demand for bad loans and incentivizing shady lending, or even the banks themselves, and their coterie of crooked appraisers and greedy mortgage brokers. It wasn't the Republican Congresses who systematically stripped the system of regualtions, thanks in large part to John McCain's buddy Phil Gramm. It wasn't the speculators or the flippers buying second, third, and even fourth homes and condos, or the price-gouging builders raising prices $30,000 a month here in Florida, or the greedy developers and brokers pushing home ownership with "no money down" as the latest fashion trend, or the combined speculative market that juiced up of home values beyond all reason. Nope. Those people are well off, and therefore they're better than you.
No, my friends, it turns out our current economic crisis, led by the massive mortgage meltdown, is the fault of liberals, who literally forced banks to lend mortgage money to poor people so they could assuage their "liberal guilt," and of course, it's also the fault of those icky, horrible poor people themselves. How dare they want to live like the rest of us! Why, they're POOR! ... and that's supposed to mean something in America!
Never mind that percentage-wise, home ownership among the poor is literally negligible, and that a huge part of the housing crisis is the LACK of affordable homes for people with little income, or that the majority of these 3-bedroom, $500,000 homes that are really worth $250,000 are being sold not to the poor, but to the middle class, often at teaser rates that mean their mortages literally can double after six or seven years.
Forget all that, and listen to Larry. He knows that it really was those bloody awful poor people, and the whimpering liberals who pamper them, at the expense of the downtrodden, helpless banks.
After a few minutes of this, Joe Scarborough was literally dumbstruck.
"Okay, so you're saying it's the poor people's fault," he deadpanned. Kudlow sputtered, but he had already said too much.
Going into the break, Scarborough sneered that coming up in the next segment, they'd explain how poor people were behind the JFK assassination, too.
Update: An astute commenter at TPM finds this link that delves into the role the SEC's lax oversight played in bringing us to the brink. An excerpt:
As we learn this morning via Julie Satow of the NY Sun, special exemptions from the SEC are in large part responsible for the huge build up in financial sector leverage over the past 4 years -- as well as the massive current unwind
Satow interviews the above quoted former SEC director, and he spits out the blunt truth: The current excess leverage now unwinding was the result of a purposeful SEC exemption given to five firms.
You read that right -- the events of the past year are not a mere accident, but are the results of a conscious and willful SEC decision to allow these firms to legally violate existing net capital rules that, in the past 30 years, had limited broker dealers debt-to-net capital ratio to 12-to-1.
Instead, the 2004 exemption -- given only to 5 firms -- allowed them to lever up 30 and even 40 to 1.
Who were the five that received this special exemption? You won't be surprised to learn that they were Goldman, Merrill, Lehman, Bear Stearns, and Morgan Stanley.
As Mr. Pickard points out that "The proof is in the pudding — three of the five broker-dealers have blown up."
So while the SEC runs around reinstating short selling rules, and clueless pension fund managers mindlessly point to the wrong issue, we learn that it was the SEC who was in large part responsible for the reckless leverage that led to the current crisis.
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.
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.
The financial crisis continues to ripple across the globe this morning, from Moscow to London to New York City. Stocks took a dive this morning on Wall Street, even after the Fed agreed to bail out AIG, the nation's largest insurance company. The FDIC -- you know, the one that insures the money you have in the bank, up to $100,000? It's running short of cash, meaning that, in the AP's words, "the taxpayer may be the lender of last resort."
Meanwhile, maybe Sarah Palin can get on this right away: Russia is threatening to seize part of the oil-rich Arctic. Yep. Seize it.
And last but not least, no, Gerald Warner, it's not just you...
...no, seriously, McCain's plan to fix the global economic meltdown is a commission ... just like the one that looked into 9/11 years later. So that's it then. John McCain is going to fight corporate greed with old-man style needling of those jerks on Wall Street, a few pokes in the gut to his "friends" on Capitol Hill who are REALLY gonna listen to him once he's in the White House ... plus the unseen power of bloated bureaucracy! ABC News, broadcast friend of Republicans everwhere? Your turn:
An angry Sen. John McCain indicated today that as president he would launch a 9/11-commission style investigation into what he called "the old-boy network and Washington corruption" that created the current Wall Street crisis and has endangered peoples' savings and retirement funds.
... uh oh... it's never good when the "drive by media" uses the words "angry" and "McCain" in the first sentence...
McCain's stance on the economy has been under attack from Democrats since he released an ad Monday that said the economy was in crisis, but later gave a speech saying the "fundamentals of our economy are strong." He defended himself Tuesday and laced into a denunciation of corporate greed.
"I said the fundamental of our economy is the American worker. I know that the American worker is the strongest, the best, and most productive and most innovative," McCain, R-Ariz., told ABC's Chris Cuomo on "Good Morning America" Tuesday.
"They've been betrayed by a casino on Wall Street of greedy, corrupt excess -- corruption and excess that has damaged them and their futures," he added.
McCain said he wants an inquiry into what led to the current mess, though he did not offer details.
"We're going to need a '9/11 Commission' to find out what happened and what needs to be fixed," he said. "I warned two years ago that this situation was deteriorating and unacceptable. And the old-boy network and the corruption in Washington is directly involved, and one of the causes of this financial crisis that we're in today. And I know how to fix it, and I know how to get things done."
"Americans are hurting right now, and there's going to be a ripple effect of this financial crisis because of the greed and corruption and excess, and Wall Street treated the American economy like a casino," he continued. "And we can fix it, and we've got to keep people in their homes."
So ... you're going to have the federal government root around into the finances and payrolls of private companies, Mr. Conservative? Hm?
This crisis seems to be bringing out the worst in John McCain. He is at his histrionic, tisk-tisking apex, railing against Wall Street, railing against Congress (which he'd like you to forget he's a part of, and has been for a quarter century,) and just generally sticking it to all the jerks he's better than. That's not change we can believe in... that's an angry Grandpa!
Today, the commission released its final report calling for the federal government to immediately withdraw from Wall Street, the home mortgage market and “other sectors where government intervention has undercut the principles of free-market capitalism.”
The commission, which convened at the Cracker Barrel Restaurant in Fogelsville, Pennsylvania, issued its recommendations before the waitress brought out the dessert menu, and it called on presidential candidates from both major parties get behind its agenda of common-sense reforms.
According to Scrappleface's crack...erbarrel reporting, the commission members include:
... a truck driver, a Wal-Mart People Greeter, a self-described public school “cafeteria lady” and “that old guy who’s always sitting by himself at Cracker Barrel”...
Carly Fiorina proved again today why she isn't the woman standing next to John McCain on the stump: she has a truth tic. This time, it's not about Viagra. This time, she slips a little nugget into her Palin support schtick, saying Sarah couldn't run HP:
Not that the shareholders thought Carly was fit to run the company either, but... it probably wasn't "on message."
Obama campaign spokesman Tommy Vietor, take it away:
"If John McCain’s top economic advisor doesn’t think he can run a corporation, how on Earth can he run the largest economy in the world in the midst of a financial crisis? Apparently even the people who run his campaign agree that the economy is an issue John McCain doesn’t understand as well as he should."
If Team Obama is smart, the economic meltdown of the United States, and John McCain's clear lack of understanding of it, will become the cudgel they beat Grandpa over the head with from now until election day.
The WaPo's Richard Cohen unloads on John McCain in an op-ed today:
McCain has turned ugly. His dishonesty would be unacceptable in any politician, but McCain has always set his own bar higher than most. He has contempt for most of his colleagues for that very reason: They lie. He tells the truth. He internalizes the code of the McCains -- his grandfather, his father: both admirals of the shining sea. He serves his country differently, that's all -- but just as honorably. No more, though.
I am one of the journalists accused over the years of being in the tank for McCain. Guilty. Those doing the accusing usually attributed my feelings to McCain being accessible. This is the journalist-as-puppy school of thought: Give us a treat, and we will leap into a politician's lap.
Not so. What impressed me most about McCain was the effect he had on his audiences, particularly young people. When he talked about service to a cause greater than oneself, he struck a chord. He expressed his message in words, but he packaged it in the McCain story -- that man, beaten to a pulp, who chose honor over freedom. This had nothing to do with access. It had to do with integrity.
McCain has soiled all that. His opportunistic and irresponsible choice of Sarah Palin as his political heir -- the person in whose hands he would leave the country -- is a form of personal treason, a betrayal of all he once stood for. Palin, no matter what her other attributes, is shockingly unprepared to become president. McCain knows that. He means to win, which is all right; he means to win at all costs, which is not.
He concludes:
...maybe [he] thinks that if he wins the election, he can -- as he did in South Carolina -- renounce who he was and what he did and resume his old persona. It won't work. Karl Marx got one thing right -- what he said about history repeating itself. Once is tragedy, a second time is farce. John McCain is both.
Of course, the right will simply dismiss Cohen and slam him for quoting Karl Marx, (surprise, folks, Cohen is a conservative...) but tragically, Cohen is right. John McCain has sold himself to the right wing of his party just so that he can hear the word "president" in front of his name, even for a year or two. He is a pitiful man. And a tragic one. And the idea that half this country thinks he should be president says as much about us as it does about him.
