The term 'Keating Five' is included in the Economics edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Choose your edition here...
The Keating Five refers to a corruption scandal of 1989. At the time, five important United States Senators were accused of corruption related to the Savings and Loan crisis in 1989. This political scandal came to represent all that Americans found (and still today find) wrong with their nationally elected congressional representatives. The five senators implicated as part of this Keating Five Scandal were California Democrat Alan Cranston, Arizona Democrat Dennis DeConcini, Ohio Democrat and former astronaut John Glenn, Arizona Republican John McCain, and Michigan Democrat Donald W. Riegle, Jr.
The five Senators endured serious accusations of having unethically involved themselves on the material behalf of banker Charles H. Keating, Jr. who was then Chairman of the Lincoln Savings and Loan Association in 1987. This bank became the subject of a more than routine regulatory investigation run by the Federal Home Loan Bank Board, the FHLBB. This government group later backed away from acting against the bank, apparently without sufficient reasoning.
Naturally the investigation revived two years later in 1989 as the Lincoln Savings and Loan institution spectacularly collapsed to the tune of a $3 billion loss to the federal government. An incredible 23,000 plus bondholders of the bank suffered wipeout losses along with countless investors who saw their entire life savings evaporate overnight. What caught the attention of journalists who investigated the mess were the major political donations Mr. Keating had directed to the campaigns of five senators. These questionably generous donations amounted to $1.3 million.
The Senate Ethics Committee began a long-running investigation into pressure which it was alleged the Keating 5 had brought to bear two years earlier on the FHLBB. Three of the five accused Senators, Cranston, DeConcini, and Riegle, were found guilty of unethically interfering with the government investigation of the bank that might have allowed them to wind down the bank before it imploded at a loss of billions of dollars. Of the three, only Senator Cranston received an official reprimand from the Senate. Both Senators John McCain and John Glenn were fully cleared of any charges of wrongdoing by the investigatory committee. Yet the two men still received a minor slap on the wrist in being told that they had “exercised poor judgment” in being at all involved.
Each of the Keating Five senators was allowed to serve out their remaining Senate terms. When it was time for reelection, both McCain and Glenn ran again. The two men each held onto their seats. McCain emerged apparently unscathed, as he was able to run for the President of the United States twice, emerging as the official 2008 campaign Republic Party nominee.
The Keating and Lincoln Savings scandal became a symbol of all that was inherently crooked about the financial system and ethics in American society. In the spring of 1992, a playing cards deck had been created, marketed, and sold under the name of the “Savings and Loan Scandal.” On the card faces were Charles Keating, Jr. holding up his hand. For the faces of the puppets on each of his fingers were the portraits of the Keating Five Senators.
Polls were taken which demonstrated that the majority of American found the doings of these five Senators to be only typical of the actions of Congress in general. Even political historian Lewis Gould wrote about it that “the real problem for the Keating Three who were most involved was that they had been caught.”