Sunday, April 15, 2012

The "Keating Five" Corruption Story Has Lessons for the Citizens United Era

Tough, smart, effective, and apolitical regulators are key to avoiding rampant fraud and future financial crises.
April 11, 2012

April 9, 2012 was the twenty-fifth anniversary of the most infamous savings and loan frauds -- Charles Keating’s successful use of five U.S. Senators to escape sanction for a massive violation of the law. The Senators were Alan Cranston (D. CA), Dennis DeConcini (D. AZ), John Glenn (D OH), John McCain (R. AZ), and Donald Riegle (D. MI). They became infamous as the “Keating Five.” I was one of four regulators who attended the April 9, 1987 meeting and took the notes of the meeting, in transcript format, that were so detailed and accurate that the Senators testified that they were sure I had tape recorded the meeting. (The reality is that I owe my note taking abilities to Bill Valentine, my high school debate coach, and experience debating for the University of Michigan.)

Reviewing my (near) transcript of the April 9 offers a large number of important lessons that would have allowed us to avoid future crises. We suffered the crises because we ignored all the lessons about which approaches are criminogenic and which are successful. The transcript shows four things that work.

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