McCain Repeating Keating Era Mistakes, Regulator Warns

"In the S&L crisis, he took his advice from the worst [kind of] criminal. Charles Keating is the person he went to for his policy advice," Black said. "Now, he certainly is getting advice from Phil Gramm, Carly Fiorina, Rick Davis -- the whole group of economic and top political advisers are lobbyist types. He just doesn't seem to get it, ever, that the advice is going to favor their clients. Even if they just stop being lobbyists, you can't just turn that off instantly. It's their mind state that develops. ... The biggest lesson is that, when you deregulate and de-supervise, you create an environment where control fraud emerges. You hyper-inflate bubbles; you get criminalization."

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Jim

The Huffington Post

October 1, 2008

Seth Colter Walls
walls@huffingtonpost.com | HuffPost Reporting From DC

McCain Repeating Keating Era Mistakes, Regulator Warns

October 1, 2008 01:00 AM

As the stock market recovers from its biggest single-day drop since the crash of 1987, a former federal regulator who had a front-row view of John McCain's role in the Savings and Loan scandal says he is repeating some of the same mistakes.

William Black -- a deputy director of the Federal Savings and Loan Insurance Corporation during the "Keating Five" scandal that nearly ended McCain's political career -- says the Arizona Republican's chief errors at the time were underestimating the importance of regulation and relying too heavily on slanted advice from captains of industry.

"In the S&L crisis, he took his advice from the worst [kind of] criminal. Charles Keating is the person he went to for his policy advice," Black said. "Now, he certainly is getting advice from Phil Gramm, Carly Fiorina, Rick Davis -- the whole group of economic and top political advisers are lobbyist types. He just doesn't seem to get it, ever, that the advice is going to favor their clients. Even if they just stop being lobbyists, you can't just turn that off instantly. It's their mind state that develops. ... The biggest lesson is that, when you deregulate and de-supervise, you create an environment where control fraud emerges. You hyper-inflate bubbles; you get criminalization."

Though McCain's latest TV ads tout the senator's sporadic calls for more government regulation, Black notes with interest that McCain bragged recently that he was "fundamentally a deregulator." Black, who is now an associate professor of law and economics at the University of Missouri-Kansas City, also said that the deregulation that McCain was until recently proud to have championed effectively took corporate cops off the beat. "Nobody calls the Houston police department and says 'I think there a problem at Enron,'" he remarked.

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