RTFA: http://www.youtube.com/watch?v=IDofbll86dY&feature…

During S&L Crisis, 747 Savings & Loans Banks Failed, Costing US Taxpayers $124 Billion; Deregulation Allowed Riskier Investments By S&Ls, Leading To Widespread Collapses And Fraud. In the 1980’s and early 1990’s the US economy was badly shaken by the failure of 747 savings and loan (S&L) institutions that had to be taken over and bailed out by the federal government. In total, the failures cost taxpayers $124 billion. One of the main causes for the epidemic of failures was the unregulated expansion of S&L’s, which had traditionally only dealt with home loans, into more exotic and riskier investments. When many of those investments failed, the institutions collapsed. [Chicago Tribune, 7/3/98, Los Angeles Times, 9/17/08]

Here’s a direct link to the video. McCain has been Keated by the Obama campaign.

Keating (past tense: Keated) is analogous to Swift Boating, in the sense that this video seriously undercuts McCain’s credibility. However, being ‘Keated’ differs from being ’swift boated’ insofar as this one is conspicuously documented by essentially every major media outlet, it is recorded in the Senate logs, and being Keated is to be confronted with incontrovertible factual evidence.

The only question I now have is: to what extent has McCain played an active role in the current sub-prime lending crisis?

RTFA: http://keatingeconomics.com/

The current economic crisis demands that we understand John McCain’s attitudes about economic oversight and corporate influence in federal regulation. Nothing illustrates the danger of his approach more clearly than his central role in the savings and loan scandal of the late ’80s and early ’90s.

John McCain was accused of improperly aiding his political patron, Charles Keating, chairman of the Lincoln Savings and Loan Association. The bipartisan Senate Ethics Committee launched investigations and formally reprimanded Senator McCain for his role in the scandal — the first such Senator to receive a major party nomination for president.

At the heart of the scandal was Keating’s Lincoln Savings and Loan Association, which took advantage of deregulation in the 1980s to make risky investments with its depositors’ money. McCain intervened on behalf of Charles Keating with federal regulators tasked with preventing banking fraud, and championed legislation to delay regulation of the savings and loan industry — actions that allowed Keating to continue his fraud at an incredible cost to taxpayers.

…so perhaps McCain does have some experience with financial crises. Here is some background on the Savings and Loan Crisis:

Savings and loan institutions (also known as S&Ls or thrifts) have existed since the 1800s. They originally served as community-based institutions for savings and mortgages. In the United States, S&Ls were tightly regulated until the late 1970s.[citation needed] For example, there was a ceiling on the interest rates they could offer to depositors.[citation needed]

In the 1970s, many banks, but more particularly S&Ls, were experiencing a significant outflow from low-interest rate deposits, as interest rates were driven up by the high inflation rate of the late 1970s and as depositors moved their money to the new high-interest money-market funds.[citation needed] At the same time, the institutions had much of their money tied up in long-term mortgage loans at fixed interest rates, and with market rates rising, these were worth far less than face value. That is, to sell a 5% mortgage to pay requests from depositors for their funds in a market asking 10%, a savings and loan would have to discount its asking price on the mortgage. This meant that the value of these loans, which were the institution’s assets, was less than the deposits used to make them, and the savings and loan’s net worth was being eroded.

Under financial institution regulation, which had its roots in the Depression era, federally chartered S&Ls were only allowed to make a narrowly limited range of loan types. Late in the administration of President Jimmy Carter, caps were lifted on rates and the amounts insured per account to $100,000. In addition to raising the amounts covered by insurance, the amount of the accounts that would be repaid was increased from 70% to 100%. Increasing Federal Savings and Loan Insurance Corporation (FSLIC) coverage also permitted managers to take more risk to try to work their way out of insolvency so the government would not have to take over an institution.

Carter left office in January 1981, a year in which 3,300 out of 3,800 S&Ls lost money. In 1982 under Ronald Reagan, the combined tangible net capital of the industry was $4 billion. The chartering of federally regulated S&Ls accelerated rapidly with the Garn-St. Germain Depository Institutions Act of 1982, which was designed to make S&Ls more competitive and more solvent. S&Ls could now pay higher market rates for deposits, borrow money from the Federal Reserve, make commercial loans, and issue credit cards. They were also allowed to take an ownership position in the real estate and other projects to which they made loans and they began to rely on brokered funds to a considerable extent. This was a departure from their original mission of providing savings and mortgages.

…by the end, the government bailed out the S&Ls that had failed, for a cost to taxpayers of around $120-160 billion. I haven’t adjusted for inflation, but I imagine that was still a bargain when compared to the $700 billion we’re talking about now – a figure which doesn’t even include the previous bailouts over the last 6 months.