John McCain’s ties to Charles Keating

The issue: Probably the biggest political embarrassment of John McCain’s career emanated from his close ties to Charles H. Keating Jr., the high-flying owner of Lincoln Savings & Loan who later went to federal prison.

Lincoln’s failure would ultimately cost taxpayers $3.4 billion, the most expensive rescue of the S&L crisis in the late 1980s.

Two years before Lincoln went under, McCain and four other senators, at Keating’s request, pressured bank regulators at two meetings to ease up their investigation of the thrift. A subsequent Senate Ethics Committee investigation of the meetings concluded that McCain had been guilty of only “poor judgment.” He did not do as much for Keating as other senators, the panel found.

But of the five senators, McCain was closest to Keating, a Phoenix businessman. In addition to accepting more than $150,000 in campaign contributions from Keating and his associates, McCain and his wife had vacationed at Keating’s Bahamas retreat and repeatedly flown on his jet. (McCain subsequently repaid the cost of the travel.) Cindy McCain and her family were also investors with Keating in a shopping mall developed by one of Keating’s companies.

And in the years preceding the meetings, McCain had fought against tougher regulation of the S&L banking sector, a key priority of Keating’s.

Why the Obama campaign says it matters: McCain’s position against regulation on behalf of a political donor is relevant to assessing how he might handle the current financial crisis.

Why the McCain campaign says it doesn’t: McCain, who subsequently said he regretted his behavior, was never found to have violated any laws or Senate rules.

Source: Noam N. Levey, Times staff writer