September 17, 2008

McCain's Hypocritical Attacks on Wall Street

After the American Century

The Republicans have shown themselves to be reckless and irresponsible stewards of the economy, not just this time but in the 1980s as well. In each case, they overspent and undertaxed, weakening the economy and driving up the national debt. In each case, major banking scandals arose at the end of their eight years in office. Back in the first Bush presidency, it was the Savings and Loan Scandal, as more than 700 savings and loan banks went bankrupt. They had been deregulated - does this sound familiar? - by the Republican Administration. Capitalism freed of interference from Washington would flourish. Instead, a wave of mismanagement and corruption followed, and none was more flagrant that a certain Charles Keating. A Californian investor, he cultivated relations with five members of the US Senate. One of them was John McCain.

That deregulation debacle required a Federal bailout for the banks that cost the American taxpayer more than $120 billion. Senator McCain was involved, though he escaped indictment. For some reason, he does not talk much about this episode in his career. McCain was one of "The Keating Five," who were accused of improperly using their office to advance the interests of Keating's bank. In 1991 he was investigated by his colleagues in the US Senate. Though he was not found guilty of specific crimes, the Senate Ethics Commitee determined that McCain had shown "poor judgement" by being involved. Keating was found guilty of illegal activities and went to prison for five years.

A quarter century ago McCain had an up-close-and-personal look at the damange that deregulation can cause in the banking industry. But he apparently learned nothing from it, and today he advocates the same policies he did in 1990, the year before he was investigated. Keeping this episode in mind, what does he mean when he says, as he repeated in the midst of the current crisis, that the American economy is fundamentally sound? Is he naive? An apologist for the many bankers who have contributed to his campaign? Or possibly a fool when it comes to economics? You don't need to know economics to graduate from a military academy. And he was unable to manage the economics of his bid for presidency the first time around.

On the positive side, McCain has not flip-flopped on this issue, as he has on so many others. On banking regulation, he has held the wrong position consistently. And he has been quite willing to put the taxpayers' money to work bailing out the "free market" banks when they mismanaged themselves into insolvency. McCain is hypocritical when he attacks Wall Street. He has been in bed with the bankers during his whole Senate career. He takes their contributions and when they get in trouble, he bails them out. He is a hypocritical populist as well, because the Republicans ultimately bail out the banks, not the little guy facing foreclosure.

This should not surprise anyone. Bush II gave the largest tax cuts to the wealthiest Americans. McCain criticized that policy in 2001, but then flip-flopped. Today he endorses the Bush tax code and wants to perpetuate it. If only it had been the other way around. If only he had flip-flopped on bank deregulation and maintained his 2001 position on taxes. Then McCain would have the same ideas about the economy as Obama.