McCain’s First Letter to Edwin Gray

This may be shocking to learn, but back in the 1980s we had a situation where a lot of financial firms that made a ton of money through real estate investments that eventually went bad and wound up leaving taxpayers to hold the bag. Why didn’t someone do something to stop them from putting taxpayer money at risk? Well, in part because the moneymen were able to curry favor with politicians who benefited from their largess, and those politicians were, in turn, able to help stymie regulatory efforts. For example, when John McCain wasn’t partying with Charles Keating at the latter’s resort in the Bahamas, he was signing letters like this one to Edwin Gray, Chairman of the Federal Home Loan Bank Board:

The purpose of this letter is to express our concern over Board Resolution No. 84-227, which would impose arbitrary limits on the ability of an insured state-chartered savings and loan association to invest in real estate, service corporations, and equity securities. While we appreciate the FHLB’s concern over FSLIC’s responsibility for insured institutions, we question whether the approach expressed by this proposed rule is the correct one.

Of course the purpose of the “arbitrary” limits was to reduce taxpayer exposure to the risks Keating was taking. But Keating wanted to make as much money as possible playing with house money. And McCain wanted as much of Keating’s money as was possible. So McCain wrote the letter, and taxpayers wound up paying the bills once the shit hit the fan.