# Charles Keating The human face of the Savings and Loan Crisis — a Catholic anti-pornography crusader turned thrift-industry buccaneer whose collapse cost taxpayers more than $3 billion, dragged five U.S. senators into ethics proceedings, and produced one of the most-cited lines in modern American political ethics: when asked whether his contributions had influenced the senators who intervened on his behalf, "**I certainly hope so.**" ## Why He Matters Keating is a load-bearing case study at the intersection of three KB themes: 1. **Deregulation moral hazard.** The 1980 Depository Institutions Deregulation and Monetary Control Act and the 1982 Garn–St. Germain Depository Institutions Act loosened restrictions on what S&Ls could invest in, while leaving federal deposit insurance — through the Federal Savings and Loan Insurance Corporation (FSLIC) — fully intact. Operators like Keating could place increasingly speculative bets (commercial real estate, junk bonds, raw land) with depositor funds whose downside was guaranteed by the federal government. Lincoln Savings and Loan is the canonical illustration of how a deregulated upside paired with a socialized downside produces a predictable wave of fraud. 2. **The corrupting influence of money in politics.** Keating donated approximately $1.3 million to the campaigns and causes of five U.S. senators — Alan Cranston (D-CA), Dennis DeConcini (D-AZ), John Glenn (D-OH), [[John McCain]] (R-AZ), and Donald W. Riegle Jr. (D-MI) — and in 1987 those senators met with federal regulators on his behalf, urging them to back off an examination of Lincoln. The "**[[Keating Five Scandal]]**" became the textbook case for the proposition that large political contributions buy access, attention, and intervention regardless of party. McCain later cited the experience as the formative moment behind his eventual sponsorship of the [[McCain–Feingold Act]] (Bipartisan Campaign Reform Act of 2002). 3. **The right-wing culture warrior as financial predator.** Before he was a thrift baron, Keating was the founder of **[[Citizens for Decent Literature]]** (1958), one of the most influential anti-pornography organizations of the postwar era — pressuring local prosecutors, filing amicus briefs in 27 Supreme Court obscenity cases, and serving on Nixon's 1969 Commission on Obscenity and Pornography (where Keating dissented from the majority's permissive findings). The simultaneity is the point: the same biographical figure was, on one front, a conservative Catholic moralist policing literature for indecency and, on another, defrauding elderly depositors of their life savings while bankrolling senators to keep regulators away. The performative-morality / actual-conduct gap is a recurring pattern in this knowledge base; Keating is one of its earliest large-scale exemplars. ## The Career Arc **Cincinnati origins (1923–1976).** Born December 4, 1923 in Cincinnati. Navy fighter pilot in WWII; national champion swimmer at the University of Cincinnati; UC law graduate. Built a Cincinnati corporate-law and insurance practice. In 1958 he founded **Citizens for Decent Literature** in response, by his own account, to a sexual assault in his family — the organization grew into one of the country's most active anti-obscenity pressure groups and made him a national figure in conservative Catholic moral politics. Appointed to Nixon's obscenity commission in 1969, he was its loudest dissenter from the majority's recommendation that most adult-obscenity laws be repealed. **American Continental Corporation (1976–1989).** Moved to Phoenix in 1976 and ran [[American Continental Corporation]] (ACC), a real-estate development firm, eventually as chairman. ACC became the holding company through which he would acquire Lincoln Savings. **Lincoln Savings and Loan (1984–1989).** Acquired Lincoln Savings in 1984 — a sleepy California thrift — and used the just-deregulated S&L vehicle to redirect insured deposits into speculative real estate (Phoenician Resort, raw Arizona land), high-yield ("junk") bonds, and unsecured loans to ACC affiliates. On paper, Lincoln's assets ballooned from roughly $1 billion to $5 billion in four years. In reality, much of that growth was accounting fiction. By the late 1980s, federal regulators — chiefly **Edwin Gray**, chair of the Federal Home Loan Bank Board — had concluded that Lincoln was insolvent and engaged in unsafe practices. **The 1987 senators' meetings.** In April 1987, four senators (Cranston, DeConcini, Glenn, McCain) met privately with Gray in DeConcini's office; a week later, those four plus Riegle met with the bank examiners directly investigating Lincoln. The senators urged regulators to drop or relax the examination. Gray and the examiners later testified that they understood the meetings as an attempt by powerful patrons to call them off. Lincoln was not seized for nearly two more years — a delay that significantly increased the eventual cost to the deposit-insurance fund. **Collapse and the press conference (April 1989).** On April 13, 1989, ACC declared Chapter 11 bankruptcy; on April 14, federal regulators seized Lincoln Savings. In remarks to reporters in the days that followed, Keating delivered the now-canonical line on whether his political contributions had influenced the senators: "**I want to say in the most forceful way I can: I certainly hope so.**" (See [[Charles Keating - I certainly hope so]].) Roughly 23,000 customers — many elderly Californians who had been steered by Lincoln branch employees into ACC subordinated bonds rather than insured deposits — lost an estimated $250 million. Total federal cost of cleaning up Lincoln exceeded $3 billion. **Conviction, reversal, plea (1991–1999).** Convicted in California state court in December 1991 on 17 counts of state securities fraud; sentenced to 10 years in state prison. Convicted in federal court in January 1993 on 73 counts of fraud, racketeering, and conspiracy. Both convictions were overturned in 1996 — the state case in April on faulty jury instructions, the federal case in December on jury-contamination grounds — and Keating was released after roughly 4½ years in prison. In April 1999, on the eve of a federal retrial, Keating pleaded guilty to four counts of wire and bankruptcy fraud (admitting he had extracted nearly $1 million from ACC while anticipating its collapse); the judge imposed no additional prison time, no fines, and no restitution, accepting Keating's claim of insolvency. He died March 31, 2014, at age 90, in Phoenix. ## The Keating Five The five senators were referred to the [[Senate Ethics Committee]] in November 1989. After a 14-month investigation: - **Alan Cranston (D-CA)**: Formally reprimanded by the full Senate in November 1991 — the most serious sanction. Cranston had received about $1 million in contributions and had directed his fundraiser to solicit Keating heavily. He did not seek re-election in 1992. - **Dennis DeConcini (D-AZ)**: Criticized for "questionable conduct"; not formally sanctioned. Did not seek re-election in 1994. - **Donald Riegle (D-MI)**: Criticized for "questionable conduct"; not formally sanctioned. Did not seek re-election in 1994. - **John Glenn (D-OH)**: Cleared of any wrongdoing beyond "poor judgment" in attending the meeting. - **John McCain (R-AZ)**: Cleared of impropriety; criticized only for "poor judgment." McCain — the only Republican of the five and personally close to Keating, having vacationed at Keating's Bahamas home — described the experience for the rest of his career as the formative scandal of his political life and, in 1995–2002, partnered with Russ Feingold to push the campaign-finance reform legislation that became the [[McCain–Feingold Act]]. The asymmetric outcomes — one reprimand, two criticisms, two clearings — illustrated both the limits of internal congressional discipline and the durability of senatorial protection for one's own. ## Legislative Aftermath: FIRREA (1989) The Lincoln collapse, arriving on top of a sector-wide wave of S&L failures, forced congressional action. The **Financial Institutions Reform, Recovery, and Enforcement Act of 1989** (FIRREA), signed by President [[George H.W. Bush]] on August 9, 1989: - Abolished the Federal Home Loan Bank Board and the FSLIC. - Transferred S&L deposit insurance to the FDIC under a new Savings Association Insurance Fund. - Created the **[[Office of Thrift Supervision]]** as the new primary S&L regulator. - Created the **[[Resolution Trust Corporation]]** (RTC) to liquidate the assets of failed thrifts. The RTC operated from 1989 to 1995, disposed of about $400 billion in assets, and is the model later studied for the 2008–2009 TARP and bad-bank proposals. - Estimated total taxpayer cost of the S&L cleanup, in 1989 dollars, ran $124–$132 billion (roughly $300 billion in 2026 dollars). Keating's case did not by itself produce FIRREA, but it became the political face of the crisis — the figure photographed leaving courthouses, the figure quoted unrepentantly about buying influence — and provided the political pressure needed to pass a substantial regulatory restructuring. ## The Analytical Frame Keating belongs in the KB for three connected reasons. **As a deregulation case.** The Reagan-era expansion of permissible S&L investments without a corresponding adjustment to deposit insurance is one of the cleanest natural experiments in American financial regulation: change the upside, hold the downside constant, observe the predictable result. Lincoln Savings is the most-studied single instance of that result. Cite when discussing the [[Reagan Tax Cuts]] regulatory record, the limits of "free-market" framing applied to government-insured industries, or the specific concept of moral hazard. **As a money-in-politics case.** The Keating Five episode is the textbook bipartisan example — four Democrats, one Republican — of contributions producing official intervention. Cite when discussing the genealogy of campaign-finance reform from FECA (1974) through McCain–Feingold (2002) through [[Citizens United v. FEC]] (2010); the Keating Five sit in the middle of that arc and are why McCain–Feingold existed. **As a culture-war / financial-predator pairing.** The Keating biography is unusually clean as an example of a conservative Catholic moralist who simultaneously ran a fraud operation against the elderly and bankrolled senators to suppress regulatory oversight. The pattern — public morality entrepreneurship paired with private predation — recurs in this knowledge base across decades and figures. Keating is a useful early data point. ## Notable Quotes - [[Charles Keating - I certainly hope so]] — April 1989 press conference statement, in response to whether his $1.3 million in contributions had influenced the five senators who intervened with regulators on his behalf. One of the most-cited lines in modern American political-ethics literature.