Charles Keating and the Lessons of the S&L Crisis

Charles H. Keating Jr., one of the most notorious fraudsters in American history, died yesterday at the age of 90. Although his status as financial criminal number one has slipped a bit in the wake of the 2008 financial crisis, Keating was for many years the guy many Americans thought off when they thought off bankster rip-off artists, and his story reminds us that historically governments have had a very specific response to bad behavior by banks and banksters.

From FDR to Reagan, from Sweden to Iceland, when banks have broken the rules or even engaged in dangerous behavior that might technically be legal but crashes an economy, the investors in those banks have lost their investments, the banks themselves have been taken over by the government (at least for a short time) and the banksters that caused the crisis have gone to jail.

Case and point: After Reagan deregulated the savings and loans in the early 1980s, Charles Keating made millions of dollars through risky investments that ripped off the people who invested in two of the companies he ran, American Continental Corporation and Lincoln Savings and Loan. Tens of thousands of everyday Americans, many of them senior citizens, lost millions of dollars on the junk bonds Keating sold to them.

Keating was protected from federal regulators for a while by a group of senators, including John McCain, but by 1989 the gig was up. American Continental went bankrupt and Lincoln Continental was seized by the government. This was the largest bank failure of the savings and loan (S&L) crisis of the 1980s and 1990s.

Ethically and logistically, there’s very little difference between what Keating did 25 years ago during the savings and loans debacle and what Wall Street banksters did in the lead-up to the 2008 financial meltdown. Like the people in charge of Bear Sterns, Lehman Brothers, and Bank of America, Keating took advantage of loose regulations to make risky and eventually unsustainable investments. And like the people in charge of Bear Sterns, Lehman Brothers, and Bank of America, Keating passed the costs of those risky investments onto everyday investors.

There’s one very big difference between what Keating did during the savings and loans crisis and what the Wall Street banksters did during the 2000s, however: Keating went to jail for his crimes. In 1993, he was convicted on 73 counts of bankruptcy and wire fraud and sentenced to 12 years in prison. Keating ended up serving only 4 ½ years of that sentence, but those 4 ½ years in prison are still longer than any prison time served by any head of any big bank responsible for the 2008 financial crisis.

And Keating wasn’t the only bankster who went to prison for his role in the S&L debacle. During the late 1980s and early 1990s, the Reagan and Bush administrations prosecuted over 1,000 different individuals for their role in the crisis, and of those prosecutions, 839 resulted in convictions. Since the 2008 crisis, however, the government hasn’t done anything like what it did after the savings and loans crisis. In fact, it’s really done nothing at all. No major player in the great mortgage bubble of the 2000’s has gone to jail for their crimes.

As the stock market continues to rise and the big banks get bigger, the shadow of the savings and loans crisis looms larger every day. By throwing the savings and loans banksters in jail, the government sent a message: if you rip people off, you will pay for it. And it gave that message extra weight by stripping the banksters of their assets, nationalizing those assets, and then reselling them to the public using a special agency called the Resolution Trust Corporation.

In the wake of the savings and loans meltdown, the government did exactly what governments should do after banking crisis. Since almost all banking crises have, to some degree, something to do with fraud, it treated the S&L crisis as a criminal matter and punished those responsible for the crimes.

The 2008 financial crisis was the savings and loans crisis on steroids, and the government should have done the same to the people in charge of Lehman Brothers and Bank of America as it did to Charles Keating and the S&L banksters. It should have sent them to jail and stripped them of their assets.

But it didn’t, and now the big banks are bigger than ever and comfortable in the knowledge that not only are they too big to fail, they’re also too big to jail. Let’s hope the death of Charles Keating reminds the government to take action now and jail the banksters before yet another financial crisis decimates the economy. After all, it’s what Reagan would have done.


DAnneMarc's picture
DAnneMarc 9 years 9 weeks ago

Quote Thom Hartmann:But it didn't, and now the big banks are bigger than ever and comfortable in the knowledge that not only are they too big to fail, they're also too big to jail.

Very well said! However big banks aren't the only people who are getting away with crimes. Ever since Nixon walked away from Watergate and the illegal War in Vietnam without answering for high crimes, our leaders have been repeating and steadily increasing the scope of those crimes. After all, why not? Like a child needs to get his first spanking before he understands the meaning of the word, "No," we need to give our politicians spankings too. Spare the rod spoil the President. The same way banksters must be held accountable for their actions so do people who lie the country into illegal wars, rifle our treasury, break their oath of office, defile the Constitution, and deliberately hold up government function. If you let a criminal get away they will always repeat the behavior seeking to out do themselves until caught. It's time we bring discipline back to our nation. It's time we hold our elected representatives and anyone else in positions of power fully accountable for their actions.

DAnneMarc's picture
DAnneMarc 9 years 9 weeks ago

The Supreme Court just handed down a decision that removes limits on campaign contributions--in effect, removing the last impediment to legalized bribery. When money is free speech, only people with money will be heard. Thus, SCOTUS just put our Democracy up for sale to the highest bidder. The need for Move to Amend has never been greater. No one should be above the law and bribery should never be legal. Therefore, it should also be a crime for any lawmakers or judges to knowingly act to make bribery legal The Move to Amend legislation should also include fines and penalties including jail time for anyone accepting or offering bribes; and, also for any Court Justices or Congressmen who misinterpret or construct the law in anyway that allows legal bribery. This isn't rocket science this is common sense. Such a basic law is a fundamental necessity in any form of a functional Democracy.

Palindromedary's picture
Palindromedary 9 years 9 weeks ago

So, Reagan and Bush regimes prosecuted fraudsters and of course Obama's regime has not prosecuted anyone. Hmmmm!;-{

But, let's not forget Michael Milken's right hand man, Peter Ackerman. Ackerman's nickname was "sniff" because he had his head so far up Michael Milken's ....! He was also known as "Michael Milken's right hand man". Ackerman got very wealthy from all of that and he never went to jail. In fact, he went on to get involved with overthrowing other governments, something the CIA used to do before they were brought to task for that in the 70s. They overthrow other governments through subversion.

Peter Ackerman founded American's Elect which was an operation that was trying to get people to vote on line, ostensibly, for politicians who represented the people instead of monied interests. That's the gist of what they were trying to sell us when they paid all of these petitioners $1 per signature in malls, or in front of stores, a few years ago. But, the problem was that AE was never up front about who was funding them. I learned that there were some very wealthy right wingers who were funding them. So, beware of any petitioners who sound like they are for the people...they aren't. They are after your votes and donations to further entrench their own wealthy interests.

Beware of liberal or peace sounding names like Freedom House and International Center for Nonviolent Conflict. It's not really about Freedom or Nonviolent Conflict. The nonviolent conflict really means that they don't have to send in the troops to invade countries (very costly)...they instead, send in money and support in trying to bribe and destabilize and foment unrest hopefully to get the people to rise up and overthrow regimes the US doesn't in Libya..Egypt..Syria..and now Ukraine. These private groups are doing what the CIA used to do so that the CIA can act like they had no part in it. But they do! Still!

The International Center for Nonviolent Conflict was founded by Jack Duvall and Peter Ackerman.

Palindromedary's picture
Palindromedary 9 years 9 weeks ago

The people in the countries that undergo the "nonviolent conflict" suffer a lot of violent conflict. And when the US manages to overthrow these governments...and if they get the puppet kind of dictators they want...the people in those countries have to further suffer the economic woes of austerity and oppression. The supposed goals of ICNC is to bring democracy to these countries non-violently. But that is total bullshit!

Palindromedary's picture
Palindromedary 9 years 9 weeks ago

"The two major US foundations promoting nonviolence, both overseas and domestically, are the Albert Einstein Institution (AEI) and the International Center for Nonviolent Conflict (ICNC). Both receive major corporate and/or government funding. The latter comes mainly through CIA “pass-through” foundations. While the ICNC is funded mainly by the private fortune of hedge fund multimillionaire (junk bond king Michael Milken’s second in command) Peter Ackerman, the AEI has received funding from the Rand Corporation and the Department of Defense, as well as various CIA-linked foundations, such as the National Endowment for Democracy (NED), the International Republican Institute (IRI), the US Institute of Peace and the Ford Foundation (see The Ford Foundation and the CIA),which all have a long history of collaborating with the Pentagon, the State Department and the CIA in destabilizing governments unfriendly to US interests."

Aliceinwonderland's picture
Aliceinwonderland 9 years 9 weeks ago

It irritates me that Charles Keating lived to be such a ripe old age. I wonder how many of his victims' lives were cut short as a direct or indirect consequence of being robbed of their life savings. While I agree that our government's response to the S&L scandal was more fitting than what followed the Big Heist of '08, I still think that for a crime of the magnitude committed by Keating, a four-year prison term is pretty lame. People have served life sentences without parole just for smoking a joint. Injustice never takes a holiday. - Aliceinwonderland

Palindromedary's picture
Palindromedary 9 years 9 weeks ago

Poor old Jimmy Stewart lost half his money...others lost a lot more.

"Imagine a Global Fraud network with corporate fronts and straw men stretching around the world. This complex and ongoing financial debacle goes back to the Savings & Loan frauds of the 1980s, and it has cost American taxpayers billions and billions of dollars.
This is a forensic study of global fraud.

In Denver, there was M.D.C. Holdings, Inc. the parent company of Silverado Savings and Loan, Silverado Elektra, and Richmond Homes, controlled by Leonard Yale Millman, Stew Webb’s former-father-in-law."

The author of this web site, Stew Webb, claims that he is a federal whistleblower and that there has been several attempts on his life...including a very questionable auto "accident", involving the FBI, that broke his neck.

"FBI Stalkers-Assassins after stalking Stew Webb for 90 days drove up left lane on Interstate scrapped wall bounced off hit Stew left rear of his van, flipped van and rolled 3 times on concrete barrier and broke Stew’s neck and cut his skull October 25, 2010."

This web site is interesting because it shows how they did it...selling property to each other for double the values each time they sold it..jacking up the value so that the junk bonds they sold could sucker investors in buying those junk bonds based on the faulty hyped values of those companies. A lot more than that was going on as well. BCCI...Saudis..Wacko WACL Singlaub..Bush crime family...9-11.

Palindromedary's picture
Palindromedary 9 years 9 weeks ago

And Charles Keating tried to come off as being bankrupt..but he hid his money..some of it in his wife's accounts....but I don't think they got away with it. No telling how much money he socked away in foreign accounts, perhaps, with other relative's names or front corporations. One thing, for sure, those who were ripped off didn't get their money back. The next time your bank rep tries to get you to take your money out of insured savings or checking and put into some investment account...think twice about it! It is not a good idea to be playing in a risk market when there are proven criminal scammers that say "Oh, I'm sorry, but we had to declare have just lost all your money...better luck next time, sonny!"

DAnneMarc's picture
DAnneMarc 9 years 9 weeks ago

Bernie Sanders for President 2016 ~ Support Bernie today and buy this T-Shirt.


Available in short and longs sleeve and various colors. Wear it with pride. Gooooo Bernie!!

mathboy's picture
mathboy 9 years 9 weeks ago

Grrr. It's "case in point".

Howard Laverne Stewart's picture
Howard Laverne ... 9 years 9 weeks ago

Not going to jail has emboldened them.

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