The Secret Political Donations

This story draws on historical investigations, journalism, and academic research. Some events described were the subject of public controversy or legal investigation. Allegations and interpretations are presented as reported claims rather than definitive conclusions.

The late 1980s were a turbulent time for American finance. The Savings and Loan (S&L) crisis, a slow-motion catastrophe, was unfolding across the nation, eventually costing taxpayers billions. At its epicenter, like a dark star, stood Charles Keating Jr.—a devout Catholic, a former anti-pornography crusader, and a high-stakes financier who operated with a brazenness that redefined influence peddling.

The Keating Five scandal, as it became known, cast a long shadow over Washington D.C., exposing the opaque nexus between political donations and legislative access. It brought five prominent U.S. senators under an unprecedented ethics investigation, questioning whether their intervention on behalf of a major donor crossed the line from constituent service into undue influence. This wasn't just a tale of financial collapse; it was a gritty examination of trust, power, and the price of political ambition.

Charles Keating Jr. was a man of contradictions. Born in Ohio, he was a decorated naval aviator, a lawyer, and an Olympic-level swimmer. Yet, he would become synonymous with the excesses and ethical ambiguities of the S&L crisis. In the 1970s, Keating rose to prominence as a vocal anti-pornography activist, cultivating an image of moral rectitude. However, according to critics, his financial dealings would eventually paint a different picture.

Keating's primary vehicle was American Continental Corporation (ACC), which, in 1984, acquired Lincoln Savings and Loan. Historically, S&Ls were conservative institutions, focused on local mortgages. Under Keating's leadership, Lincoln Savings reportedly morphed into a speculative investment firm. Instead of traditional home loans, Lincoln allegedly plunged into high-risk junk bonds, real estate development, and other ventures. This aggressive strategy, while initially generating high returns, was a ticking time bomb, according to federal regulators.

Federal Home Loan Bank Board (FHLBB) examiners, tasked with overseeing S&Ls, began expressing alarm. Reports from the FHLBB, later detailed in congressional hearings, indicated that Lincoln's investments were unsound and posed significant risk to depositors. Regulators reportedly attempted to impose restrictions on Lincoln's operations and even considered seizing the institution. Keating, however, reportedly fought back with every tool at his disposal, including legal challenges and, most notably, political influence.

Between 1982 and 1987, Charles Keating and his associates allegedly poured over $1.3 million into political campaigns, with a significant portion directed towards five U.S. senators: Alan Cranston of California, Dennis DeConcini of Arizona, John Glenn of Ohio, John McCain of Arizona, and Donald Riegle Jr. of Michigan. These contributions reportedly came from various sources linked to ACC and Keating's family, raising questions about their origins and intent. Critics later argued that these donations were not merely acts of civic engagement but a calculated strategy to buy access and protection from regulatory oversight.

Keating's financial generosity was legendary, but it was reportedly matched by his combative personality. He once famously remarked, according to press reports, 'I want to influence them, I want them to hear me out.' He was also quoted as saying, 'The most important thing I learned in Washington is that money talks.'

Journalists investigating the scandal later highlighted the timing and scale of these contributions, noting that they often preceded critical regulatory decisions concerning Lincoln Savings. This pattern, according to news reports and later official investigations, suggested a quid pro quo, though proving such a direct exchange in a court of law proved challenging. The stage was set for a collision between an aggressive financier, increasingly concerned regulators, and a group of powerful politicians.

The central event that ignited the Keating Five scandal occurred in April 1987. Facing mounting pressure from federal regulators, Charles Keating reportedly sought the assistance of the five senators who had received his significant campaign contributions. According to Senate Ethics Committee investigations, the senators subsequently arranged and participated in two meetings with top officials from the Federal Home Loan Bank Board (FHLBB) and its enforcement arm.

The first meeting, on April 2, 1987, involved Senators DeConcini, Glenn, McCain, and Riegle meeting with FHLBB Chairman Edwin Gray. The senators reportedly expressed concerns about the treatment of Lincoln Savings by Gray's agency. According to later testimony from Gray, the senators questioned the FHLBB's aggressive regulatory stance towards Lincoln. Senator DeConcini reportedly opened the meeting by stating that 'we wanted to make sure that Charles Keating was being treated fairly,' according to Gray's testimony before the Senate Ethics Committee.

A second, more confrontational meeting took place on April 9, 1987, where all five senators—Cranston, DeConcini, Glenn, McCain, and Riegle—met with FHLBB examiners and enforcement staff. Accounts of this meeting, as revealed in Senate Ethics Committee records, describe a tense atmosphere. According to transcripts of the meeting, Senator Riegle reportedly asked the regulators, 'Are we going to create a situation where we're going to have an impaired thrift, or are we going to let the institution go forward?' Senator Glenn reportedly expressed concerns about the fairness of the regulatory process, while Senator Cranston allegedly urged regulators to back off, claiming they were 'harassing' Keating.

The senators, in their defense, consistently maintained that their actions were legitimate constituent services, a common practice for elected officials advocating for businesses and individuals in their states. They argued that they were merely seeking information about the regulatory process and ensuring that a constituent, Charles Keating, was being treated fairly, as documented in their testimonies before the Ethics Committee.

However, critics, including journalists and public interest groups, argued that the scale of the campaign contributions and the high-level nature of the meetings—involving the highest echelons of a regulatory agency—went far beyond routine constituent service. The fact that the meetings allegedly had the effect of delaying regulatory action against Lincoln Savings was a significant point of contention. Investigators later claimed that the meetings contributed to a delay in the FHLBB's enforcement action, allowing Lincoln to continue its high-risk activities for another two years, as highlighted in reports by the Office of Thrift Supervision (OTS).

This period of alleged delay was crucial, as Lincoln's financial health continued to deteriorate, increasing the eventual cost to taxpayers. The question lingered: did the millions in political donations buy Keating precious time, or were the senators genuinely acting on behalf of a constituent they believed was being unfairly targeted? The answer, as the subsequent investigations revealed, was complex and highly contested.

The house of cards built by Charles Keating Jr. at Lincoln Savings and Loan finally collapsed in April 1989. Federal regulators seized the institution, declaring it insolvent. The fallout was immense, both financially and politically. The ultimate cost to U.S. taxpayers from Lincoln's failure alone was estimated to be over $3.4 billion, a staggering sum that made it one of the most expensive S&L failures in history, according to reports from the Resolution Trust Corporation (RTC).

The collapse of Lincoln Savings triggered a wave of public outrage and official investigations. Depositors, many of whom were elderly and had invested their life savings in high-yield bonds issued by Lincoln's parent company, ACC, faced ruin. While federal deposit insurance protected traditional savings accounts, many bondholders were left with nothing, sparking protests and calls for accountability, widely reported in national media.

In November 1989, federal authorities, including the Department of Justice and the FBI, launched comprehensive criminal investigations into Charles Keating Jr. and his associates at ACC. These investigations focused on allegations of fraud, racketeering, and other financial crimes related to Lincoln's collapse. Simultaneously, the question of the five senators' involvement gained national prominence, propelled by relentless media scrutiny and public demand for answers regarding political influence.

The Justice Department's Public Integrity Section reportedly began its own inquiry into the senators, while the U.S. Senate faced immense pressure to address the ethical questions surrounding its members. In November 1989, the Senate Ethics Committee, chaired by Senator Howell Heflin, initiated a preliminary inquiry into the Keating Five. This was an unprecedented move, as it involved investigating multiple sitting senators for allegations of impropriety, a rare and politically charged undertaking.