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As Palin Brings Up Ayers, Obama Team Cites Keating

By Anne E. Kornblut and Michael Abramowitz
Washington Post Staff Writers
Tuesday, October 7, 2008

The presidential campaign of Sen. Barack Obama for the first time criticized Sen. John McCain for his role in the "Keating Five" savings-and-loan scandal yesterday, saying the issue is fair game after a weekend of attacks by Alaska Gov. Sarah Palin over the Democrat's ties to Vietnam War-era radical William Ayers.

Attempting to link the early-1990s scandal to the current economic crisis, the Obama campaign launched a Web site devoted to "Keating Economics," including a documentary-style video of McCain's involvement and news clips of his Senate testimony. The campaign also sent an e-mail to millions of supporters arguing that then, as now, the Republican lacks judgment on financial oversight during a crisis.

"With so many parallels to the current crisis, McCain's Keating history is relevant and voters deserve to know the facts -- and see for themselves the pattern of poor judgment by John McCain," Obama's campaign manager, David Plouffe, wrote in the e-mail.

At his own campaign event hours later, McCain sharply questioned Obama's character and intentions, telling a crowd in New Mexico that "even at this late hour in the campaign, there are essential things we don't know about Senator Obama or the record that he brings to this campaign."

"All people want to know is: What has this man ever actually accomplished in government? What does he plan for America?" McCain said. "In short: Who is the real Barack Obama?"

The back-and-forth, coming on the eve of a presidential debate tonight, represented some of the strongest language yet in a race that has grown increasingly negative and signaled that the final four weeks of the campaign could grow even nastier.

McCain senior adviser Nicolle Wallace defended Palin, dismissing the suggestion that the vice presidential nominee was overstating the relationship between the two men when she accused Obama of palling around with a former terrorist.

Ayers was a member of the Weather Underground, a group that carried out several domestic bombings when Obama was a child. Obama has denounced the actions of Ayers, who went on to become a university professor and education advocate in Chicago.

Wallace said the issue is Obama's "dishonest explanation" of his relationship with Ayers, whom he once described as just a "guy who lives in my neighborhood." She noted that Ayers once hosted an event for Obama early in his political career and served with him on a community foundation board.

Palin kept up her attacks on Obama and Ayers at stops in Florida, saying, "This is about the truthfulness and judgment needed in our next president, and Barack Obama doesn't have it."

Raising the Keating scandal fulfilled a promise by the Obama campaign to revive the matter if it felt the McCain campaign ventured too far down the path of personal attacks.

Obama aides also said the current financial meltdown brought fresh currency to the savings-and-loan scandal, elevating it above an ordinary guilt-by-association charge. The collapse of Charles Keating's thrift cost taxpayers billions and required a large government bailout package.

In the video, William Black, a former deputy director of the Federal Savings and Loan Insurance Corp., said the Keating Five scandal "involved all the things that have brought the modern crisis."

"Senator McCain has not learned the lessons and has continued to follow policies that are going to produce a disaster," Black said.

The Senate Ethics Committee exonerated McCain in 1991 after a two-year investigation of whether he and four other lawmakers used improper political influence to protect Keating's failing Lincoln Savings and Loan from regulation. But the committee did fault him for exercising "poor judgment" in his dealings with Keating, an investor who gave McCain $112,000 in contributions as well as lavish gifts.

Keating later went to prison for fraud, and McCain said the ordeal showed him the value of political reform.

The McCain campaign pushed back hard yesterday against Obama's charges, arguing that the senator from Arizona was treated unfairly by the Senate ethics investigation and asserting that McCain had been much more open about his relationship with Keating than Obama has been about his connection with Ayers.

In a conference call with reporters yesterday afternoon, John Dowd, the Washington lawyer who represented McCain during the Senate investigation, called the inquiry a "classic political smear job" by the Democrats running the Senate at the time. Dowd said Democrats included McCain only to make sure that a Republican was part of the investigation. "John had not done anything wrong," he said.

Dowd's point of view was amplified by Robert Bennett, a Washington lawyer who served as special counsel to the Senate ethics committee during the Keating Five investigation.

In an interview, Bennett said McCain should never have been dragged into the ethics case to begin with. He said that after his own lengthy investigation, he came to the conclusion that the case against McCain and former senator John Glenn (D-Ohio) "should have been dropped" because the evidence suggested that once McCain understood that the Justice Department was investigating Keating, he backed off any involvement.

Bennett said former senator Howell Heflin (D-Ala.) insisted that the two be included in the formal public inquiry because otherwise there would have been a month of public hearings "with no Republicans in the dock." The other members of the Keating Five were Democrats.

"I felt it was unfair for McCain to be included as part of the Keating Five," Bennett said, stressing that he was not speaking as part of the campaign, though he noted he also represented McCain in his recent battles with the New York Times.

Disagreement has continued about whether McCain's attendance at those meetings was inappropriate. McCain has previously expressed contrition for being there, telling the New York Times in 1999 that going "into that room gave a definite appearance of impropriety."

But Dowd said yesterday that there was no impropriety because McCain was merely inquiring about reasonable questions raised on behalf of a major local employer.

Bennett said Dennis DeConcini (D), a former senior senator from Arizona and another member of the Keating Five, bore far more culpability for the affair. "I guess you can argue that McCain should have asked more questions of Keating when he was asked to a meeting, but the whole thing was driven by DeConcini," Bennett said.

"The bottom line is that I don't think McCain was treated fairly, and frankly I wish both candidates would get back to the issues," Bennett said.

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