Obama to Attack McCain on Role in "Keating 5" Scandal, Despite Previous Statement it isn't "Germane"

On Monday the Obama campaign will start hitting Sen. John McCain, R-Ariz., on his role in the late 80s/early 90s Keating 5 scandal, despite previous indications by Sen. Barack Obama, D-Ill, made months ago, that the scandal was not "germane" to the presidency because McCain had apologized for his role.

Coming off two events -- Alaska Gov. Sarah Palin attacking Sen. Barack Obama, D-Ill., for his controversial associate William Ayers, and Wall Street's financial crisis -- the idea put forward by the Obama campaign is: ‘You want to discuss questionable associates, Sen. McCain? Let’s discuss questionable associates.’

In an email sent to supporters Sunday evening with the subject line "What they don't want to talk about," Obama campaign manager David Plouffe wrote that, "During the savings and loan crisis of the late '80s and early '90s," Plouffe wrote, "McCain's political favors and aggressive support for deregulation put him at the center of  the fall of Lincoln Savings and Loan, one of the largest in the country. ...The McCain campaign has tried to avoid talking about the scandal, but 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"

Monday at noon at the website "Keating Economics.com," the Obama campaign will launch a 13-minute film it is calling a “documentary” called "Keating Economics: John McCain and the Making of a Financial Crisis."

A 35-second preview can be seen HERE.

“Fraud is the creation of trust and its betrayal,” says William Black, former deputy director of the Federal Savings and Loan Insurance Corporation, in the video. “The Keating Five 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 was in attendance at an April 9, 1987 meeting when McCain, Sens. Dennis DeConcini, D-Ariz., Alan Cranston, D-Calif., John Glenn, D-Ohio, and Don Riegle, D-Mich. – soon to be nicknamed the “Keating Five” -- met with Federal Home Loan Bank Board regulators to dissuade them from seizing Lincoln Savings and Loan, part of the empire of Charles Keating, a contributor to their campaigns.

The Senate Ethics Committee ultimately cited McCain for “poor judgment” in meeting with those regulators on Keating’s behalf, though his actions was also deemed "not improper nor attended with gross negligence." Keating ultimately went to prison for fraud and McCain became active in campaign finance reform, almost a form of public penance.

"The appearance of it was wrong," McCain later told the Arizona Republic. "It's a wrong appearance when a group of senators appear in a meeting with a group of regulators because it conveys the impression of undue and improper influence. And it was the wrong thing to do...I was judged eventually, after three years, of using, quote, poor judgment, and I agree with that assessment."

Allies of McCain's would later say that McCain was only included in the group because Democrats wanted the scandal to be bipartisan. ''McCain was going to remain their Republican hostage, no matter what,'' wrote former Sen. Warren Rudman, R-NH, in his memoir, ''Combat.''

The new "Keating Economics" website attacking McCain on the scandal says: “The Keating scandal is eerily similar to today's credit crisis, where a lack of regulation and cozy relationships between the financial industry and Congress has allowed banks to make risky loans and profit by bending the rules. And in both cases, John McCain's judgment and values have placed him on the wrong side of history.”

Obama didn't use to hold such a strong opinion on the controversy. Before the Democratic primary in Oregon in May, Obama appeared at an event alongside Rep. Peter DeFazio, D-Ore., who said of McCain, "he says we need less regulation. Hello! Wall Street mortgage meltdown, Bear Stearns taxpayer bailout, Enron, but, you know, I guess maybe for a guy who was up to his neck in the Keating Five and savings and loan scandal, less regulation is better."

Obama was that month asked about DeFazio's remarks, and he distanced himself from them.

"Congressman DeFazio obviously delivered a speech that wasn’t, uh, wasn't my speech," Obama said. "I don’t have any doubt that John McCain's public record about issues that he's apologized for and written about is not germane to the presidency."

That said, Obama noted that he "was just asked previously about a whole host of issues and associations that were a lot more flimsy than John McCain's relationship to Keating Five. What I've said is, you know, I can't quarrel with the American people wanting to know more about that and me having to answer questions about that."

Asked about Obama's previous implication that he wouldn't attack McCain on the Keating 5 scandal, Obama spokesman Bill Burton said, "John McCain once said he would run a respectful and honorable campaign -- but now his campaign says that he wants to turn the page on the economy and make character assaults.  That’s his choice.  But on this issue, his involvement in the Keating scandal is relevant to the economic crisis we find ourselves in."

Plouffe wrote in his email that the "point of the film and the web site is that John McCain still hasn't learned his lesson...It's no wonder John McCain would rather spend the last month of this election smearing Barack's character instead of talking about the top priority issue for voters."

-- Jake Tapper and Sunlen Miller

UPDATE: McCain-Palin campaign spox Brian Rogers emails: "The difference here is clear: John McCain has been open and honest about the Keating matter, and even the Democratic special counsel in charge recommended that Senator McCain be completely exonerated. By contrast, Barack Obama has been fundamentally dishonest about his friendship and work with the unrepentant terrorist William Ayers, whose radical group bombed the Pentagon and the U.S. Capitol. Nor has Barack Obama come clean on his close friendship with Tony Rezko, a felon convicted on bribery charges who subsidized the purchase of Barack Obama’s home. It's obvious that Barack Obama is frantically attacking because he knows that most voters find these kinds of friendships, and the failed judgment they expose, to be unacceptable for our next president."

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