Almost exactly 20 years ago -- in the middle of the saving and loan crisis -- federal regulators seized Lincoln Savings and Loan Association of Irvine, California. The takeover took place more than a year after five United States senators had tried to hold-off a government investigation by the Federal Home Loan Bank Board into Lincoln's risky loan practices regarding home loans.
Those five senators included Sen. John McCain (R-AZ) and the chairman of Lincoln was Charles Keating -- who was not only a top McCain donor but was Cindy McCain's business partner in a real estate deal in Arizona (as I detailed earlier this year). This scandal -- known as The Keating 5 -- remains an albatross for McCain's political career.
As a result of Lincoln's collapse, American taxpayers lost more than $2 billion on the bailout and more than 21,000 mostly elderly investors lost their life savings as a result of bankruptcy of Lincoln's parent company.
In 1991, the Senate Ethics Committee rebuked McCain, finding that he had "exercised poor judgment in intervening with the regulators." The net effect of the actions of the Keating 5 senators was to prevent federal regulations from intervening a year earlier and limiting the amount of exposure to taxpayers and investors.
Why is this relevant?
Well, 20 years later, we're back in the middle of another banking crisis and federal regulators have already begun seizing insolvent banks, and this advisory ran on the wires over the weekend:
Silver State Bancorp (NASDAQ:SSBX), the holding company for Silver State Bank, announced today that Andrew K. McCain submitted his resignation today as a director on the Boards of Directors of Silver State Bancorp and Silver State Bank, citing personal reasons.
Mr. McCain previously served as a director of Choice Bank in Scottsdale, Arizona from 2006 to April 1, 2008 when Choice Bank merged into Silver State Bank. Mr. McCain had been appointed to the Boards of the Company and Silver State Bank in February, 2008 and had served on the Audit Committee.
Andrew is none other than the son of John McCain.
Be mindful that while Silver State Bancorp has not been seized by federal regulators, it isn't hard to conclude that they're near the top of the watch list. Just last week, the investment site The Motley Fool listed Silver State as three bank stocks not to buy right now. Last month, fears were raised in another Motley Fool analysis of underperforming loans that showed Silver State in dire straits, and check out how the stock has done over the past year:
Already this morning, Silver State (SSBX) is down another 10 percent.
So what is going on? Why did McCain leave the bank's board so suddenly?
Here's what my political gut is telling me: It was pointed out above that Andrew McCain served on the bank's audit committee -- the entity which would know most about the bank's financial situation and its portfolio of increasingly bad loans. Is McCain fleeing the bank, knowing that federal regulators are likely to seize it in short order and did not want his name attached to a collapsing bank right in the middle of a presidential race where his dad is the trailing nominee and whose own political history is soiled with unethical actions involving a bank collapse during the last great banking crisis?
Shockingly -- or not -- the traditional media hasn't yet touched this development, that I've seen. But let's keep a very close eye on developments. It might again prove the saying that the apple doesn't fall far from the tree...
Cross-posted at Political Base.
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Posted July 28, 2008 | 12:55 PM (EST)