By Rob Wells
Special to the NWA Democrat-Gazette
Thirty years ago, the savings and loan crisis penetrated America's living rooms. Televised hearings of the U.S. House Banking Committee in the fall of 1989 investigated the political might and corruption masterminded by Charles Keating Jr., one of the nation's most powerful businessmen.
Keating and his team engaged in "a looting" of the Southern California-based Lincoln Savings & Loan, a federal judge wrote. Thousands of elderly investors saw their life savings wiped out. "We're looking at the biggest bank heist in history," then-U.S. Rep. Jim Leach, an Iowa Republican, said at the time. Keating had five U.S. senators pressuring regulators not to close Keating's shaky Lincoln Savings and Loan.
Due to these congressional hearings, Keating came to symbolize the savings and loan crisis, one of the worst banking scandals of the 20th century, an event that cost taxpayers at least $125 billion to clean up.
What the American people didn't realize is that mainstream news reporters largely were playing catch-up. A small mortgage industry newspaper, the National Thrift News, had broken the story of Keating and his ring of political corruption nearly two years earlier, in September 1987. Powerful newspapers such as The New York Times and The Wall Street Journal basically ignored the important reporting by the National Thrift News, which won a George Polk Award in 1988 for its overall savings and loan coverage.
How the tiny National Thrift News beat the journalism giants on the Keating Five scandal, a major political corruption story in the 1980s, is a question explored in my new book, The Enforcers: How Little-Known Trade Reporters Exposed the Keating Five and Advanced Business Journalism (University of Illinois Press). I find there is some socially important journalism being produced by the trade press, specialized publications such as National Thrift News or Tax Notes or Aviation Week and Space Technology. We need recognize and distribute this important journalism that has a real impact on our lives and pocketbooks.
The Keating saga began in 1984 when his Phoenix-based home building firm, American Continental Corp., purchased the small, federally insured Lincoln Savings and Loan, based in the Los Angeles area. Keating quickly began using this sleepy home mortgage lender to help finance ambitious real estate projects in Arizona and beyond. The U.S. Federal Home Loan Bank Board, alarmed at the risk and leverage of Keating's activities, took steps to curtail his speculative activities. Keating fought the regulator and eventually called on five U.S. senators to intervene: Democrats Alan Cranston of California, John Glenn of Ohio, Donald Riegle of Michigan, Dennis DeConcini of Arizona and Republican John McCain of Arizona. They met with Federal Home Loan Bank staff in April 1987 and urged them to ease up on the Keating examination, an extraordinary case of political interference in a regulatory matter.
Keating remained in operation until April 1989, when regulators finally seized Lincoln Savings and Loan, a bank failure that cost taxpayers of an estimated $3.4 billion. In addition, some 25,000 bond investors lost an estimated $250 million as Lincoln's parent company, American Continental Corp., filed for bankruptcy protection. Had regulators acted in the wake of the 1987 National Thrift News story -- and there were calls by staff to shut down Lincoln at the time -- the fraud and resulting losses could have been stopped earlier. That's the social cost of ignoring the trade press.
The National Thrift News' reporting was remarkable given Keating's legal and economic power. From 1980 through 1989, Keating filed two libel suits, four lawsuits involving media leaks and eight threats of libel or legal action against the media, according to his corporate records. Keating's use of the courts to intimidate and stifle press coverage is a long-held strategy by business executives to silence critics, one practiced by Donald Trump in his business career. By one estimate, Trump has made 43 public threats of lawsuits and filed five lawsuits against the press. Despite Keating's deep financial pockets and vast legal resources, National Thrift News Editor Stan Strachan and his staff pursued the Keating story anyway.
The National Thrift News case provides new evidence of investigative reporting in this obscure genre of journalism. Consider the Timothy White Award winners, which recognizes courageous trade journalists in publications such as Computer World, which stood up to Oracle Corp.'s Larry Ellison, to Aquatics International, which published a cover story warning about pedophiles working at public swimming pools.
My study suggests businesses and political types will pay for investigative reporting in the trade press because it warns them about bad actors in their industry. It also shows how small newsrooms such as the National Thrift News, with journalists as owners, can innovate in the face of advertiser influence. Instead of letting the industry set the agenda, the National Thrift News had journalists in charge. It was "a reporter's paper."
Commentary on 10/26/2019