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Keating Five

McCain's upward political trajectory was jolted when he became enmeshed in the Keating Five scandal of the 1980s. In the context of the Savings and Loan crisis of that decade, Charles Keating Jr.'s Lincoln Savings and Loan Association, a subsidiary of his American Continental Corporation, was insolvent as a result of some bad loans. In order to regain solvency, Lincoln sold investment in a real estate venture as an FDIC-insured savings account. This caught the eye of federal regulators who were looking to shut it down. It is alleged that Keating contacted five senators to whom he made contributions.

McCain and Keating had become personal friends following their initial contacts in 1981. Between 1982 and 1987, McCain had received $112,000 in legal political contributions from Keating and his associates. In addition, McCain's wife Cindy and her father Jim Hensley had invested $359,100 in a Keating shopping center in April 1986, a year before McCain met with the regulators. McCain, his family, and their baby-sitter had made nine trips at Keating's expense, sometimes aboard the American Continental jet.

By March 1987, Keating was asking McCain to travel to meet with regulators regarding Lincoln Savings; McCain refused. Keating called McCain a "wimp" behind his back, and on March 24 the two had a heated, contentious meeting. On April 2 and April 9, 1987, McCain and the other senators met at the Capitol with regulators, first with Edwin J. Gray, chairman of the Federal Home Loan Bank Board, and then members of the FHLBB San Francisco branch, to discuss the government's investigation of Lincoln. McCain would write in 2002 that attending the two meetings was "the worst mistake of my life".

News of the meetings first appeared in National Thrift News in September 1987, but was only sporadically covered by the general media through April 1989.

After learning Keating was in trouble over Lincoln, McCain paid for the air trips totaling $13,433.

McCain and some of his family at the September 1992 christening of USS John S. McCain at Bath Iron Works in Maine. Left to right, John McCain; his mother Roberta McCain; his son Jack; his daughter Meghan, ship's maid of honor; and his wife Cindy McCain, ship's sponsor.

Eventually the real estate venture failed, leaving many broke. Federal regulators ultimately filed a $1.1 billion civil racketeering and fraud suit against Keating, accusing him of siphoning Lincoln's deposits to his family and into political campaigns. The five senators came under investigation for attempting to influence the regulators. In the end, none of the senators was charged with any crime. McCain was rebuked by the Senate Ethics Committee for exercising "poor judgment" in intervening with the federal regulators on Keating's behalf, but the Senate panel's 1991 report said that McCain's "actions were not improper nor attended with gross negligence and did not reach the level of requiring institutional action against him." Robert S. Bennett, who was the special investigator during the scandal, said that he fully investigated McCain back then and suggested to the Senate Ethics Committee to not pursue charges against McCain. Bennett, a Democrat who would represent McCain in the future for another matter, wrote years later in his autobiography that it was his opinion that McCain was not dismissed from the case because without him, the investigation would have solely been against Democrats.

On his Keating Five experience, McCain said: "The appearance of it was wrong. 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."

McCain survived the political scandal by, in part, becoming friendly with the political press; with his blunt manner, he became a frequent guest on television news shows, especially once the 1991 Gulf War began and his military and POW experience became in demand. McCain began campaigning against lobbyist money in politics from then on. His 1992 re-election campaign found his opposition split between Democratic community and civil rights activist Claire Sargent and impeached and removed former Governor Evan Mecham running as an independent. Although Mecham garnered some hard-core conservative support, Sargent's campaign never gathered momentum and the Keating Five affair did not dominate discussion. McCain again won handily, getting 56 percent of the vote to Sargent's 32 percent and Mecham's 11 percent. McCain's victory put a final end to Mecham's political career, and during the same election Arizona finally passed a referendum, which McCain supported, enabling the state Martin Luther King, Jr. holiday.