Wells podcast: Enforcement Journalism and the Keating Five Scandal

podcastlogoFor the 70th episode of the Journalism History podcast, host Ken Ward spoke to Rob Wells about how a trade publication uncovered a scandal involving five U.S. senators in the midst of the 1980s savings and loan crisis.

Rob Wells is an assistant professor at the School of Journalism and Strategic Media at the University of Arkansas. He is the author of “John J. Kiernan: Business Journalism Pioneer, 1845-1893” in the December 2020 issue of Journalism History.

This episode is sponsored by Taylor & Francis, publisher of Journalism History.


Rob Wells: The trade press plays an essential enforcement mechanism in a free market economy by providing the unflattering information about — about industry characters who violate norms.

Ken Ward: Welcome to Journalism History, a podcast that rips out the pages of your history books to reexamine the stories you thought you knew and the ones you were never told.

Teri Finneman: I’m Teri Finneman, and I research media coverage of women in politics.

Nick Hirshon: And I’m Nick Hirshon, and I research the history of New York sports.

Ken Ward: And I’m Ken Ward, and I research the journalism history of the Great Plans and Rocky Mountains.

Teri Finneman: And together we are professional media historians getting you through our own drafts of history. Transcripts of this show are available at journalism/history.org/podcast. This episode is sponsored by Taylor and Francis,


the publisher of our academic journal Journalism History.

Ken Ward: We’re familiar with the concept of the watchdog journalist, the reporter ever vigilant against wrongdoing especially by elected officials. The watchdog is adversarial, doggedly pursuing misconduct by those in power. But as Dr. Rob Wells, assistant professor at the University of Arkansas, explains, there’s another type of journalist at publications, especially in the trade press. This journalist is the enforcer. Their relationship with those in power is more nuanced.

The publications these journalists work at rely almost exclusively on a niche audience of readers, such as bankers, for survival, and they exclusively cover topics of interest to that audience. But in the process, those readers often become information sources and sometimes even become the subjects of investigative journalism.

This is a tough spot to be in, but it’s central to the work of the enforcer because it gives them unique insight into important topics. And at times, such as when reporters at one –


such trade publication uncovered a scandal that embroiled five U.S. senators in controversy in the 1980s, this journalism can be crucial to the healthy functioning of a democracy.

For this reason, Rob Wells says we should pay more attention to the trade press, and he does so through the case of the Keating Five scandal, this landmark episode in the 1980s savings and loan crisis. It’s the topic of his recent book The Enforcers: How Little-Known Trade Reporters Exposed the Keating Five and Advanced Business Journalism, and it’s a story that he’s going to share with us today.

All right, Rob. Welcome to the show, it’s great to have you.

Rob Wells: Oh, well, thank you very much, Ken, for having me. I appreciate it.

Ken Ward: Yeah, absolutely. So in talking about your book, I think one of the most important topics to sort of get out in the open beforehand to help orient us all to the topic is the trade press. So why don’t you start by sort of orienting us to, to how journalism factors into that space.

Rob Wells: Sure. So. the trade press really started in you know, about –


the 1830s, 1840s with the rise of industrial America as we had specialized industries. There was a big need for information, for continuing education, for, you know, knowledge about supplies and best practices. And so you had railroad journals emerge in this period, and then, you know, chemical journals and drug journals. And these can be either beholden to the industry or they can be, you know, separate independent entities.

Good example of contemporary trade press would be like the American Banker, you know?

Ken Ward: Mm-hmm.

Rob Wells: Covering the banking industry as an independent journalistic enterprise. So, the trade press has evolved in tandem with the economy. It has become very, very big, very powerful and, and an important part of the business journalism universe and no academics are looking at it.

Nobody is like really kind of looking at –


what is happening in the trade press? And this is what my book brings to the table I really think for the first time in a detailed way.

Ken Ward: Why is it that it’s so understudied, right? Is it just not sexy enough to, to get the attention of researchers?

Rob Wells: It is not sexy enough. That is exactly right. Business journalism, I don’t know if – what newsroom you were in, but, you know, the business desk in my experience is always back in the corner, right? It was always kind of like off to the side and, and it had low status. It was regarded as a beat that it really required a lot of technical expertise, it never got on the front page that much.

And so business journalism has been a backwater for many years, and that’s sort of the narrative I’m kind of fighting about and discussing. It may have been a backwater then, but it’s just so essential for our economic well-being right now. I mean it is really these business stories go to the heart of our current –


election, you know?

Ken Ward: Sure.

Rob Wells: Talk about taxes. These are big business stories. And so the trade press as – has always been considered sort of kind of a stepchild of conventional journalism because there was this kind of hazy idea of whether or not these are journals that are published by, you know, by industries themselves, or are they too close to the industry, the covering, are they really providing hard hitting objective news?

And I’m finding a slice of this industry does some really great independent investigative reporting, which nobody really had been talking about until this point.

Ken Ward: Well, and so your book centers on one specific case that sort of illustrates the value that that type of journalism can have. And so why don’t you sort of ease us into the story that you tell in this book. What was it that happened at the core of your book?

Rob Wells: Right, so the core is this whole episode –


in the 1980s called the Keating Five scandal. And it looks kind of quaint compared to today’s political scandals, but it was a very big deal at the time. And basically Charles Keating, who is a very powerful conservative developer, major funder for the Reagan and George H. W. Bush campaigns. Um a big – a religious conservative activist who was on a – on a major anti-pornography campaign.

And he owned a small savings and loan out in California called Lincoln Savings and Loan, and he bought it at a time when Reagan deregulated the banking industry. And the purpose was to use this federally chartered entity as a way to finance some of his very ambitious home building projects in the Southwest in Phoenix. He was now a big-time home developer.


What he ended up doing was getting involved with some highly speculative and aggressive finance. He was bankrolled by Michael Milken of the junk bond king, you know, of the ‘80s.

Ken Ward: Mm-hmm.

Rob Wells: And the bank became highly leveraged and unstable, and regulators wanted to shut it down because it was taking on too much risk on the – as a – as a taxpayer-insured entity. So there was a regulatory fight, and he ended up getting five U.S. senators to intervene on his behalf in this regulatory fight, and they all got money from him: John McCain and Donald Riegle, Dennis DeConcini, Alan Cranston and John Glenn, the former astronaut.

Ken Ward: Right.

Rob Wells: These all – all these guys said to him, with the regulators to say, “Hey, you know, Keating’s he’s – he’s a constituent in our districts,” because he had nationwide, you know, operations.


And “Back off on him. He’s just trying to do the right thing.”

So, it was a political money scandal that had not been seen in, in Washington at that time. You know, to have five sitting senators come in and, and try to run interference for you in a regulatory matter. It became one of this, you know, main symbols of the savings and loan crisis, which was one of the worst bank disasters to happen since the Great Depression at that time.

And Keating became the symbol on television, in the newspaper coverage, of corruption in the banking industry and political corruption.

Ken Ward: So how did how did the story eventually wind up being discovered? How does the trade press sort of enter into this space and publicize what happened here?

Rob Wells: And, and so this goes back to the earlier narrative about business being a backwater. Nobody was really –


paying attention to the S&L industry in mainstream media. Ah, you know, reporters were kind of coming through and cycling through this story, but in the major publications, they weren’t really paying close attention to what Keating was doing on this space but the trade press was.

And the publication that I focused on is called National Thrift News, and you can’t buy National Thrift News on the newsstand. It’s a specialized publication, and it’s just for mortgage executives, right? It’s not a general circulation publication, but they do real journalism, and they’re really, you know, very aggressive about covering their industry.

And as I got in to see their coverage, I was surprised at how much they would write very critically about the people who were their main advertisers and readers. And the advertisers and readers later told me that, you know, “Yeah, we didn’t want to get him beat up in the paper,


but it was very valuable intelligence for us to see what was happening throughout the industry.”

National Thrift News got wind of what was going on with Keating Five case, and they did some remarkable investigative reporting. They got a transcript of the meeting with the five senators and the regulators. They got a frigging transcript. And apparently one of the regulators, you know, was not trusting anybody in the meeting and so he might have worn a wire and that’s where the transcript came from.

But anyway, they got this transcript and that wasn’t good enough, so they called everybody on the transcript and got it nailed down. So, they got everything on this leaked document nailed down, broke the story and for the next two and a half years the mainstream media ignores it.

Ken Ward: Huh.

Rob Wells: They ignore this incredible story back in September of 1987 allowing, you know, this bank to continue to get even more leveraged and even more –


risky. And, and then it ends up with a multi-billion-dollar failure. And ah, a price tag that the American public had to pick up.

So this basic story was this small trade paper in doing, you know, business journalism in a – in a corner of the financial markets. It breaks a big story. I know that the reporters were reading this paper.

Ken Ward: Mm-hmm.

Rob Wells: And they frigging ignored it.

Ken Ward: So why? What is it about these topics that, that, you know, get ignored or overlooked by – you know, you note in your book that the New York Times and the Wall Street Journal in particular dropped the ball on this. Why? What – how did they miss such a high-profile incident like this?

Rob Wells: Part of it is you just didn’t have consistent reporting. Um, you didn’t have consistent staffing on this beat and reporters wanted to move up to something more –


prestigious like foreign affairs or, or national politics. So, you didn’t have the intellectual, you know, history in the foundation that, that the trade press did. They were staying with the characters, and they knew the trajectory of these stories.

So you had a lot of turnover on the big papers. It was a complex story to convey on, on some level, and you needed to have some amount of expertise to understand the nuance in the regulatory filings. When they were filing a cease and desist order, well, they were really mad they were going to shut you down so you had to know, you know, something about what was going on with the regulatory system.

And there is also, I believe, institutional arrogance. And it’s something that I saw working at the Wall Street Journal and at – and at AP. You know we – if we didn’t break it then it doesn’t happen.


And, and I think that was, was definitely some of the factor that, that lead to this problem.

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Ken Ward: And so do those – do the big papers eventually pick up this story and run with it or, or does it stay low key?

Rob Wells: They eventually pick it up when Lincoln Savings fails and Keating files for bankruptcy in April of 1989. And then it becomes like, “Wow, this is a very large failure of a savings and loan. What happened? Who is this guy?” And they go back and rediscover the Keating Five story that the National Thrift News had published in September of 1987.

And the story comes out about, you know, these five senators, and by the fall of 1989, there are major congressional hearings. Ah, some call them the –


Watergate hearings of the savings and loan crisis, but they were – you know, they were like six weeks of hearings where senators, top regulators, all of this, were brought to the forefront by former congressman Henry Gonzalez of Texas.

And this led to the resignation of the chief savings and loan regulator and some legislation, and some very embarrassing moments for prominent politicians like John McCain. And McCain as – you know, he was one of these guys running interference for Keating who was from Phoenix so was kind of the constituent.

But I think McCain kind of comes out a little better than most in this because he apologized, and he ended up sponsoring campaign finance legislation after this.

Ken Ward: Interesting. So you, you note – ah, you actually already noted but I want to come back –


to it, a little bit about this conflict of interest that trade publications like National Thrift News have. What is about – like where is that conflict of interest? Is it – is that unique to the trade press? Is it something to do with that positioning of these publications?

Rob Wells: So it’s not unique with the trade press, but it’s very, very, you know, bold and present and, and sort of in your face. There are the — National Thrift News, for example, their main source of revenue would be the advertisements and subscriptions of people who are in that industry. So, it’s a very narrow base of revenue. They’re not getting a diversified revenue stream like a mainstream newspaper would get from the auto industry or, you know, the movies or what have you.

And so when you are writing something critical about them, about your –


particular industry, there could be potential for an advertiser boycott, or what have you, that could really hurt your potential income and, and the sustainability of the – of the newspaper.

So, what I found in this case was there were a couple advertising boycotts of the National Thrift News, but they didn’t last long, and the reason was because they were providing such an essential service. And this is why I call the book The Enforcers because I’m arguing the trade press plays an essential enforcement mechanism in a free market economy by providing the unflattering information about industry characters who violate norms, who violate the standard ethical behavior.

And so trade publications like the National Thrift News are enforcers of sort of a corporate morality –


is what I’m arguing.

Ken Ward: Well, and, and if I understood your book right, ownership of the – of the publication was really important to fulfilling this role, right? You make some really big conclusions about the different types of, you know, ownership that a publication might have and the impact that that has on the type of reporting that they can produce. Can you say a little bit about that in this case?

Rob Wells: Yeah, so the National Thrift News was unusual. It was – it was a completely independent publication from the industry. It was run – it was partly owned by a journalist and his name was Stan Strachan, who had worked at the American Banker and came up through New York newspapers in the ‘50s and ‘60s.

And just a wonderful old school reporter who had a very strong sense of journalistic values. And he was recruited by a couple outside investors and given, you know, pretty much editorial autonomy to build this up. So having a journalist –


as part owner of a news organization in this case was really important. When it came – you know, the savings and loan industry was experiencing a lot of financial problems and the — just a disaster really in that – in that period.

And he was able to fight back, you know, attempts to cut the budget by some of the investors by saying, “There’s no way we can sacrifice quality journalism with these budget cuts. If you do this, I’m going to walk and the whole place is going to come down.”

So we had a – at the table, doing budget decisions, you know, a part owner, a journalist defending quality reporting, and this allowed – this ownership structure allowed independent investigative journalism to flourish. When you look through the history of commercialism and in journalism, there’s a significant problem with –


shareholder-owned entities having pressure to meet quarterly earnings.

I think McClatchy is a really prime example of that. Gannett is another one where the pressure for quarterly earnings growth is, you know, is in conflict with long-term investments in broader newsrooms.

Ken Ward: One of the topics that your book brings up, but I think we would be crazy to, to ignore here, deals with sort of that – the not just ownership but also just the sort of bravery of reporters in this case, and standing up to pressure from Keating and others. Because something you talk about in the book is Keating using some tactics much like some, some characters that we may be a little bit more familiar with in contemporary society, namely Donald Trump, right?

So can you speak a little bit to how –


Keating dealt with reporters, dealt with journalists and sometimes tried to pressure them to avoid back publicity, and why that may not have come into play in this particular case?

Rob Wells: Yeah, so I argue that the National Thrift News was an incredibly brave outfit by standing up and reporting aggressively on Keating. Because at the time, he was suing a number of publications in — and journalists in Arizona and elsewhere. He had 82 law firms on retainer.

Ken Ward: Wow.

Rob Wells: That came out in the congressional hearings. He had spent $50 million. He had enormous financial resources. And he was known for filing libel suits that may not be successful, but they were a way of, of really challenging, you know, any aggressive reporting about –


just his developments. There was a libel suit filed over some dispute involving water at an Arizona subdivision.

And the National Thrift News didn’t even have a lawyer on staff. It was a very small enterprise. And they went ahead and filed this story at a time where Keating had, had brought a very large libel suit against a freelance writer who was looking at some of these similar issues.

So, what I found is, you know, some really strong parallels between Keating and Donald Trump in that Trump was using the same sort of tactics to push back against critical reporting of his Atlantic City casinos and other narratives. You know, challenging whether or not he in fact is a billionaire.

Ken Ward: Sure.

Rob Wells: There was a long running libel case, which he lost. And Trump was, you know, very blunt about the whole thing, “Well,


I taught – I showed him a lesson. You know, they’re going to think twice before coming after me next time.” And they do. Libel suits are an existential threat to journalists. They are something that could potentially put a major financial burden on a – on a news organization.

So it is a very, very serious thing within the culture of journalism to deal with a libel case, and it’s a classic way of a strong economic actor trying to brush back and potentially censor the news.

Ken Ward: Absolutely. So, I think the clearest message that I got from reading your book was that, that we need to take business journalism and the trade press more seriously. Can you neatly summarize sort of your main argument for that? It’s come out in what you’ve said already, but I think it would benefit us all to get a crystal clear picture of why it is that the trade –


press needs more serious attention by historians, and why it should maybe play a larger role in American journalism more broadly.

Rob Wells: Yeah, so the – at this point in our society, a lot of us are on our own to make really critical decisions about health care, about investments, about our own financial lives. We are in this neoliberal environment where we’re kind of on our own. And we will look – we need to have quality, dependable and accurate reporting about the institutions where we might be trusting our life savings.

This is the role that the trade press can play. This is why we need to support, you know, very strong investigative journalism, business journalism, to bring to the forefront these potential –


problems in corporate America, and the corporations benefit from this. They get to see — large organizations may not know what’s going on in the corner of their universe. And they can step up and, and police their actors and, and take action.

So I just think that going forward that business journalism is really essential for protecting society at a time when we have to make so many decisions on our own about our financial livelihoods.

Ken Ward: Absolutely. Okay, well one last question for you. This is a question we ask all of our guests, and that is in, in your own mind, why does journalism history matter?

Rob Wells: Well journalism history matters in many ways, but I would say we need to really understand – in order to understand the complex environment that we’re in with, with the media,


looking back to in the origins of the Industrial Revolution and the press, the conflicts in the commercial revenue model that was taking place back at that time really kind of informs some of the problems we have today with, with social media platforms and, and advertising you know, conflicts and so forth.

I just find that journalism history is a critical lens for us to make sense of our current media environment.

Ken Ward: Absolutely. Well, I really enjoyed our conversation today, Rob. Thank you for being on the show.

Rob Wells: Well, thank you Ken. Appreciate it very much.

Ken Ward: That’s all the time we have for today. Again, the book is The Enforcers: How Little Known Trade Reporters Expose the Keating Five and Advanced Business Journalism. Thanks for tuning in and be sure to subscribe to our podcast. You can also follow us on Twitter –


at jhistoryjournal. That’s all one word.

Until next time I’m your host Ken Ward signing off with the words of Edward R. Murrow, “good night, and good luck.”

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