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McCain called for reform of Freddie Mac and Fannie Mae in May, 2006

I never thought I’d be writing a blog entry defending John McCain’s record, but the Obama campaign has responded to the recent loan company bail-out by charging that McCain has “lobbyists” on his campaign staff. However, Obama’s campaign staff is more directly linked to Fannie Mae and Freddie Mac. Obama is a top recipient of contributions from these organizations.

Here are the top recipients of campaign contributions from Fannie Mae and Freddie Mac, 1989-2008:

1. Dodd, Christopher J D-CT $133,900
2. Kerry, John D-MA $111,000
3. Obama, Barack D-IL $105,849

An article from June 11, 2008 reports that “Barack Obama’s taking serious heat for his reliance on former Fannie Mae CEO James Johnson to vet potential vice presidential prospects. Obama has presented himself as an outsider and a Washington change agent and Johnson, whose favorable loan deals with Countrywide Financial Corp. made him a lightning rod, is as inside as they come in the capital. How much of an outsider can Obama be, really, GOP skeptics ask, if he’s turned to somebody like Johnson for important spadework in finding a running mate? Johnson announced he quit the Obama campaign earlier today, but the question likely will linger. John McCain’s campaign manager, Rick Davis, also has ties to Fannie Mae, though less directly.”

In 2005, the Democrats voted adown a bill co-sponsored by McCain that purported to bring reform. Could it be a coincidence that Obama is now scrambling to deflect the blame with irrelevant charges?

On May 25, 2006, John McCain called for reform of Freddie Mac and Fannie Mae. He co-sponsored the S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005 that was introduced in January 2005.

Sen. John McCain [R-AZ]:

Mr. President, this week Fannie Mae’s regulator reported that the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years, I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac–known as Government-sponsored entities or GSEs–and the sheer magnitude of these companies and the role they play in the housing market. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.

I join as a co-sponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.

I urge my colleagues to support swift action on this GSE reform legislation.

Here is a summary of the bill: 1/26/2005–Introduced. Federal Housing Enterprise Regulatory Reform Act of 2005 – Amends the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 to establish: (1) in lieu of the Office of Federal Housing Enterprise Oversight of the Department of Housing and Urban Development (HUD), an independent Federal Housing Enterprise Regulatory Agency which shall have authority over the Federal Home Loan Bank Finance Corporation, the Federal Home Loan Banks, the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac); and (2) the Federal Housing Enterprise Board.Sets forth operating, administrative, and regulatory provisions of the Agency, including provisions respecting: (1) assessment authority; (2) authority to limit nonmission-related assets; (3) minimum and critical capital levels; (4) risk-based capital test; (5) capital classifications and undercapitalized enterprises; (6) enforcement actions and penalties; (7) golden parachutes; and (8) reporting.Amends the Federal Home Loan Bank Act to establish the Federal Home Loan Bank Finance Corporation. Transfers the functions of the Office of Finance of the Federal Home Loan Banks to such Corporation. Excludes the Federal Home Loan Banks from certain securities reporting requirements. Abolishes the Federal Housing Finance Board.

Comments

Your comments are welcome!

Rubbish. First of all it was Chuck Hagel's bill, not McCain's. McCain isn't even on that committee. He tacked his name to the bill like the worthless opportunist he is, and then showboated his support for it.

Secondly, the bill had serious flaws and never made it out of the committee. The senate and house never voted on it. Amongst other things, the bill would have actually loosened the reporting requirements on securities. Remember those? The securities that got bundled into market bonds?

That's not even mentioning the fact that it would replace a government regulatory department with what is essentially a "Mortgage Czar" who reports only to the president.

Posted by Jamieson Graham Dahl on 08/20/2014 04:27 PM #

Jamieson,

It's kind of funny that none of what you say here contradicts what I wrote.

I just posted facts that are on public record and I posted all the links to those records.

McCain was a co-sponsor of a bill that never became law and he spoke out against the danger of Fannie Mae and Freddie Mac a long time ago.

That is a matter of record.

So how can it be "rubbish"?

Posted by Jay Rogers on 08/20/2014 04:27 PM #

The two government-backed mortgage holding companies, Freddie Mac and Fannie Mae, have been given billions of dollars to keep the housing industry afloat. However, despite all the money they’ve been given, no Freddie Mac or Fannie Mae principal reductions are taking place.

Posted by edgarY on 12/08/2013 10:22 PM #

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