courtesy National Review Online, Sept. 17

Bart Hall (Kansas, USA) wrote:

It’s not as though this couldn’t be foreseen. It was. By the same guy who called for (years before it happened) a surge of troops to turn things around in Iraq.

John McCain. 25 May 2005, speaking to the Senate [Congressional Record]:

"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 cosponsor 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."

* * *

The legislation was blocked by Democrats, with the assistance of a few Republicans.

James Johnson, former CEO of Fannie Mae and current Obama advisor, has cost us many tens of billions of dollars we can’t afford.

Franklin Raines, former CEO of Fannie Mae and current Obama advisor, has cost us many tens of billions of dollars we can’t afford.

Barack Obama: if we can’t afford his advisors, we certainly can’t afford him.

September 17, 12:52 pm

07:17 PM

McCain Did Anticipate Problems with Fannie and Freddie [Mark Hemingway]

ABC's Jake Tapper:

"Two years ago, I warned that the oversight of Fannie and Freddie was terrible, that we were facing a crisis because of it, or certainly serious problems," Sen. John McCain, R-Ariz., told CBS this morning. "The influence that Fannie and Freddie had in the inside the Beltway, old boy network, which led to this kind of corruption is unacceptable and I warned about it a couple of years ago.”

How does this claim of foresight square with this interview that McCain gave to the Keene (NH) Sentinel, discussing the subprime mortgage crisis, in December 2007?

Tapper goes on to quote McCain saying of the broader subprime/liquidity crises that occurred at in the last few months of 2007, "So, I’d like to tell you that I did anticipate it, but I have to give you straight talk, I did not."

A couple points — in the quote above McCain is clearly referring to Fannie and Freddie explicitly. While they're arguably the lynchpin of the current financial crises, anticipating problems with Fannie and Freddie is hardly the same as foreseeing the overall extent subprime crises.

And if Tapper googled a little harder he would see that McCain's not making a "claim" — he really did anticpate the problems with GSEs and see them as a systemic financial problem. He even sponsored legislation to deal with it:

"I join as a cosponsor 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."

McCain deserves credit for being on the right side of this. Meanwhile, Obama in just four years in the Senate raked more contributions from Fannie and Freddie than any other Senator in the last 19 years — save Dodd. McCain should pummel Obama with this. He's right on Fannie/Freddie where Obama has done nothing but take their money look the other way.