With the financial sector in turmoil today, the media and the
politicians have started throwing around blame with the same
recklessness as lenders threw around credit to create the problem.
Politically, the pertinent question is this: Which candidate foresaw
the credit crisis and tried to do something about it? As it turns
out, John McCain did — and partnered with three other Senate
Republicans to reform the government’s involvement in lending three
years ago, after an attempt by the Bush administration died in
Congress two years earlier. McCain spoke forcefully on May 25, 2006,
on behalf of the Federal Housing Enterprise Regulatory Reform Act of
2005 (via Beltway Snark):
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.
In this speech, McCain managed to predict the entire collapse that has
forced the government to eat Fannie Mae and Freddie Mac, along with
Bear Stearns and AIG. He hammers the falsification of financial
records to benefit executives, including Franklin Raines and Jim
Johnson, both of whom have worked as advisers to Barack Obama this
year. McCain also noted the power of their lobbying efforts to
forestall oversight over their business practices. He finishes with
the warning that proved all too prescient over the past few days and
weeks.
It never made it out of committee. Chris Dodd, then the ranking
member of the Banking Committee and now its chair, was in the middle
of receiving preferential loan treatment from Countrywide Mortgage,
one of the companies gaming the system in the credit crisis.
Meanwhile, Barack Obama took hundreds of thousands of dollars from the
lobbyists McCain mentions in this speech, making him the #2 recipient
of Fannie/Freddie money:
http://hotair.com/archives/2008/09/17/mccains-attempt-to-fix-fannie-mae-freddie-mac-in-2005/
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