McCain Foresaw the Problem

In my posts, Immediate Reactions to Palin's Second Interview and From My Research...Will McCain Be Different?, I discussed Sarah Palin's claim that McCain's economic policies will differ from those of President Bush in three areas: (1.) McCain will limit government spending, (2.) he will make taxes lower than they are now, and (3.) he will regulate lending companies. I documented that McCain has a solid record on opposing government boondoggles, and also that he's fairly okay on the tax issue.

But it turns out that he has a good record on (3.) as well: regulation of lending companies. He was a co-sponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, which the Democrats blocked. Here is his warning about Fannie Mae and Freddie Mac, a couple of years before their bailout:

"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."

See here and here.

McCain foresaw the Freddie and Fannie problems a few years before they happened, and he wanted to prevent them.

Meanwhile, according to the non-partisan Center for Responsive Politics, guess which Senator received the second largest number of contributions from employees and PACs of Fannie Mae and Freddie Mac? Barack Obama! And he's not even been in the Senate that long. The report covers 1989-2008, and Obama still comes in at number 2 (see here). Change Washington? I don't think so!

I heard this on Sean Hannity's radio program today, and I felt compelled to pass it along to whatever circle of influence I have. People probably won't learn of it from the mainstream news!