GOLDEN, Colo. – Senator Barack Obama scoffed at a proposal offered Tuesday by Senator John McCain to create a commission to study the calamity in the nation’s financial markets, declaring: “We know how we got into this mess.”

–  ‘The Caucus’ blog, New York Times

 

Indeed, Mr. Obama.  But apparently John McCain knew well before you did: 

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.

– US Senator John McCain, introducing a bill he co-sponsored, The Federal Housing Enterprise Regulatory Reform Act of 2005 (May 25, 2006)

That bill died.  

I’ll play devil’s advocate for a moment and offer up the argument that McCain’s co-sponsored bill may not have prevented the taxpayer-funded bailout, and it probably was too late to stop the bubble from bursting due to ‘easy money’ matched with low interest rates.  It could very well be that we would have still wound up in the same economic situation that we find ourselves in at the present moment.  No one can say for sure.

But the fact is that John McCain recognized what was going on as early as 2003 (as did the Bush Administration), and wanted to fix it.  He warned what failing to act would do, and he was dead-on.  American taxpayers have now been exposed to serious economic repercussions by having to pay for the bailout of Freddie & Fannie (to the tune of $200 billion), and the housing market has collapsed all over the US. 

How did this happen?

Freddie and Fannie kept buying up all of the ‘bad’ or risky loans that private banks didn’t want, due to the risk involved.  The private banks knew that they could just dump them off on Freddie and Fanny.  John McCain saw that this was a house of cards, and knew that it couldn’t continue as it was.

Also be aware that the Federal Housing Enterprise Regulatory Reform Act (FHERRA) was DOA because of Christopher Dodd, Democrat of Connecticut, who was insisting a little more than two months ago that Freddie and Fannie were “fine”.  Senator Dodd receives a nice chunk of his campaign money from–you guessed it–the mortgage lending industry, as well as Freddie and Fannie.

“[Freddie and Fannie will] be fine,” Senate Banking Committee Chairman Chris Dodd, D-Conn., told reporters Friday. Dodd, who helped shepherd the bill through the Senate, says the companies are “fundamentally sound and strong,” noting that they hold excess capital and that their portfolios are primarily made up of healthy, 30-year fixed-rate loans.

“There’s no reason for the kind of reaction we’re getting,” Dodd added, referring to what he described as “panic” on Wall Street.

So tell me, Mr. Obama, exactly what more could John McCain have done to attempt to change the course of the housing bubble and the Freddie & Fannie bailouts (which in turn are harming our economy and taking money from the taxpayers’ pockets)?  And exactly how is it that the top four recipients of campaign money from Freddie and Fannie PAC’s  (1998-2008) were Christopher Dodd (D), John Kerry (D), Barack Obama (D) and Hillary Clinton (D)?  Mind you, when Republicans controlled the senate, Freddie and Fannie gave 52% to Republicans.  It seems that whomever is in power in Congress gets their money.  However, McCain didn’t appear to be swayed by this at all, and his co-sponsorship of FHERRA seems to prove it.  (Unless someone can give me more information that I don’t have, already.)

McCain and those who fought for this bill were set up for failure by Senator Dodd and others who were receiving funds from the wealthy executives and employees of Freddie & Fannie, and other lending agencies.  These creeps were already bought and paid for, not caring about anything more than helping their campaign contributors continue to act irresponsibly on the dime of the taxpayer, so that their contributors could line their own pockets. 

Barack Obama is telling his feeble-minded followers that John McCain has no ability to address issues like this head-on, but he should have probably done a little research, first.  Again, unless there’s something I’m missing, here? 

I suppose there is a good chance that Obama knew all along about McCain’s co-sponsorship of FHERRA, but counts on the fact that most of his followers are too enamored with his celebrity to do any research, themselves.  They WANT to believe him.  Mix that with the fact that the media doesn’t do a good job of reporting the most important and significant things; like this historical, factual account of McCain’s foresight and subsequent move to action. 

Another lesson we need to learn from today’s events is that the Democrat’s are hardly the party of and for the poor.  I would encourage you to do your research at one of the campaign contribution database websites  (like OpenSecrets) and then come back and tell me that you found otherwise.  Pay special attention to the lending industry, with a focus on real estate (mortgage lending).  

UPDATE:  Jay over at Wizbang has a superb article chronicling what led to this fiasco, and the players involved (including the Clinton Administration’s role in all of this).   It’s highly-recommended reading.

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