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TweetJohn McCain tried to warn the country about Freddie Mac and Fannie Mae back in 2005 and pushed the Federal Housing Enterprise Regulatory Reform Act of 2005. This is the kind of thing that should be hammered home by the McCain campaign and I hope McCain grills Obama when he tries to question his understanding of the economy.
Oh and Bush also called for regulation of Fannie and Freddie in 2003 (Ny Times), but the Dems denied there was any problem.
Here’s John McCain’s statement in 2006 before the Senate:
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 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.
And by the way, the following are those who sponsored the bill. Notice you won’t see any democrats on the list.
Senate sponsors”
- Sen. Charles Hagel [R, NE]
- Sen. Elizabeth Dole [R, NC]
- Sen. John McCain [R, AZ]
- Sen. John Sununu [R, NH]
And the House Complimentary bill included sponsors:
- Rep. Richard Baker [R, LA-6]
- Rep. Robert Aderholt [R, AL-4]
- Rep. James Barrett [R, SC-3]
- Rep. Roy Blunt [R, MO-7]
- Rep. Geoff Davis [R, KY-4]
- Rep. Tom Feeney [R, FL-24]
- Michael Fitzpatrick
- Rep. E. Scott Garrett [R, NJ-5]
- Rep. Paul Gillmor [R, OH-5]
- Rep. Jeb Hensarling [R, TX-5]
- Rep. Walter Jones [R, NC-3]
- Rep. Thaddeus McCotter [R, MI-11]
- Rep. Patrick Mchenry [R, NC-10]
- Rep. Ileana Ros-Lehtinen [R, FL-18]
- Rep. Paul Ryan [R, WI-1]
- Rep. Christopher Shays [R, CT-4]
- Rep. Frank Wolf [R, VA-10]
hattip: Free Republic
In addition to McCain’s warning, the NY Times also reported in 2003 a proposal by the Bush administration to reign in the out of control mortgages and increase regulation.
Source: NY Times: September 11, 2003 New Agency Proposed to Oversee Freddie Mac and Fannie Mae
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.
The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
Of Course the Dems denied it and called for a stop to the fearmongering.
Barney Frank (D-Mass): “These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
Representative Melvin L. Watt, Democrat of North Carolina, agreed.
”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.
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