July 17, 2008
Both Campaigns Linked To Fannie, Freddie
Washington Post: Figures Connected To McCain, Obama Also Have Deep Ties To Mortgage Giants
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Play CBS Video Video Freddie, Fannie And Friends With trouble brewing inside mortgage giants Freddie Mac and Fannie Mae, Armen Keteyian reports that the nation is learning more and more about the companies and their friends in high places.
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Video Fed To Help Mortgage Giants The U.S. government is stepping in to help ailing mortgage giants Freddie Mac and Fannie Mae. The Fed plans to expand their lines of credit and buy equity, if needed. Randall Pinkston reports.
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Video If Mortgage Giants Fall Bankrate.com's Greg McBride tells Katie Couric whether homeowners should be worried about the problems plaguing mortgage giants Fannie Mae and Freddie Mac, and gives some other finance advice.
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Some of the most prominent supporters to both John McCain and Barack Obama also have deep ties to embattled mortgage giants Fannie Mae and Freddie Mac. (AP Photo)
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Timeline Credit Crunch Feeling the squeeze? Here's a look at actions and statements from key players in Washington.
From Our Partner:
When Fannie Mae and Freddie Mac's stock prices plunged and rumors of their insolvency swirled, the presidential campaigns of Sens. John McCain and Barack Obama released terse statements about the mortgage giants, then went nearly silent.
Their responses made sense in political and economic terms. The risks of intervening in the firms' rescue are high, the rewards are scant, and the tentacles of the government-sponsored enterprises reach into both campaigns.
"You see a consensus developing that the current system is unsustainable," said David C. John, a senior research fellow at the conservative Heritage Foundation. "But actually saying what has to happen next is a little bit scary if you're in a campaign, especially if some of your most prominent supporters have such deep ties to these entities."
Rick Davis, McCain's campaign manager, was president of the Homeownership Alliance, which advocates the expansion of homeownership through low-interest mortgages funded by Fannie and Freddie. Arthur B. Culvahouse Jr., who is heading McCain's vice presidential vetting panel, was a lobbyist for Fannie Mae. Mark Buse, a longtime McCain aide, lobbied for Freddie Mac before returning to McCain's Senate staff.
And the list of Republican Fannie and Freddie lobbyists includes some of its most notable rogues -- including Tony Rudy, Edwin Buckham, Kevin Ring and David H. Safavian, all of whom were linked to the Jack Abramoff lobbying scandal -- as well as some of its leading power brokers, from Reagan White House chief of staff Kenneth M. Duberstein to uberlobbyists Vin Weber and Tom Korologos. Alberto R. Cardenas, one of McCain's top fundraisers, has lobbied for Fannie Mae, as have former Montana governor Marc Racicot and tax-cut advocate Grover Norquist.
Obama also has ties to the firms. James A. Johnson, the former head of his vice presidential vetting panel, was a chief executive of Fannie Mae, as was Franklin D. Raines, who said this week that he has been consulting with the campaign on housing issues. Maria Echaveste, a top Clinton White House official whose husband, Christopher Edley Jr., is a close Obama friend and adviser, has lobbied for Freddie Mac, and former commerce secretary William M. Daley, a top Obama backer, was an in-house lobbyist.
Other Democratic luminaries who have advocated for the mortgage giants include strategist Steven Elmendorf, Rep. Doris Matsui (Calif.), former Al Gore aide Ronald A. Klain, former Clinton aide Steve Ricchetti and former congressman Harold E. Ford Jr. (Tenn.), now the head of the Democratic Leadership Council. Jamie Gorelick, a deputy attorney general in the Clinton administration, was also vice chairman of Fannie Mae.
That payroll has cost Fannie and Freddie nearly $200 million in lobbying and campaign contributions over the past decade, according to lobbying reports and Federal Election Commission disclosures. It has also won them plenty of protection from calls for greater regulation, less federal protection, and even nationalization.
With the current housing meltdown, that protection may be ending, Washington economists say, but any real changes will almost certainly happen after the election.
"I am hopeful that the extent of carnage will shake up the status quo," said Douglas W. Elmendorf, an economist at the Brookings Institution who has worked at the Federal Reserve Board and Treasury Department and is not related to Steven Elmendorf. "And if the taxpayers end up putting in a significant amount of money, which I think they will, members of Congress will realize whatever their past views were, the future cannot be a replay of the past."
Fannie Mae and Freddie Mac grew huge and powerful by buying up home mortgages and consolidating them into fixed return bonds and other financial instruments with the implicit backing of the Treasury. But with so many of those mortgages going into default, investors fear that both companies lack the capital to cover the losses, and the lobbyists have helped Fannie and Freddie fend off calls to bolster their reserves.
On Sunday, Treasury Secretary Henry M. Paulson Jr. made that implicit federal backing more explicit, allowing the companies to borrow directly from the Federal Reserve and pledging that the government stands ready to pump money into the giants in exchange for equity if necessary.
Douglas Elmendorf argued that federal loans will minimize the personal risks to Fannie and Freddie managers and shareholders, while leaving taxpayers with all the risk. Instead, the government should be taking stakes in the companies in exchange for that cash. That way, a recovery would have some benefit to the government.
The McCain campaign has been reticent about backing anything that smacks of partial nationalization. Last week, the senator from Arizona issued what amounted to full-throated support of the Bush administration's efforts to keep the companies afloat.
"Those institutions, Fannie and Freddie, have been responsible for millions of Americans to be able to own their own homes, and they will not fail, we will not allow them to fail," he said. "They are vital to Americans' ability to own their own homes. And we will do what's necessary to make sure that they continue that function."
Obama has been slightly more skeptical, at least in tone. His initial statement put the issue of homeownership first. The senator from Illinois "has long believed we should take all necessary steps to ensure affordable homeownership for millions of American families, and that includes an essential role for Fannie Mae and Freddie Mac," spokesman Bill Burton said last week.
Then on Tuesday, Obama sounded a note of skepticism: "I think it is important, with respect to Freddie Mac and Fannie Mae, that we ensure there's continued liquidity in the housing market, but that we're not devoting huge sums of money to bailing out shareholders or CEOs. I mean, I think that there's got to be some recognition that you can't have those institutions with all upside but no downside," he said on PBS's "NewsHour With Jim Lehrer."
That is still a far cry from prescriptions coming from the campaigns' left and right flanks, from firing the firms' managers before offering any loans, to nationalizing them to breaking them up. But analysts in Washington say those next steps will have to wait.
"It's going to take a lot of effort, and it's going to require some real sustained activities," John said. "It won't be easy, but it can be done."
By Jonathan Weisman
© 2008 The Washington Post Company
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The secrets of tennis legend 
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See all 161 CommentsKeep in mind that Phil Gramm is McCain''s campaign co-chair.
The difference is Obama''''s on the terrorist''''s 5
The favorite 5 on their cell phones
Keating 5, what a bunch of made up BS by the left
Posted by Minuteman-1 at 04:47 PM
Minuteman
First you make something up (in an attempt at humor?)
"Obama''s on the terrorist''s 5
The favorite 5 on their cell phones."
Then you dismiss the Keating 5 as being a fabrication by the left.
Your post illustrates that you have not done any research on the Keating 5, and that you really have no grasp what is and isn''t funny.
Do some research and then get back to me.
McCain was knee deep in that mess.
Posted by Minuteman-1 at 04:47 PM : Jul 17, 2008
Keating 5, what a bunch of made up BS by the left
------------------------------------------------
JohnMcCain was connected to the Keating 5 bunch.
Obama was not in politics back then.
Do I have to freakin explain everything to you, like a child ?
Posted by Minuteman-1 at 04:42 PM : Jul 17, 2008
Minuteman1, Sorry, I''m not trying to horn in on your banter with hungry1968, but you did ask him what part, Manhattan? I would have assumed you lived in NYC too. I''m bowing out now, see you later.
Moron, I said I was from New York, not New York City....you''''re from New York too....Buffalo, New York.....I mean come on
Do I have to freakin explain everything to you, like a child ?
Posted by Minuteman-1 at 04:42 PM : Jul 17, 2008
We were talking about NYC, and you said, "I''m from NY, are you?" When we are talking about a specific place, and then YOU SAY THAT YOU ARE FROM THAT PLACE, why should I assume differently?
It''s not my fault you''re unable to correctly express yourself.
And I thought you said I was from Buffalo, NY in Canada? Or did you mis-speak then too?
The difference is Obama''s on the terrorist''s 5
The favorite 5 on their cell phones
Keating 5, what a bunch of made up BS by the left
Google:
Rick Davis, McCain''s campaign manager
Also Google Phil Gramm, co-chairman of McCain %u2019s campaign & head econ. adviser.
Gramm and his wife are responsible for Enron, the "Enron loophole" and the Subprime meltdown.
Also McCain was one of the Keating 5.
All of the things listed above tie into the dangers of deregulation.
What does Israel have to do with appreciating the way Gulianni cleaned up the city ?
Posted by Minuteman-1 at 04:11 PM : Jul 17, 2008
NYC is a money hole to NY state, like Israel is to America.
And actually yes - you did say at 3:47, that you were from NY. Or did you not really mean it?
are you from New York ? Because I am, and everything you say is totally incorrect, lies, fabricated
Posted by Minuteman-1 at 03:47 PM : Jul 17, 2008
Take a barrel, and then get in to take a dip in the falls
We won''t miss you.....(sound familiar?)
Again you assume and don''t read closely, I never claimed to live in the city, I live upstate in the suburbs.....so wrong again
What does Israel have to do with appreciating the way Gulianni cleaned up the city ?
Basically, you lived in Canada, so you have no clue what your talking about, just the word from a few friends is no substitute for actually seeing it with my own eyes
My sister studied in Amherst, ever hear about it?
Posted by Minuteman-1 at 04:01 PM : Jul 17, 2008
Yeah it''s right around the corner - you probably think that''s in Canada too, huh? But that''s typical for NY''ers - they think ALL the taxes should come from upstate to fund your city, while our economy has been dying for decades. You all treat NY outside of NYC, like a foreign country, that''s supposed to support your city.
I guess that''s where you get your ideas and opinions on Israel from too.
Excellent, the city was a complete disaster before Guiliani arrived and after he left, it was a whole new city, low crime rate, re-built, family friendly....you name it, he did it
Sorry, just keep your republican hating to yourself, you are beginning to embarrass yourself, like usual
Posted by Minuteman-1 at 03:55 PM : Jul 17, 2008
Are you kidding? Bloomberg had to undo EVERYTHING Giuliani did, (which wasn''t much), AND now the city is coming around with it''s excellent services.
Bloomberg has an 83% approval rating, (UNHEARD of for a NYC politician), and several groups were preparing lawsuits if he decided to run for president, so they could SUE HIM to force him to finish out his term!!
And by the way, Bloomberg WAS a republican, AND I would have supported him if he ran for president - and yes - even over Obama.
Now HE is a legitimate mayor of NYC!!
Basically, you lived in Canada, so you have no clue what your talking about, just the word from a few friends is no substitute for actually seeing it with my own eyes
My sister studied in Amherst, ever hear about it?
Sure, there were some depts that didn''''t like him, but the rest of NewYorkers, even upstate love Guiliani and what he did to clean up NY....you don''''t have a clue, do you?
Posted by Minuteman-1 at 03:47 PM : Jul 17, 2008
I live in Buffalo, and have several co-workers that live in NYC, and have lived there, their whole lives - he wasn''t liked at all!
And after 9/11, the firefighters REALLY hated him!!
Excellent, the city was a complete disaster before Guiliani arrived and after he left, it was a whole new city, low crime rate, re-built, family friendly....you name it, he did it
Sorry, just keep your republican hating to yourself, you are beginning to embarrass yourself, like usual
Posted by jgg000 at 03:46 PM : Jul 17, 2008
I wouldn''t trust him to run the sanitation department.
Clueless and useless.
Aka - typical republican.
Speaking of "typical republican", what did NYC''s finances look like when Giuliani was in charge?
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