John McCain’s 2006 Warning About Today’s Financial Crisis

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 in 2006.

McCain spoke forcefully on May 25, 2006, on behalf of the Federal Housing Enterprise Regulatory Reform Act of 2005;

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.

The Bill 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 making him the #2 recipient of Fannie/Freddie money:

Top Democrats Charged with Fannie Mae Oversight – Took “Special Loans”

Dems deny knowing loans had VIP rates

Friday, June 13th 2008, 8:55 PM

WASHINGTON – The two key Democratic senators who reportedly got sweetheart deals on mortgages from Countrywide Financial Corp. said Friday that they didn’t know they were getting special treatment.

Connecticut Sen. Christopher Dodd, chairman of the Banking Committee, and North Dakota Sen. Kent Conrad, chairman of the Budget Committee and a member of the Finance Committee, both tapped into a little-known program that waived points, lender fees and bent borrowing rules for VIPs, Portfolio magazine reported Thursday.

“As a United States senator, I would never ask or expect to be treated differently than anyone else refinancing their home,” Dodd said in a statement.

The lawmakers’ participation in the VIP program came to light just days after similar revelations about Jim Johnson, one of Sen. Barack Obama‘s vice presidential vetters, led to his resignation.

Conrad, the Budget Committee chairman, said it was Johnson who referred him to Countrywide in 2002.

“If they did me a favor, they did it without my knowledge and without my requesting it,” Conrad said.

Countrywide, whose overaggressive lending policies helped fuel the mortgage crisis and led to the devaluation of its stock from $45 a share to $5, reportedly is being investigated by the FBI for securities fraud.

Obama’s Million Dollar Men From Fannie Mae – Who Are Franklin Raines, Tim Howard and Jim Johnson – How Big Were The Golden Parachutes – UPDATED

Obama talks about greed on Wall Street – making those responsible account for their activities. Is that so? How about the Wall Street Big Shots Obama hired to work on his campaign – the very same big shots who brought Fannie Mae Down. 

Franklin Raines was a Chairman and Chief Executive Officer at Fannie Mae. He served as President Bill Clinton’s Budget Director. Raines was forced to retire from his position with Fannie Mae  when auditing discovered severe irregulaties in Fannie Mae’s accounting activities. At the time of his departure The Wall Street Journal noted, ” Raines, who long defended the company’s accounting despite mounting evidence that it wasn’t proper, issued a statement late Tuesday conceding that “mistakes were made” and saying he would assume responsibility as he had earlier promised. News reports indicate the company was under growing pressure from regulators to shake up its management in the wake of findings that the company’s books ran afoul of generally accepted accounting principles for four years.”


Fannie Mae had to reduce its surplus by $9 billion.

Raines left with a “golden parachute valued at $240 Million in benefits. The Goverment filed suit against Raines when the depth of the acounting scandel became clear. . The Government noted, “The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.”  These charges were made in 2006.


The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the mis-stated Fannie Mae profits. WHERE IS RAINES NOW ? Raines works for the Obama Campaign as Chief Economic Advisor. , The wikipedia site has be rewritten – contact wikipedia for an explanation – or search the WEB to for articles on the rewrite. 

Tim Howard Was the Chief Financial Officer of Fannie Mae. Howard, “was a strong internal proponent of using accounting strategies that would ensure a “stable pattern of earnings” at Fannie. In everyday English – he was cooking the books.

The Government Investigation determined that,  “Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,”

On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant’s income statement to achieve management pay bonuses.

Investigations by federal regulators and the company’s board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004. ,

Howard’s Golden Parachute was estimated at $20,000,000.

Where is Howard now? Howard is a Chief Economic Advisor to Barack Obama.

Jim Johnson: A former aid to Walter Mondale, a former executive at Goldman Sachs and Lehman Brothers and who was later forced from his position as Fannie Mae CEO, was hired as a Senior Obama Finance Advisor. Johnson is so senior that he was selected to run Obama’s Vice Presidential Search Committee, the Committee that selected Joe Biden.

The National Review suggested – “Look at the former Fannie Mae Chief Obama choose for the job (selecting Biden). …. specifically, look at the Office of Federal Housing Enterprise Oversight’s May 2006 report on mismanagement and corruption inside Fannie Mae, and you’ll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson’s 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million.”

Now, this might seem the sort of inside-Washington dealing that Obama says he wants to change. If so, Obama will have Johnson himself there to help.

It is ironic that the National Review would have made that comment. Obama gave a speech Monday to Wall Street Bankers addressing the Finacial Crisis where he called for,  “reappraisal of values.” and stated “”The danger with this mentality isn’t just that it offends our morals, it’s that it endangers our markets,”. Obama’s Speech Writer – Jim Johnson.

This revelation contradicts earlier reports that Johnson had left the Campaign when he came under investigation for taking illegal loans from Country Wide Financial while serving as CEO at Fannie Mae. 

On September 9, 2008, Obama critized “Golden Parachute” payments to Fannie Mae executives. Jim John’s parachute at the time he left Fannie Mae was estimated at $28 Million.


Would you trust the men who tore Wall Street down to build the New Wall Street?


McCauleysweblog: The following Articles describe the role of “political ideology” in the Financial Crisis – How Politics fueled the crisis:

Professor Stan Liebowitz: The Real Scandal –

Professor Thomas J DiLorenzo: The CRA Scam and its Defenders:

John R Lott, Jr : Analysis – Reckless Mortgages Brought Financial Market To Its Knees,2933,424945,00.html

Infamous Video of Committee Meeting on Fannie Reform

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