A Race42008 reader Terry asks:

“Why the hell is McCain not advertising and talking regularly about the Federal Housing Enterprise Regulatory Reform Act that he co-sponsored and the Dems blocked?”

When Iraq was heading south, John McCain’s experience and judgement led him to champion The Surge. John McCain was right, and today Iraq has the breathing room it needs to continue on the path towards becoming a functioning democracy.

In 2005, John McCain’s experience and judgement led him to conclude that our nation’s housing market was headed towards a catastrophe. He sponsored the Federal Housing Enterprise Regulatory Reform Act in an effort to avert the crises.

Why on Earth is the McCain Campaign not trumpeting from the mountain tops that, just like The Surge, John McCain had the vision to understand the oncoming crises and fought as hard as he could to fix it.

This is the narrative that should close out the final 40 days of the campaign. That it apparently won’t be is a blown opportunity in a election that has little room for error.

by Kavon W. Nikrad @ 11:33 am. Filed under Issues, John McCain

 The McCain campaign is coming out, but not neary strong enough in my opinion:

Today the New York Times launched its latest attack on this campaign in its capacity as an Obama advocacy organization. Let us be clear about what this story alleges: The New York Times charges that McCain-Palin 2008 campaign manager Rick Davis was paid by Freddie Mac until last month, contrary to previous reporting, as well as statements by this campaign and by Mr. Davis himself. 

In fact, the allegation is demonstrably false. As has been previously reported, Mr. Davis separated from his consulting firm, Davis Manafort, in 2006. As has been previously reported, Mr. Davis has seen no income from Davis Manafort since 2006. Zero. Mr. Davis has received no salary or compensation since 2006. Mr. Davis has received no profit or partner distributions from that firm on any basis — weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annual or annual — since 2006. Again, zero. Neither has Mr. Davis received any equity in the firm based on profits derived since his financial separation from Davis Manafort in 2006.

Further, and missing from the Times‘ reporting, Mr. Davis has never — never — been a lobbyist for either Fannie Mae or Freddie Mac. Mr. Davis has not served as a registered lobbyist since 2005.

Though these facts are a matter of public record, the New York Times, in what can only be explained as a willful disregard of the truth, failed to research this story or present any semblance of a fairminded treatment of the facts closely at hand. The paper did manage to report one interesting but irrelevant fact: Mr. Davis did participate in a roundtable discussion on the political scene with…Paul Begala.

Again, let us be clear: The New York Times — in the absence of any supporting evidence — has insinuated some kind of impropriety on the part of Senator McCain and Rick Davis. But entirely missing from the story is any significant mention of Senator McCain’s long advocacy for, and co-sponsorship of legislation to enact, stricter oversight and regulation of both Fannie Mae and Freddie Mac — dating back to 2006. Please see the attached floor statement on this issue by Senator McCain from 2006.

To the central point our campaign has made in the last 48 hours: The New York Times has never published a single investigative piece, factually correct or otherwise, examining the relationship between Obama campaign chief strategist David Axelrod, his consulting and lobbying clients, and Senator Obama. Likewise, the New York Times never published an investigative report, factually correct or otherwise, examining the relationship between Former Fannie Mae CEO Jim Johnson and Senator Obama, who appointed Johnson head of his VP search committee, until the writing was on the wall and Johnson was under fire following reports from actual news organizations that he had received preferential loans from predatory mortgage lender Countrywide.

Therefore this “report” from the New York Times must be evaluated in the context of its intent and purpose. It is a partisan attack falsely labeled as objective news. And its most serious allegations are based entirely on the claims of anonymous sources, a familiar yet regretful tactic for the paper.

We all understand that partisan attacks are part of the political process in this country. The debate that stems from these grand and sometimes unruly conversations is what makes this country so exceptional. Indeed, our nation has a long and proud tradition of news organizations that are ideological and partisan in nature, the Huffington Post and the New York Times being two such publications. We celebrate their contribution to the political fabric of America. But while the Huffington Post is utterly transparent, the New York Times obscures its true intentions — to undermine the candidacy of John McCain and boost the candidacy of Barack Obama — under the cloak of objective journalism.

The New York Times is trying to fill an ideological niche. It is a business decision, and one made under economic duress, as the New York Times is a failing business. But the paper’s reporting on Senator McCain, his campaign, and his staff should be clearly understood by the American people for what it is: a partisan assault aimed at promoting that paper’s preferred candidate, Barack Obama.

Statement by Senator John McCain, May 25, 2006:

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.

If you don’t do the Paulson plan, what do you do?

There are several options. The first is to do nothing and let the economy slide into a hole. Not really a responsible option, but one that House and Senate Democrats are looking at if they can’t get enough Republican votes. Senator McCain said it best on this point:

But when he was asked by ABC News’ Ron Claiborne what he would do if the fate of the bill was in his hands, he said Senate Democrats should not use his vote as the determining factor on the success of the bill.

“This issue should be - and their vote should be determined in how we can resolve this crisis and get America going again,” McCain said. “This is a huge crisis. We know, in the words of many  experts and mine, this is the greatest financial crisis since World War II. So to somehow, for the Democrats to say that their vote is going to be gauged on my vote frankly doesn’t do them a great deal of credit.

“Their first and only priority should be making sure this economy recovers and get back on our feet again,” McCain said.

True, Senator, but that whole, “country first” thing ain’t their motto. For starters, both campaigns have asked for modifications of the plan. John McCain asked that there be a bi-partisan board to oversee implement of the program, that there be a path to taxpayer recovery of the bailout money, that there will be transparency in the process as to what companies are bailed out, limits on executive compensation set at $400,000 per year for companies that are bailed out, and finally, that no earmarks get included in the bail out.

Obama’s demands are similar except he didn’t specifically raise transparency on the companies being bailed out and didn’t object to the possibility (i.e. probability) of earmarks being inserted into the bill and an insistent that the bill include help for people to stay in their homes.

If the changes Senator McCain proposes were made to the bill, I could live with it. I’m not a big fan of the Senator’s, but I do appreciate the seriousness with which he’s coming at the issue, and I think Senator Obama is closer to the right track than usual. Though, the insertion of bailing out people who are facing foreclosure is actually a bit of a poison bill. The point of the bail out is to stop the economy from having a train wreck and at $700 billion, the price tag is high enough.

Of course, there is a third option to do nothing or to letting the economy go down the tank, based on proposals from the Republican Study Committee, Mike Huckabee, and personal finance guru Dave Ramsey. We’ll call it the Huckabee-Ramsey plan as a compositie of the three ideas:

1) Suspend the Capital Gains Tax for 2 years. Yeah, it’s really expensive and will run a deficit. But guess what, it’ll be a lot less expensive. The RSC says, “By encouraging corporations to sell unwanted assets, this provision would unleash funds and materials with which to create jobs and grow the economy.” Adds Mike Huckabee, “If Congress is going to lose money, let them lose it with lower taxes, not with public dollar bailouts of  private market mistakes.”

2) Authorize a temporary change to accounting rules to free the market up. Says Ramsey:

However, it (Sarbanes-Oxley) does make each company each day restate what their assets are worth if sold on the market. This accounting procedure is mark to market accounting–you need to remember that. It’s a good concept and keeps companies from having loaded balance sheets.

However, it’s part of what’s caused this in the news now. Merrill Lynch was sitting with $30 billion are tied up in sub-prime loans with houses. Stupid! They get what they deserve for doing that, and I’m with you on that. Those houses didn’t become worthless all of a sudden because those people couldn’t sell their bonds. Since they couldn’t sell them, they basically gave them away for 22 cents on the dollar. Now do you think all those houses lost 80% of their value underneath that deal? No, they didn’t, so they gave them away for 22 cents on the dollar (about $6 billion total) because there was no market for them. Nobody wants to buy sub-prime bonds because they suck. They’re junk bonds. But at 22 cents on the dollar, it’s a bargain because even if you foreclosed on every one of the houses in there, you’d probably get $20 billion back out of $30 billion, and so the company that bought those for $6 billion got a deal! But there’s no market for them. That’s where these companies are stuck. They can’t sell this stuff, but accounting-wise, they’ve had to mark it down to market and it’s frozen the marketplace.

Economist Wesberry is saying that if we change that one rule and don’t force them to market down to market and just let them hold on to all the stuff, and say just on sub-primes for this period of time you can change that rule — a temporary change — that’ll free the market up. It’s seized right now; it’s frozen. This will thaw it out and get it going again. He says that’ll solve 60% of the problem … and I think he’s right.

That one accounting rule is what made Merrill Lynch sell out. That one accounting rule is what’s driving other ones into the dirt. Would you rather let them change their accounting rule or loan them $700 billion for us to buyout their bad paper?

I think I’ll let them change the accounting rule, thanks. Huckabee goes even further and suggests a repeal of Sarbanes-Oxley, which ain’t a bad idea, but is perhaps beyond the scope of this situation. Ditto to the RSC’s proposed privatization of GSE’s

3) Cover Sub-Prime Mortgages with FHA Insurance

Again quoting Dave Ramsey:

 Why don’t we just take the FHA insurance program and extend it across these sub-primes? What that means is that you and I are guaranteeing the lender that they’re not going to lose as much or any money on those mortgages. Now I don’t like guaranteeing them, but I like it better than buying them. In other words, instead of $700 billion in tax-payer debt going out there to bail out these companies, just extend the insurance out. You could probably do that for less than $40 billion. It’s like a 95% savings!

Ca-ching. With suspsending the Capital Gains Tax for 2 years and covering sub-prime mortgages with FHA insurance, even assuming it’s a Zero Sum result on the revenue base (which I doubt), this would probably end up costing less than the bail out and be better for the long-term health of the economy.

The problem is that it makes far too much sense to pass in this current Congress.