Freddie Mac and Fannie Mae are private corporations created and sponsored by Congress in an effort to lower the cost of mortgage capital. However, Mac and Mae got greedy. Very greedy.
Both corporations are attributed to being pioneers in "the practice of selling bundled mortgages in the form of securities." They also began buying mortgages on the secondary market in an effort to increase their own market share and lost an obscene amount of money.
John McCain's ad campaigns have boasted (and it has been reiterated in debates by both McCain and Sarah Palin) that McCain saw this crisis coming and warned us two years in advance. He further claims he made valiant effort to stop the problem that was thwarted by Democratic opposition.
While many Republicans are claiming Bill Clinton created the Mac and Mae crisis, federal officials in both Bill Clinton's and George W. Bush's administrations wanted greater authority to regulate Freddie Mac and Fannie Mae. But Congress stalled and nothing resulted.
In 2005, Sen. Chuck Hagel, R-Neb., introduced the Federal Housing Enterprise Regulatory Reform Act of 2005. Three other Republicans co-sponsored the bill including John McCain. The bill, which never made it to the Senate floor, would have enhanced oversight of Freddie and Fannie.
Here is where John McCain does tell the truth:
In May 2006, McCain strongly warned that, "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." This warning was not an independent insight, but came after a scathing report on accounting practices at Mac and Mae were made public. Still, McCain deserves credit for his statement.
Here is where McCain veers from the truth:
Senate Democrats did not block the Federal Housing Enterprise Regulatory Reform Act of 2005, which never went up for vote. They did, however, refuse to support a provision of the bill. They sought stricter oversight but would not support a provision of Hagel's bill that would limit the size of the company's portfolios. As a result of this disagreement the negotiations stalled and the bill never made it to the floor.
McCain did not continue the fight or introduce any new bills. It is also important to note he was not a disaffected party. According to PolitiFact.com, "McCain has taken heat for recent revelations that Freddie Mac paid a lobbying firm co-owned by his campaign manager, Rick Davis, $15,000 a month from 2005 through August 2008. But the campaign has called attention — in advertisements [like this one] — to McCain's support for tighter oversight of the companies."
