Despite Claims Today He Warned of this Crisis, McCain in 2007 Said He Didn't See This Crisis Coming

September 17, 2008 12:24 PM

 

"Two years ago, I warned that the oversight of Fannie and Freddie was terrible, that we were facing a crisis because of it, or certainly serious problems," Sen. John McCain, R-Ariz., told CBS this morning. "The influence that Fannie and Freddie had in the inside the Beltway, old boy network, which led to this kind of corruption is unacceptable and I warned about it a couple of years ago."

 

How does this claim of foresight square with this interview that McCain gave to the Keene (NH) Sentinel, discussing the subprime mortgage crisis, in December 2007?

 

Q: "Well the dimension of this problem may be surprising to a lot of people, but to many people, to many others there were feelings that there was something amiss, something was going too fast, something was a little too hot. Going back several years. Were you one of them? Or, I mean you're a busy guy, you're looking at a lot of things, maybe subprime mortgages wasn't something you focused on every day. Were you surprised?

 

McCain: "Yeah. And I was surprised at the dot-com collapse and I was surprised at other times in our history. I don't know if surprised is the word, but...

 

Q: "S&Ls?"

 

McCain: "I don't -- what did you say?"

 

Q: "The S&Ls."

 

McCain: "Yeah, the S&Ls."

 

Q: "Is this bigger than that?

 

McCain: "I don't know the dimensions of this. It's hard to know what the dimensions are. As I say, I never thought I'd pick up the paper and see a city in Norway is somehow dramatically impacted by it. When I say 'surprised' I'm not surprised when in capitalist systems that there's greed and excess. I think it was Teddy Roosevelt who said 'unfettered capitalism leads to corruption' or something like that, that people have disputed for years.

 

"But so, in this whole new derivative stuff, and SIBs and all of this kind of new ways of packaging mortgages together and all that is something that frankly I don't know a lot about.

 

"But I do rely on a lot of smart people that I have that are both in my employ and acquaintances of mine. And most of them did not anticipate this. Most of them, I mean I can find some that did. But, a guy that's on my staff named Doug Holtz-Eakin, who was once the head of the Office of Management and Budget, said that there was nervousness out there. There's nervousness. There was nervousness that we had such a long period of prosperity without a downturn because of the history of our economy. But I don't know of hardly anybody, with the exception of a handful, that said 'wait a minute, this thing is getting completely out of hand and is overheating.'

 

"So, I'd like to tell you that I did anticipate it, but I have to give you straight talk, I did not."

http://blogs.abcnews.com/politicalpunch/20...ite-claims.html

Anybody who didn't see the dot com burst coming isn't that bright IMO. The housing crisis was pretty clear to see too. You can say hindsight is 20-20, but I thought it was pretty clear both were bubbles about to bust at anytime. I remember just looking around at all the developments going up in Hollywood, Hallandale, Aventura, etc etc etc...all over South Florida...stacked one on top of another and thinking ...where they hell do they think all these people are going to come from to move into these places???!?

 

It was ridiculous and every single common Joe out there all of a sudden thought they were going to be the next real estate mogul. That's when you know a bubble is coming, when people who know absolutely nothing about the stock market, real estate, whatever start thinking they can make a quick buck off of these complicated markets.

 

Thank goodness I was able to talk my parents out of buying a condo in Coral Springs as investment property, although they are still feeling the pains of this crisis in their own way.

FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005

The United States Senate

 

May 25, 2006

 

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.

Anybody who didn't see the dot com burst coming isn't that bright IMO. The housing crisis was pretty clear to see too. You can say hindsight is 20-20, but I thought it was pretty clear both were bubbles about to bust at anytime. I remember just looking around at all the developments going up in Hollywood, Hallandale, Aventura, etc etc etc...all over South Florida...stacked one on top of another and thinking ...where they hell do they think all these people are going to come from to move into these places???!?

 

It was ridiculous and every single common Joe out there all of a sudden thought they were going to be the next real estate mogul. That's when you know a bubble is coming, when people who know absolutely nothing about the stock market, real estate, whatever start thinking they can make a quick buck off of these complicated markets.

 

Agreed. That's why I held off on buying property the last couple of years. Now the time is getting better for it, but we may be headed towards a deflationary perdio, particularly in real estate, so it may be a good idea to wait even longer.

FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005

The United States Senate

 

May 25, 2006

 

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.

 

 

 

That'sthe same Franklin Raines who is Obama's economic adviser. Fannie / Freddie were in bed with Obama and the Democrats. McCain needs to ties them around Obama's neck. It's shouildn't be hard to do.

McCain has his own albratross (Gramm-Leach-Bliley) to worry about. After all, they are all directly responsible for this. Someone forgot to tell those four idiots that Wall Street is nothing but a bunch of Gordon Gekkos (notwithstanding my uncle (a muni bonds manager) or first cousin twice removed (a hedge-fund manager who genuinely wanted to rescue Delphi until the credit crunch hit. Either way, his specialty is in distressed companies, and there will be plenty of those in the coming months)).

Yeah, good time to be in private equity. You can pick up some undervalued companies, turn them around, and sell them in a few years. The only problem is that you'll likely have to hold on to them for a while, as this credit crunch will reduce the number of potential buyers.