Chutzpah

by hilzoy

It takes a certain amount of chutzpah for McCain to produce ads about Obama's advisors having ties to Fannie Mae and Freddie Mac. One of the people McCain focusses on denies advising the Obama campaign; the story the McCain campaign based its ad on said only that he had "taken calls" from the Obama campaign, which is probably true of half the known universe. The other was Jim Johnson, who was asked to vet Vice Presidential candidates, but withdrew shortly afterwards, when questions arose about his ties to the financial industry.

Compare this to John McCain. He too picked a former lobbyist for Fannie and Freddie to vet his Vice Presidential candidates. In addition:

"At least 20 McCain fundraisers have lobbied on behalf of Fannie Mae and Freddie Mac, netting at least $12.3 million in fees over the past nine years."

Plus:

"Among the companies' past advocates are McCain's campaign manager, Rick Davis, a longtime lobbyist; McCain's confidant and adviser Charlie Black, whose firm worked for Freddie Mac for several years ending in 2005; and his deputy campaign finance chairman, Wayne Berman, a vice president of Ogilvy Worldwide, the advertising and marketing firm, and a former Fannie Mae lobbyist. Davis once was head of the Homeownership Alliance, a coalition of banks, mortgage lenders and other housing industry interests led by Fannie and Freddie to stave off proposed regulations or government fees."

Davis' record on this score is charming. USNews:

"McCain's campaign manager Rick Davis was hired—after running McCain's failed 2000 presidential campaign—to head up a group called the Homeownership Alliance, a Fannie Mae and Freddie Mac advocacy group, which the Wall Street Journal reported (in August 2000) had a website creed of being dedicated to: "exposing and defeating trends that would harm consumer access to the lowest-cost mortgage option." The group viewed as threats those who are "seeking to spread unfounded fears about risks to the housing system.""

"Unfounded fears". Gotta love it.

From the Times-Picayune (April 15, 2001, accessed via Lexis/Nexis):

"It shouldn't have come as a surprise to anyone when the Homeownership Alliance announced its opposition last week to legislation by Rep. Richard Baker, R-Baton Rouge, to strengthen regulatory oversight for Fannie Mae and Freddie Mac, the two giant agencies that buy home mortgages to expand homeownership opportunities. Rick Davis, president of the Homeownership Alliance, said that "we are concerned that Rep. Baker's bill would break the first rule of any legislation related to housing -- that is, to do no harm to the greatest housing system in the world." He said the bill "presents the potential for a burdensome regulatory process that could lead to less consumer choice, reduced availability of financing and higher prices for home purchases and multi-family construction." What Davis didn't say is that Fannie Mae and Freddie Mae are both members of his alliance, which also includes the National Association of Home Builders and National Association of Real Estate Brokers. Baker, chairman of the House Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee, has said that Fannie Mae and Freddie Mac have gotten so big, and have piled up so much debt, that more oversight is needed. If either of them failed, it could do major damage to the U.S. economy, he said."

Which helps to explain this response from "William Maloni, Fannie Mae Senior Vice President for Government and Industry Relations (1983-2004)":

"Yesterday, Senator John McCain released a television commercial attacking Barack Obama for allegedly receiving advice on the economy from former Fannie Mae CEO Franklin Raines. (...)

It is an interesting card for Senator McCain to play, given that his campaign manager, Rick Davis, was paid by Fannie Mae and Freddie Mac several hundred thousand dollars early in this decade to head up an organization to lobby in their behalf called The Homeownership Alliance. ...

I worked in government relations for Fannie Mae for more than 20 years, leading the group for most of those years. When I see photographs of Sen. McCain's staff, it looks to me like the team of lobbyists who used to report to me. Senator McCain's attack on Senator Obama is a cheap shot, and hypocritical."

I do not think it ought to be a problem for a campaign to ask for advice from people who have some connection to Fannie Mae and Freddie Mac. A lot of those people know a lot about the mortgage industry, and having no contact whatsoever with them would probably be a bad idea. I do get concerned when a campaign has people who lobbied against better regulation in its most senior positions. There is only one campaign of which that is true, and it's not Obama's.

Comments

[Gorgon]

I think McC is on the verge of a default due to his overuse of MBS's (morality backed secrities) and CDS's (credibility default swaps)

[john miller]

Just as bad is McCain saying those two men took tax payer's money in salary when both organizations were private companies. Of course Palin has shown the same ignorance.

Probably the only (well, there might be one or two other circumstances) time McCain has told the truth in the past year was when he said he didn't know as much about the economy has he should.

[Gary Farber]

McCain's new commercials. (30 second actual commercial precedes.)

[ThatLeftTurnInABQ]

CDS's (credibility default swaps)

Who is the counterparty? The media? The American people?

My friends, I think we should call the McCain campaign's communications what they really are: sub-prime unreal estatements.

[John Thullen]

None of it matters.

As Steve Benen points out, now a McCain advisor is counseling that Obama's uppityness should be stressed in the campaign (echoing a southern piece of filth Republican Congressman from a few weeks ago).

The Republican Party is going full bore for the stupid, racist, white trash filth vote.

That's good for 49% in America. Throw in the 2% who will vote for stupid, racist white trash who promise to lower their taxes and you have a working majority.

Burn it down with real fire.

[ThatLeftTurnInABQ]

This looks like as close as we are going to get to a thread on the subject of the proposed Paulson plan, so here's my rant on the subject.

The proposal currently under discussion is based on a big lie. A really big lie. The lie is that what is happening now is at least partially a crisis of liquidity. If this were really true, the firms being bailed out could be supported via bridge loans of one sort or another (e.g. what was extended to AIG) with the intent of using them to get these firms through a temporary period of illiquidity.

This liquidity lie is based on taking advantage of popular ignorance, greed and/or fear regarding the sustainability of bubble level housing prices. Under the proposal in question Mortgage backed securities (MBS) will be sold to the US Govt under the pretense that perhaps they may be worth something after all, once the dust clears and prices recover from a temporary shock.

The idea is that we don't really know what the MBS are worth because of the currently frozen state of the credit markets. That is horse manure pure and simple - even cursory research regarding historical trends in price/rent and price/income ratios shows that even current off-peak pricing is unsustainable and housing prices still have at least 20-30% further to fall, from where they are now.

This means that that these securities are not as difficult to value as you might think - the difficulty in pricing them is due in part to their current holders engaging in mark to model pricing. It isn't that they can't sell this debt, rather they don't want to, because doing so would expose the real crisis.

While we do have a liquidity trap right now, that is only a symptom. The real crisis is a solvency crisis. The investment banks and hedge funds used too much leverage and got caught doing it. Mr Margin is calling on line 1. They are now, more or less all of them, insolvent.

As in broke.

To a lesser extent this problem is shared by some of the less careful of the major depository banks, and it is also in all likelihood shared by many smaller regional banks which are heavily exposed to bad loans within the CRE (commerical real estate) sector which historically lags behind the market for private homes but is showing many of the same trends as the latter.

The solution to an insolvency crisis is painful but conceptually very simple: recapitalize the insolvent institutions. This requires two things - (1) transparency in accounting, and (2) an influx of new capital from outside which dilutes existing shareholder equity. That is how it works - you open your books to outsiders who have money to invest in your firm, and after they've gotten a good look at how bad the situation is, they buy you out, either partially or wholly.

Period. End of Story.

In the private sector there is no other way of doing this, for the very good reason that outside investors would have to be insane to put their money into an insolvent firm under any other conditions.

That is not what we the taxpayers, are being asked to do.

What we are being asked to do is to make an outright gift to the insolvent firms on Wall St., without getting much of anything in return. That is because the proposed transfer of mortgage backed debt instruments in exchange for funds is being conducted without transparency (the decisions as to what is transferred and what is not are at the combined discretion of the firms involved and Paulson & co. at Treas with no requirement for public approval or disclosure), and without dilution of shareholder equity.

Essentially we get all of their most toxic securities and no control over these firms (either via new regulation or via equity stake) in return.

No private investor or sovereign wealth fund would accept this deal. Why should we?

Not because this is the only way to unfreeze the credit markets.

Rather, because it is the only way to unfreeze the credit markets while imposing no pain or loss of control over the very people who benefitted most from the bubble years and who are most responsible for making the bad decisions which created this situation.

We are being asked to reward failure, with one of the largest single transfers of wealth in our history from the middle class upwards.

You are going to hear over and over again in the media over the next couple of days that anyone who questions this, who objects to it or trys to impose conditions or restraints on this act of robbery, is responsible for destroying the credit market. The logic behind this flimflam is the same as in the old joke about the highwayman who told his victim that it would be illegal not to hand over the money:

"Why?" asked the victicm.

"Because if you do not", said the highwayman, "then I shall be forced to shoot you, and that will make you a murderer".

[liberal japonicus]

That Benen point is here. To the rest of what Thullen says, preach, brother, preach.

The old definition of chutzpah, of the man who kills his parents and then asks for mercy because he's an orphan, seems to be a point McCain passed a long time ago. There also seems to be a glimmer of positive meaning with chutzpah, a hint of audacity. To apply that word to McCain's 'campaign' is to make it represent something completely borne of deception and fraud.

[cleek]

SNL had a good skit on McCain last night.

[Gary Farber]

"SNL had a good skit on McCain last night."

It's remarkably like the one I pointed out and linked to at 11:44 a.m. above, as it happens.

[Gary Farber]

No, wait, I'm wrong, I apologize! Different sketchs!

Thanks, Cleek!

[Gary Farber]

No, wait, it is the same sketch! I accidentally clicked on your blog, and the Wolves sketch!

[Gary Farber]

No, wait, it is the same sketch! I accidentally clicked on your blog, and the Wolves sketch!

[cleek]

No, wait, it is the same sketch!

the link in your 11:44 doesn't go anywhere. there is no HREF in the A tag.

[Gary Farber]

"the link in your 11:44 doesn't go anywhere."

Oh, I hadn't noticed it was broken. Here it is again.

[Nell]

@TLTIABQ: Thank you, thank you, thank you.

We have about five days to make the case to Congress and in the media that this bill is a ploy on a par with all of the the regime's power grabs so far.

All of them: the abuses after September 11 (Patriot Act, Homeland Security gobbling up multiple agencies and dispensing with any union representation, massive domestic spying), the Iraq invasion and occupation, the thousand-plus signing statements, and the bills to retroactively legalize the past crimes and power grabs (Military Commissions Act 2006, Protect America Act 2007, FISA Amendments 2008).

All of them -- all of them were political ploys to amass power, that did nothing that needed to be done. And Democrats in Congress made it possible down the line, so why I allow myself to hope this will be any different is unclear.

[now_what]

Why you should oppose the blank check.

Congressional contact info can be found here.

It's up to us. Don't wait for the press or the candidates to catch on. It'll be too late.