[Vision2020] McCain and the Bailout

[Tom Hansen]

>From the International Herald Tribune (global edition of the New York 
Times) at:

http://tinyurl.com/3vvew2

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Loan titans paid McCain adviser nearly $2 million 
By David D. Kirkpatrick and Charles Duhigg

Senator John McCain's campaign manager was paid more than $30,000 a month 
for five years as president of an advocacy group set up by the mortgage 
giants Fannie Mae and Freddie Mac to defend them against stricter 
regulations, current and former officials say.

McCain, the Republican candidate for president, has recently begun 
campaigning as a critic of the two companies and the lobbying army that 
helped them evade greater regulation as they began buying riskier 
mortgages with implicit federal backing. He and his Democratic rival, 
Senator Barack Obama, have donors and advisers who are tied to the 
companies.

But last week the McCain campaign stepped up a running battle of guilt by 
association when it began broadcasting commercials trying to link Obama 
directly to the government bailout of the mortgage giants this month by 
charging that he takes advice from Fannie Mae's former chief executive, 
Franklin Raines, an assertion both Raines and the Obama campaign dispute.

Incensed by the advertisements, several current and former executives of 
the companies came forward to discuss the role that Rick Davis, McCain's 
campaign manager and longtime adviser, played in helping Fannie Mae and 
Freddie Mac beat back regulatory challenges when he served as president of 
their advocacy group, the Homeownership Alliance, formed in the summer of 
2000. Some who came forward were Democrats, but Republicans, speaking on 
the condition of anonymity, confirmed their descriptions.

"The value that he brought to the relationship was the closeness to 
Senator McCain and the possibility that Senator McCain was going to run 
for president again," said Robert McCarson, a former spokesman for Fannie 
Mae, who said that while he worked there from 2000 to 2002, Fannie Mae and 
Freddie Mac together paid Davis's firm $35,000 a month. Davis "didn't 
really do anything," McCarson, a Democrat, said.

Davis's role with the group has bubbled up as an issue in the campaign, 
but the extent of his compensation and the details of his role have not 
been reported previously.

McCain was never a leading critic or defender of the mortgage giants, 
although several former executives of the companies said Davis did draw 
McCain to a 2004 awards banquet that the companies' Homeownership Alliance 
held in a Senate office building. The organization printed a photograph of 
McCain at the event in its 2004 annual report, bolstering its clout and 
credibility. The event honored several other elected officials, including 
at least two Democrats, Governor Edward Rendell of Pennsylvania and 
Representative Artur Davis of Alabama.

In an interview Sunday night with CNBC and The New York Times, McCain 
noted that Davis was no longer working on behalf of the mortgage giants. 
He said Davis "has had nothing to do with it since, and I'll be glad to 
have his record examined by anybody who wants to look at it."

Asked about the reports of Davis's role, a spokesman for McCain said that 
during the time when Davis ran the Homeownership Alliance, the senator had 
backed legislation to increase oversight of the mortgage companies' 
accounting and executive compensation. The legislation, however, did not 
seek to change their anomalous structure as private companies with federal 
support.

The spokesman, Tucker Bounds, also noted that the Homeownership Alliance 
included nonprofit organizations like Habitat for Humanity and the Urban 
League. "It's not controversial to promote homeownership and minority 
homeownership," Bounds said. More than a half-dozen current and former 
executives, however, said the Homeownership Alliance was set up mainly to 
defend Fannie Mae and Freddie Mac by promoting their role in the housing 
market, and the two companies paid almost the entire cost of the group's 
operations.

"They were financed largely, possibly exclusively, by Fannie and Freddie," 
said William R. Maloni, a Democrat who is a former head of industry 
relations for Fannie Mae. "We thought it would be helpful to have someone 
who was a broadly recognized Republican to be the face of the 
organization, and that person became Rick Davis." Maloni added, "Rick, for 
that purpose, turned out to be quite good." (Several executives said 
Davis's compensation was not unusual for the companies' well-connected 
consultants.)

The federal bailout of the two mortgage giants has become an emblem of 
what critics say is the outdated or inadequate regulatory system that 
allowed the financial system to slide into crisis this summer.

At the time that Fannie Mae and Freddie Mac recruited Davis to run the 
Homeownership Alliance in 2000, they were under new pressure from private 
industry rivals and deregulation-minded Republicans who argued that the 
two companies' federal sponsorship gave them an unfair advantage and put 
taxpayers at risk. Critics of the companies had formed their own 
Washington-based advocacy group, FM Watch. They were pushing for 
regulations that would deter the companies from expanding into new areas, 
including riskier and more profitable mortgages.

Davis had recently returned to his lobbying firm from running McCain's 
unexpectedly strong 2000 Republican primary campaign, which elevated 
McCain's profile as a legislator and Davis's as a lobbyist.

"You can say what you want about free-market distortions, but people like 
the system because it gets them into houses cheap," Davis said to 
Institutional Investor magazine in 2000, adding that he would run the 
advocacy group out of his Alexandria, Virginia, lobbying firm.

The organization also hired Public Strategies, a communications firm that 
included former Bush adviser Mark McKinnon. Davis wrote letters and gave 
speeches for the group. In April 2001, he sent out a press release 
headlined, "It's Tax Day — Do You Know Where Your Deductions Are? For Most 
Americans, They're in Your Home."

But by the end of 2005, Fannie Mae and Freddie Mac were recovering from 
accounting problems and re-examining costs, former executives said. The 
companies decided the Homeownership Alliance had outlived its usefulness, 
and it disappeared.

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Seeya rouind town, Moscow.

Tom Hansen
Moscow, Idaho

"We're a town of about 23,000 with 10,000 college students. The college 
students are not very active in local elections (thank goodness!)."

- Dale Courtney (March 28, 2007)


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