Wednesday, September 24, 2008

Unearthing Another McCain Lie

We get emails. This morning a reader asked us to address the meme making the rounds of right-wing fringe elements to the effect that famed de-regulator John McCain co-sponsored regulatory reform legislation in 2005 which would have prevented the current credit crisis by reigning in Freddie Mac and Fannie Mae, sometimes lumped together as "government-sponsored entities" or GSEs.

Only the big, bad Democrats stopped him, or so it is claimed.

Is this true?
the reader asks.

The short answer is "no." It is a deeply dishonest, cynical distortion of the facts.

Where Do Wingnuts Get These Crazy Ideas?

Who knows how such craziness gets started? We've seen suggestions that Rush Limbaugh, whose knowledge of economics begins and ends with the street price of oxycodone, dreamed it up. Others say it was college-dropout Sean Hannity of Fox News.

The McCain campaign effectively juiced this deceptive meme the other day when Kevin Hassett -- a McCain campaign advisor whose major claim to fame is that he's one of the two idiots who predicted "Dow 36,000" -- repeated it in one of those we'll- print- any-old-opinion articles at Bloomberg.com.

Hassett's article is complete fiction. It has about as much truth as the latest caterwauling that Rick Davis, McCain's head campaign manager, really wasn't in the pay of Freddie Mac. In fact, as we now know, Davis's firm was paid $15,000 per month by Freddie Mac until last month (!) "because of Mr. Davis’s close ties to Mr. McCain, the Republican presidential nominee, who by 2006 was widely expected to run again for the White House."

As Steve Bennen points out:
Davis lobbied against federal regulations of Fannie Mae and Freddie Mac through the Homeownership Alliance, and once that was done, Davis asked Freddie Mac to put his firm on retainer, for $15,000 a month, for very little work.
Hi, Mom!

Alas, to get to the truth about McCain and Freddie Mac reform, as is so often the case, requires a tedious examination of the facts. Wingnuts don't do facts. We have to.

In this case, to answer our reader's question what's required is a long archeological expedition through the archives of the Congressional Record. Unearthing facts is never an exciting task and never ever something the right-wing wants to bother you with.

Moreover, to understand the facts in this instance requires some knowledge about the arcane legislative process, mortgage financing, executive branch regulatory oversight, and the shenanigans of Wall Street investment houses as they invented the nightmares of new slice-and-dice mortgage derivative instruments and CDOs in the late 1990's and early 2000's.

At the risk of boring the one or two other intrepid readers who have read this far (Hi, mom!) , here is what we need to tell our morning correspondent who asked us to look into the matter.

S. 190 (2005)

This much is true: On January 26, 2005, Nebraska senator Chuck Hegel (a Republican senator who has refused to back McCain) introduced S. 190 at the start of the 109th Congress. S. 190 was an executive branch reorganization bill that had been kicking around previous congresses for several years. Because all bills die at the end of every two-year Congress if they're not enacted as laws, sponsors had to re-introduce it after every two-year congressional election.

S. 190 would have transferred a number of mortgage loan regulatory and oversight functions traditionally given to the U.S. Housing and Urban Development Department (H.U.D.) to a new agency to be called the "Federal Housing Enterprise Regulatory Agency." Nothing in the text of the bill itself would have prevented the current credit crisis, although, obviously, there was hope that the new agency might better police Freddie Mac and Fannie Mae loan activities.

Co-Sponsors

Co-sponsors of S.190 when it was introduced in January 2005 were Elizabeth Dole (R-N.C.) and then-senator John Sununu (R-N.H.). Not John McCain.

McCain did not become a listed co-sponsor until May 25, 2006 -- a year and a half later, or almost one full year after the bill's short life came to an end. (see screenshot below).

This was two months after McCain's announcement on the David Letterman show that he would be running for president.

As it had in earlier congressional sessions, the Republican majority in both the Senate and the House killed the bill outright within six months. It was never brought to a floor vote in either the House or the Senate. (Remember, this was after the 2004 elections when voters rewarded Bush and his fellow Republican congress-persons with a continuing majority in all three elective branches of government.)

Here's a screenshot from the non-partisan govtrack.gov describing the short life of the bill:

What's meant by the phrase "to be reported with an amendment in the nature of a substitute favorably"? Again, as govtrack.gov explains:
[A] substitute bill was drafted up, possibly by the highest committee members, that makes substantive changes to the original, and the bill has been replaced by this substitute. This substitute is actually drafted in the form of an amendment to the original that reads “strike all after the enacting clause and insert the following”, i.e. it’s an amendment that says start over with this. This is the substitute amendment.
* * *
As for the term favorably, this means that a majority of the members of a committee support the bill being reported.

So, in the instance of S. 190 in the 109th Congressional session it was the Republican majority committee that substituted another bill for Hegel's and reported a later version favorably. And it was the Republican-dominated House and Senate leadership that never got around to formally asking for a vote on the measure.

Johnny Come Lately

McCain, well behind the curve, was adding his name as a co-sponsor to Hegel's bill months and months after another bill had taken its place and even that substitute bill had been derailed by his own party.

Public records will never reveal this, but it's a good bet that lobbyists for Freddie Mac and Fannie Mae -- many of whom today are running John McCain's campaign under Rick Davis' leadership -- had a lot to do with killing the substitute bill once it was reported out of committee. Indeed, the man chosen by McCain to be his "transition team leader" should he win the White House, William Timmons Sr., has lobbied for Freddie Mac and Fanny Mae since the year 2000. Such people as Timmons and Davis are the most likely source for advising McCain to sign onto the bill when it no longer mattered.

It's one of the oldest deceptions in the legislative bag of tricks to pretend to sign on to a piece of legislation you know is dead in the water. Despicable lying? Yes. Bad legislating? Of course. But clever politics when you can pull the wool over the people's eyes.

But that's not the end of the story.

Regulatory Reform of the GSEs

Beginning with a series of House of Representative votes in mid 2007, Democratic leaders in the current 110th Congress eventually enacted the re-designated H.R. 3221 (over Republican party opposition from 163 of 202 House Republicans), now known as the Housing and Economic Recovery Act of 2008 (HERA). You can read a summary of the bill here [pdf] or the full text of the bill here.

On all recorded roll call votes in the Senate, John McCain was absent and not voting. So, too, was every other senatorial candidate for president, from both parties, except for Christopher Dodd (D-CT).

But a Democratic majority in the House passed the reform bill. And a bipartisan coalition of Democrats and Republicans passed it in the Senate.

Dept. of Amplification
10-3-08 om

In the wake of the vice presidential debate where Sarah Palin claimed that McCain "sounded a warning bell" in 2006 about Fannie Mae and Freddie Mac, New York Times fact-checkers agreed with our analysis: McCain was tardy in recognizing the issue, not a leader:
Ms. Palin was referring to Mr. McCain’s decision in 2006 to sign on as a co-sponsor of a Senate bill that would have overhauled regulations governing Fannie Mae and Freddie Mac. But the legislation was introduced more than 16 months earlier and the debate over the issue had been going on for some time. He also only added his name after an oversight agency issued a lengthy report condemning practices at Fannie Mae.

2 comments:

Anonymous said...

"Co-sponsors of S.190 when it was introduced in January 2005 were Elizabeth Dole (R-N.C.) and then-senator John Sununu (R-N.H.). Not John McCain."

Since he's still a Senator, it's not really correct to say "then-Senator" John Sununu...

Bryan said...

The 2005 bill that would have done something about this mess was introduced by Mike Oxley [R-OH] in the House. The bill was passed by the House, but the companion Senate bill sponsored by Paul Sarbanes [D-MD] went no where because of opposition from the White House.

Oxley & Sarbanes had earlier collaborated on the bill that required more reporting and responsibility for CEOs after the Enron et al. messes.

Federal Housing Finance Reform Act of 2005 passed by the House, and then:

Oct 31, 2005: Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

The Senate did nothing.