Lobbyists caused the downfall of Fannie and Freddie.....
LESLIE DOYLE
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September 10, 2008
For '08 Rivals, a Skein of Ties to Loan Giants
By JACKIE CALMES
WASHINGTON — Senators Barack Obama and John McCain each cite the mess
at Fannie Mae and Freddie Mac as a consequence of the corrosive
coziness of lobbyists and politicians that they promise to end. But
each man and his party also have ties to the fallen giants that will
complicate the next president's job of reshaping the mortgage finance
companies that have been essential to the economy.
The Republican nominee, Mr. McCain of Arizona, has numerous close
relationships with and contributions from current and former company
lobbyists.
Mr. Obama, his Democratic rival from Illinois, is second among members
of Congress in donations from the firms' employees and political
action committees.
Beyond the antilobbyist message, Mr. Obama also indicts the Bush
administration and the Republicans who controlled Congress for a dozen
years until 2007, including Mr. McCain.
He blames them for lax regulation that freed the companies to go deep
into debt to buy the mortgages that crushed them as the housing crisis
persisted. Yet his fellow Democrats in Congress have been well known
as enablers of the two companies for years, protecting the firms'
dueling responsibilities to support affordable housing as well as to
maximize shareholder profits.
For all their outrage now, neither Mr. Obama, with less than four
years in the Senate, and Mr. McCain, after a quarter-century in the
House and Senate, has a record of directly challenging the companies.
Mr. Obama did warn publicly of a coming housing crisis in March 2007,
five months before it erupted and the government first took action.
Several former company executives, as well as current and former
Senate Republican staff members, said Mr. McCain seemed to avoid
matters related to the financial industry after the last major
financial crisis — the savings and loan crisis of the late 1980s. He
was one of the "Keating Five" senators investigated by the Senate,
accused of interceding with federal regulators for the operator of a
failing thrift. Mr. McCain received a rebuke.
More than Mr. Obama, Mr. McCain's circle of advisers and contributors
includes current and former lobbyists or directors for the companies,
although since July he has called for a ban on any lobbying by the two
firms.
Among the companies' past advocates are Mr. McCain's campaign manager,
Rick Davis, a longtime lobbyist; Mr. McCain's confidant and adviser
Charlie Black, whose firm worked for Freddie Mac for several years
ending in 2005, and the deputy campaign finance chairman, Wayne L.
Berman, a vice president for Ogilvy Worldwide and a former Fannie Mae
lobbyist.
Mr. Davis previously was head of the Homeownership Alliance, a
coalition of banks and housing industry interests led by Fannie and
Freddie to stave off regulations.
The group was formed to counter another organization, FM Watch, an
alliance of financial institutions and lobbying associations that
wanted to even the playing field against Fannie Mae and Freddie Mac,
by challenging the implicit government guarantee that allowed the two
firms to borrow funds at lower interest rates.
Six members of the Republican lobbying firm Fierce Isakowitz &
Blalock, all Fannie Mae lobbyists, have given Mr. McCain $13,250,
records show.
The New York investor Geoffrey T. Boisi, a member of Freddie Mac's
board, contributed more than $70,000 to Mr. McCain and Republican
Party committees working for his election. Both he and Richard F.
Hohlt, a Fannie Mae lobbyist, are among the McCain "bundlers" who have
raised $100,000 to $250,000 from others, according to the campaign Web
site.
Both candidates' vetters for their vice presidential picks have links
to Fannie. The former chairman, James Johnson, initially led Mr.
Obama's search committee, but stepped aside after a controversy over
favorable loan terms he received from another firm. Mr. McCain's
vetter, Arthur B. Culvahouse Jr., was a past Fannie lobbyist.
Mr. Obama's contributors include the Freddie Mac senior vice president
Robert Y. Tsien and the directors William M. Lewis Jr., a banker at
Lazard, and the Chicago businesswoman Brenda J. Gaines. He does not
accept contributions from lobbyists, but Mr. Obama has been a favorite
of Fannie Mae employees and their political action committee,
according to an analysis by the nonpartisan Center for Responsive
Politics.
He was second only to the Senate Banking Committee chairman,
Christopher J. Dodd, the Connecticut Democrat, in contributions from
the two firms' employees and PACs since 1998, the analysis found, even
though Mr. Obama has been in the Senate only since 2005. While the two
firms have long been careful to hire from and contribute to both
parties, generally Fannie Mae has favored Democrats and Freddie Mac
the Republicans.
The center said he received $122,850, of which $101,150 was from Fannie Mae.
Until now, the companies were among the capital's lobbying powerhouses
— hiring former members of Congress, administration officials and top
staff members as in-house lobbyists, contracting with outside lobbying
firms, and sprinkling development projects and charitable
contributions among Congressional districts.
With the Treasury's action over the weekend putting Fannie and Freddie
in government conservatorships, the issue of what went wrong and how
to fix them has intruded into the presidential campaign.
Mr. McCain wants to see the companies carved up and privatized, as
commercial lenders have long sought. Phil Gramm, Mr. McCain's friend
and longtime adviser, also took that position when he was the Senate
Banking Committee chairman in the late 1990s to 2003.
Mr. Obama's comments signal a preference for the sort of
public-private hybrid that Fannie and Freddie were, but with tighter
controls. The firms, until now, were shareholder-owned and highly
profitable, but chartered by the government and backed by an implicit
government guarantee that is now explicit.
Both senators issued statements supporting Treasury's seizure. And
both increased the populist rhetoric in their competition to be seen
as an agent of change.
Mr. McCain attributed the companies' troubles to "cronyism, special
interest lobbyists and executives making millions of dollars a year
while things were going downhill."
Mr. Obama, in Ohio on Tuesday, said he would oppose any golden
parachutes for the companies' ousted executives. "Any action with
respect to Fannie Mae and Freddie Mac needs to put taxpayers first and
can't under any circumstances bail out shareholders or senior
management of those companies," he said.
He sent a letter late Monday to Treasury Secretary Henry M. Paulson
Jr. and James B. Lockhart, the companies' conservator, seeking
clarification that the bailout would not provide "a windfall" to
ousted executives.
Kitty Bennett contributed reporting.
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