...we should note that Sen. McCain was late coming to the realization about Fannie and Freddie's cooking of the books. There were people inside the financial industry who had come to that conclusion in 2003, for God's sake, perhaps alerted to the fact that the many of the same scams so adroitly used by the sharks at Enron were being recycled by Fannie/Freddie.
However, that fact does NOT excuse all of Fannie and Freddie's Congressional apologists - both right AND left - for their failure to do their due diligence.
Perhaps that's why President Bush"s approval numbers, while deservedly low, are still 280% above that of Congress (34% to 12%).
Forget cleaning up the White House; what we need to do - and can do if we only are willing to face up to the truth - is clean up the People's House - and the Senate too...
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.
John McCain May 25, 2006, on behalf of the Federal Housing Enterprise Regulatory Reform Act of 2005
The bill died in committee.