Mortgage News

I just saw a little editorial piece in the Wall Street Journal that made me sick. The editorial starts off well, saying, "In the rush to bulldoze the Fannie Mae-Freddie Mac and housing bailout bill through Congress this week, scant attention has been paid in Washington to how the U.S. system fell into this hole."

Too bad that was the last thing mentioned in the article about "how the U.S. system fell into this hole." Instead, the rest of the article was devoted to praising Republican presidential candidate Sen. John McCain for saying that Fannie Mae and Freddie Mac should be taken off life support. While I oppose the bailout too, McCain is no saint on the issue. For one thing, he was too busy meeting with the Dalai Lama to find the time to go to Washington to vote against the cloture motion, but that's small potatoes compared to the larger issue because McCain has long championed using Federal funds to support affordable housing, which combined with Fed policy is what ultimately led to the subprime mortgage crisis and the overall ills of the lending industry.

The Chicago Tribune's Andrew Zajac blogged in June that McCain's campaign manager, Rick Davis has ties to Fannie Mae. He wrote, "Davis, was president of the Homeownership Alliance, a Fannie Mae and Freddie Mac-led advocacy group which has tried to fend off regulation sought by large private banks and mortgage lenders." Zajac goes on to make it clear what the real motivations of Davis were:

The back story, according to critics, is that Fannie Mae and Freddie Mac feared that Congressional meddling would lower their healthy profits.

The issue really hasn't been who could buy a home. It's been more about the playing field for the vast mortgage market.

Fannie and Freddie are publicly-traded companies, but they are federally-chartered, which creates the widespread impression that if they really screw up, the government will bail them out.

Private banks don't operate with that perception and so, they argue, their costs of doing business are higher.

For years, banks' Hill allies, mostly Republicans, including Richard Baker, of Louisiana, have sought 'reforms' to level the playing field.

 Davis, who has a 25+ year pedigree as a lobbyist and Republican political consultant, was hired in 2000 and the Homeownership Alliance was ginned up, to help Fannie and Freddie build support to rebuff Baker's efforts. The organization dissolved about two years ago.

It's noteworthy that Zajac's piece was originally written to take Democratic presidential candidate Sen. Barrack Obama to task for employing Washington insiders in his campaign while claiming to be an outsider. The information Zajac presented about McCain was intended to counterbalance his commentary on Obama, not to focus on McCain's indiscretions.