With a congressional disapproval rating of 71%, the 110th Congress has a staggering emergency on its hands.
As Federal Reserve chairman Ben Bernanke laid out the frightening ramifications of the financial crisis, congressional leaders sat in stunned silence.
“When you listened to him describe it you gulped,” said Senator Charles Schumer (D-NY). Senator Chris Dodd (D-CT) said, “We’re literally maybe days away from a complete meltdown of our financial system, with all the implications here at home and globally.” Dodd went on to describe the meeting this way, “Somber doesn’t begin to justify the words. We have never heard language like this. This problem began with bad lending practices.”
Congress now wants to work together, to reach across the aisle to work out a stimulus package to avert a meltdown. The world is watching…waiting. The American heartland is holding its breath.
Sen. Barack Obama has portrayed Sen. John McCain as being for less regulation but the Washington Post, in a highly surprising move, refuted that claim by publishing McCain’s full quotation, “I am aware of the view that there is a need for government oversight. I think we found this in the subprime lending crisis — that there are people that game the system and if not outright broke the law, they certainly engaged in unethical conduct which made this problem worse. So I do believe that there is role for oversight.”
In the aftermath of the Enron collapse and other accounting scandals, he was a leader, with Sen. Carl M. Levin (D-MI), in pushing to require that companies treat stock options granted to employees as expenses on their balance sheets.
In a July 2002 op-ed piece in the New York Times, McCain wrote, “I have long opposed unnecessary regulation of business activity, mindful that the heavy hand of government can discourage innovation. In the current climate, only a restoration of the system of checks and balances that once protected the American investor–and that has seriously deteriorated over the past 10 years–can restore the confidence that makes financial markets work.”
In 2006, he pushed for stronger regulation of Fannie Mae and Freddie Mac while Obama was deafeningly silent. “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,” Mr. McCain warned.
Quoting directly from the Washington Post: “One element of the Obama campaign’s brief against Mr. McCain is that he supported repeal of the law separating commercial banks from investment banks. ‘He’s spent decades in Washington supporting financial institutions instead of their customers,’ Mr. Obama said yesterday. ‘Phil Gramm, one of the architects of the deregulation in Washington that led directly to this mess on Wall Street, is also the architect of John McCain‘s economic plan.’ Would it be churlish to point out that another author of the Gramm-Leach-Bliley law is former congressman Jim Leach, a founder of Republicans for Obama? Or that Obama advisers Lawrence H. Summers and Robert E. Rubin supported the repeal — which was signed by President Bill Clinton?”
There is certainly enough blame to go around and it is quite fair to say that no one’s hands are clean, but consider this: In the four years since he stepped down as Fannie Mae’s chief executive under the shadow of a $6.3 billion accounting scandal, Franklin D. Raines has taken calls from Barack Obama’s presidential campaign seeking his advice on mortgage and housing policy matters. Even today, some think he contributed to Fannie Mae’s slide.
Raines for more than a decade enjoyed a bully pulpit in Washington, first as head of the White House Office of Management and Budget under President Clinton and then as chief executive of Fannie Mae, where he was the first African American chief executive of a Fortune 500 company. Raines settled charges brought by the Office of Federal Housing Enterprise Oversight by agreeing this spring to pay $2 million and forfeiting $22.7 million in stock and other benefits. In October 2003, even as Raines was invited to the Bush White House to receive a leadership award on behalf of Fannie Mae, investigators were about to look into the company’s accounting books. A year later, Congress held a hearing on accounting irregularities at the company. By the end of 2004, Raines was forced out by the board, accused by regulators of overseeing accounting manipulations to bolster his compensation.
It’s a reasonable question which candidate has been more attentive to the brewing problems on Wall Street and which has a better prescription for them, but don’t blame John McCain for this travesty. The record clearly shows, as the Washington Post has courageously pointed out, that John McCain saw this coming and spoke forcefully about it.