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Paul Kiesel
Paul Kiesel
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Douglas Holtz-Eakin, McCain’s Economic Adviser, Confused on Fannie and Freddie?

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I wouldn’t say that Douglas Holt-Eakin is confused on what Fannie and Freddie do operationally, about the origins of the two mortgage giants, nor what transpired over at Fannie and Freddie over that last five years that required the federal government’s takeover this weekend, but I think he’s confused on or ignoring who was providing strong economic advice to John McCain until just recently: Phil Gramm. And it was Phil Gramm who helped orchestrate our current mortgage and, subsequently, housing crisis due to deregulation bills passed when he was a Texas senator.

Holtz-Eakin, McCain’s economic adviser, said yesterday that if the Arizona senator wins the race, he’ll privatize the two government sponsored mortgage companies once economic conditions stabilize.

“The financial problems at these institutions are a legacy of crony capitalism, the absence of transparency and accountability, and the implied backing of the taxpayer,” said Holtz-Eakin. “If elected, they will continue the crusade for the right reform of the institutions.”

Crony capitalism? The absence of transparency? Has he not read the Commodity Futures Modernization Act of 2000? Phil Gramm, who had Holtz-Eakin’s job before he was let go this summer for making insensitive comments about economic conditions/complaints that are all too much of a reality for many Americans, authored that bill (snuck it into Because of Gramm’s bill, cronies were able to run loose and trick mostly unsuspecting borrowers into loans that the lenders themselves knew couldn’t be fulfilled by the mortgagor.

If what was coming out of the McCain camp was true (that McCain wants to reform the two mortgage giants and clean up transparency issues among lenders), it’d be admirable, but since McCain and Gramm were such great personal and political buddies (I’m sure anyone could Google: McCain & Gramm, hit images, and find photos of the two men looking like longtime pals), I highly doubt McCain has had a change of heart overnight. McCain, it’s safe to assume since he promotes his campaign as being the “Straight Talk Express,” was very clear on the mortgage crisis back in March:

[. . .] just three months ago, McCain suggested that it’s the borrowers’ fault for why we’re in this mortgage mess and that he couldn’t understand how such a small percentage of foreclosures and/or troubled mortgages are causing this much financial turmoil, “[Americans] bought homes they couldn’t afford [. . .] Only 55 million [homeowners] have a mortgage at all and 51 million are doing what is necessary [. . .] to make their payments on time. That leaves us with a puzzling situation: How could 4 million mortgages cause this much trouble for us all?” (New York Times, 3/25/08). He also said in March that government intervention is unnecessary and he wouldn’t support it, but clearly his statements today contradict his former ones.

LosAngeles.InjuryBoard.com, 7/10/08