Freddie Mac Paid McCain Campaign Manager's Firm Through last Month
Huffington Post | Nicholas Graham September 23, 2008 08:21 PM
Two reports tonight, one from the New York Times, and the other from Newsweek, contradict John McCain's statement this week that his campaign manager Rick Davis had no involvement with mortgage giant Freddie Mac for the last several years. The Times reports:
One of the giant mortgage companies at the heart of the credit crisis paid $15,000 a month to a firm owned by Senator John McCain's campaign manager from the end of 2005 through last month, according to two people with direct knowledge of the arrangement. The disclosure contradicts a statement Sunday night by Mr. McCain that the campaign manager, Rick Davis, had no involvement with the company for the last several years. Mr. Davis's firm received the payments from the company, Freddie Mac, until it was taken over by the government this month along with Fannie Mae, the other big mortgage lender whose deteriorating finances helped precipitate the cascading problems on Wall Street, the people said...
...On Sunday, in an interview with CNBC and The New York Times, Mr. McCain responded to a question about Mr. Davis's role in the advocacy group through 2005 by saying that his campaign manager "has had nothing to do with it since, and I'll be glad to have his record examined by anybody who wants to look at it."
Newsweek confirms the story:
Freddie Mac had previously paid an advocacy group run by Davis, called the Homeownership Alliance, $30,000 a month until the end 2005, when that group was dissolved. That relationship was the subject of a New York Times story Monday, which drew angry denunciations from the McCain campaign. McCain and his aides have vehemently objected to suggestions that Davis has ties to Freddie Mac-an especially sensitive issue given that the Republican presidential candidate has blamed "the lobbyists, politicians and bureaucrats" for the mortgage crisis that recently prompted the Bush administration to take over both Freddie Mac and its companion, Fannie Mae, and put it under federal conservatorship.
But neither the Times story -- nor the McCain campaign -- revealed that Davis's firm, the Washington, D.C. based lobbying firm Davis Manafort, continued to receive $15,000 a month from Freddie Mac until last month-long after the Homeownership Alliance had been terminated. The two sources, who requested anonymity discussing sensitive information, told Newsweek that Davis himself approached Freddie Mac in 2006 and asked for a new consulting arrangement that would allow his firm to continue to be paid. The arrangement was approved by Hollis McLoughlin, Freddie Mac's vice president for external relations, because "he [Davis] was John McCain's campaign manager and it was felt you couldn't say no," said one of the sources. [McLoughlin did not return phone calls].
In a sharply-worded statement released to the Huffington Post, David Donnelly, director of the watchdog group Campaign Money Watch, said: "John McCain's campaign manager and Freddie Mac essentially had a secret half a million dollar lay-a-way plan. For almost three years, they made secret, monthly payments of $15,000 to Rick Davis for apparently no other work than for him to provide special access to a future McCain White House in exchange. If McCain knew about this, his presidential campaign should be over. If he didn't know about it, he ought to fire Rick Davis immediately."
McCain's campaign has been attacking Obama over his own (rather tenuous) ties to the two former lending giants. GOP officials argued that despite whatever connections Davis or others had to the mortgage giants, McCain was a leading advocate for reforming them. However, the Times' reporting punches some holes in that claim:
In an interview Tuesday with conservative talk-radio host Neal Boortz, Mr. McCain said, "I remember warning at that time that Fannie and Freddie were out of control and that they needed to be reined in. And, frankly, I warned that this kind of thing could lead to serious problems. Now, in full disclosure, I didn't foresee something this huge, but certainly I saw the fundamentals there for serious problems when you have a quasi government agency acting the way they did."
When Mr. Boortz noted approvingly that Mr. McCain had co-sponsored a Senate bill to mandate new regulations, Mr. McCain said, "I remember it very well."
But a Freddie Mac official said Mr. McCain "never took on the role that some other Republicans did" to try to limit the companies. He named instead Senators Chuck Hagel of Nebraska, John Sununu of New Hampshire and Elizabeth Dole of North Carolina, all of whom were on the banking committee during recent years. "I remember working against a number of amendments and they were always introduced by Hagel and Sununu. John McCain was never anywhere to be found."
A check of the records for the legislation that Mr. Boortz mentioned shows that Senator Hagel was the original sponsor on Jan. 26, 2005, and Senators Sununu and Dole were co-sponsors then. Mr. McCain did not sign on as a co-sponsor for more than a year, on May 25, 2006.
Rick Davis, left, with Senator John McCain in 2007. Stephan Savoia/Associated Press
By JACKIE CALMES and DAVID D. KIRKPATRICK Published: September 23, 2008
WASHINGTON — One of the giant mortgage companies at the heart of the credit crisis paid $15,000 a month from the end of 2005 through last month to a firm owned by Senator John McCain’s campaign manager, according to two people with direct knowledge of the arrangement.
The disclosure undercuts a statement by Mr. McCain on Sunday night that the campaign manager, Rick Davis, had had no involvement with the company for the last several years.
Mr. Davis’s firm received the payments from the company, Freddie Mac, until it was taken over by the government this month along with Fannie Mae, the other big mortgage lender whose deteriorating finances helped precipitate the cascading problems on Wall Street, the people said.
They said they did not recall Mr. Davis’s doing much substantive work for the company in return for the money, other than speak to a political action committee of high-ranking employees in October 2006 on the approaching midterm Congressional elections. They said Mr. Davis’s firm, Davis & Manafort, had been kept on the payroll because of Mr. Davis’s close ties to Mr. McCain, the Republican presidential nominee, who by 2006 was widely expected to run again for the White House.
Mr. Davis took a leave from Davis & Manafortfor the presidential campaign, but as a partner and equity-holder continues to benefit from its income. No one at Davis & Manafort other than Mr. Davis was involved in efforts on Freddie Mac’s behalf, the people familiar with the arrangement said.
A Freddie Mac spokeswoman said the company would not comment.
Jill Hazelbaker, a spokeswoman for the McCain campaign, did not dispute the payments to Mr. Davis’s firm. But she said that Mr. Davis had stopped taking a salary from his firm by the end of 2006 and that his work did not affect Mr. McCain.
“Senator McCain’s positions on policy matters are based upon what he believes to be in the public interest,” Ms. Hazelbaker said in a written statement.
The revelations come at a time when Mr. McCain and Mr. Obama are sparring over ties to lobbyists and special interests and seeking political advantage in a campaign being reshaped by the financial crisis and the plan to bail out investment firms.
Mr. McCain’s campaign has been attacking Senator Barack Obama, his Democratic rival, for ties to former officials of the mortgage lenders, both of which have long histories of cultivating allies in the two parties to fend off efforts to restrict their activities. Mr. McCain has been running a television commercial suggesting that Mr. Obama takes advice on housing issues from Franklin D. Raines, former chief executive of Fannie Mae, a contention flatly denied by Mr. Raines and the Obama campaign.
Freddie Mac’s roughly $500,000 in payments to Davis & Manafort began immediately after Freddie Mac and Fannie Mae in late 2005 disbanded an advocacy coalition that they had set up and hired Mr. Davis to run, the people familiar with the arrangement said.
From 2000 to the end of 2005, Mr. Davis had received nearly $2 million as president of the coalition, the Homeownership Alliance, which the companies created to help them oppose new regulations and protect their status as federally chartered companies with implicit government backing. That status let them borrow cheaply, helping to fuel rapid growth but also their increased purchases of the risky mortgage securities that were their downfall.
On Sunday, in an interview with CNBC and The New York Times, Mr. McCain responded to a question about Mr. Davis’s role in the advocacy group through 2005 by saying that his campaign manager “has had nothing to do with it since, and I’ll be glad to have his record examined by anybody who wants to look at it.”
Such assertions, along with McCain campaign television ads tying Mr. Obama to former Fannie Mae chiefs, have riled current and former officials of the two companies and provoked them to volunteer rebuttals. The two officials with direct knowledge of Freddie Mac’s post-2005 contract with Mr. Davis spoke on condition of anonymity. Four other outside consultants, three Democrats and a Republican also speaking on condition of anonymity, said the arrangement was widely known among people involved in Freddie Mac’s lobbying efforts.
As president of the Homeownership Alliance, Mr. Davis got $30,000 to $35,000 a month. Mr. Davis, along with Fannie Mae and Freddie Mac, have characterized the alliance as a coalition of many housing industry and consumer groups to promote homeownership, but numerous current and former officials at both companies say the two mortgage companies created and bankrolled the operation to combat efforts by competitors to rein in their business. They dissolved the group at the end of 2005 as part of cost-cutting in the wake of accounting scandals and, at Freddie Mac, a lobbying scandal that forced out its former top Republican lobbyist.
On Monday, the McCain campaign accused The New York Times of bias for reporting the payments to Mr. Davis for the alliance work from the mortgage giants. Mr. Davis said that he had worked not for the two companies but for the advocacy group, which included other nonprofit organization as well, and was focused only on promoting homeownership.
After the Homeownership Alliance was dissolved, Mr. Davis asked to stay on a retainer, the people familiar with the deal said. Hollis McLoughlin, who was chief of staff to Richard F. Syron, Freddie Mac’s chief executive, arranged for a new contract with Davis & Manafort, at the reduced rate of $15,000 a month, they said. Mr. Syron lost his job in the government takeover this month. Mr. McLoughlin, who through a spokeswoman declined to comment, was a former chief of staff to Treasury Secretary Nicholas Brady in the first President Bush’s administration, and has longstanding Republican ties.
Mr. Davis was hired as a consultant, not a lobbyist, the officials said. Davis & Manafort in recent years has filed federal lobbying reports for a number of companies but not Freddie Mac or Fannie Mae.
Later in 2006, Mr. Davis was working on Mr. McCain’s emerging presidential campaign, as chief financial officer. The only thing that Freddie Mac officials could recall Mr. Davis doing for the company was the October 2006 pre-election forum with mid-level and senior executives who contribute to Freddie PAC, the company’s political action committee.
An electronic invitation to the employees, read by an official to the New York Times, said “Please join us for political food for thought” with Paul Begala, a longtime Democratic consultant, “and Rick Davis, former 2000 presidential campaign manager and current advisor to Senator John McCain.” Mr. Begala, who also was a paid consultant to Freddie Mac until this month, confirmed that the event took place.
At least two other people associated with Mr. McCain have ties to either Freddie Mac. The lobbying firm of the Republican that Mr. McCain has enlisted to plan his transition to the White House should he be elected, William Timmons Sr., earned nearly $3 million from Freddie Mac between 2000 and its seizure, federal lobbying records show. Mr. Timmons is founder of Timmons & Co., one of Washington’s best-known lobbying shops. The payments were first reported by Bloomberg News.
Mark Buse, Mr. McCain’s chief of staff for his Senate office, also is a Freddie Mac alumnus. He and his former lobbying employer, ML Strategies, registered to lobby for the company in July 2003, and received $460,000 before the association ended after 2004.
Mr. McCain and his advisers have argued that whatever connections Mr. Davis and other McCain campaign officials have had to the mortgage giants, Mr. McCain in the Senate has been an advocate for reforming them. And they have suggested that Mr. Obama is linked to the companies through donations from their employees ties to former officials there, including James Johnson, another former chief executive of Fannie Mae who was the head of Mr. Obama’s vice presidential search team until stepping aside after coming under criticism for getting a mortgage on favorable terms.
Since his first campaign for the Senate in 2004, Senator Obama has received about $126,000 in contributions from employees of Fannie Mae and Freddie Mac, while Senator McCain, over the last decade, has received about $22,000, according to the Center for Responsive Politics.
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