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October 10, 2008

Where Is The Subprime Crisis Warning Letter McCain Wrote?

 Both John McCain and Barack Obama took turns during the second presidential debate on Tuesday night claiming credit for having warned of an imminent economic crisis.

Obama has referred frequently to his 2007 letter to Treasury Secretary Henry Paulson. But Sen. McCain countered by saying that he had written a letter “warning of exactly this crisis.” As far as we can tell, this was the first reference McCain has made of such a letter, and we couldn’t find it. Despite multiple requests, the McCain campaign did not provide comment or the letter.

Obama likes to bring up the letter he wrote to Paulson and Federal Reserve Chairman Ben Bernanke. Dated March 22, 2007, about six weeks after he’d declared his candidacy for the presidency, the letter stressed the need for immediate intervention to curb the “rising rates of home foreclosure in the subprime mortgage market”:

And while neither the government nor the private sector acting alone is capable of quickly balancing the important interests in widespread access to credit and responsible lending, both must act and act quickly.

Crediting the senator with a foresight others lacked, however, would be a stretch. The subprime mortgage crisis had been well underway for some time. See, for example, reporting by the New York Times in June 2005 on a growing housing crisis. A month later the Times wrote of the unease among federal banking regulators with regards to high-risk mortgage loans.

At Tuesday’s debate, McCain added a new detail to his role as an early warrior against bad lending practices by Fannie Mae and Freddie Mac. Apparently he, too, wrote a letter:

I think if we act effectively — if we stabilize the housing market, which I believe we can if we go out and buy up these bad loans so that people can have a new mortgage at the new value of their home; I think if we get rid of the cronyism and special interest influence in Washington so we can act more effectively — my friend, I’d like you to see the letter that a group of senators and I wrote warning exactly of this crisis. Senator Obama’s name was not on that letter.

McCain may have been referring to actions he took in support of the bill he co-sponsored in 2005 — the Housing Enterprise Regulatory Reform Act — which called for stricter regulations for Freddie Mac and Fannie Mae. When he joined as a co-sponsor in May 2006, about a year after it was first introduced, he made the following statement:



October 4, 2008

Economic Pain: 159,000 Jobs Lost In September. Obama Will Be BEST Protector of Middle Class

 Can you or your family afford to lose a job next week or next month? Barack Obama will be best protector of our economy which is in the middle of the worst financial crisis since the Great Depression.

“John McCain doesn’t seem to understand that this crisis isn’t two weeks old,” Ohio Governor Ted Strickland said earlier today in the Democratic Party’s address. “Maybe he doesn’t realize that we’ve lost jobs every month this year. He hasn’t said one thing he’d do to make his economy look any different than George Bush’s economy.”

Labor Department figures released on Friday shows that the U.S. lost 159,000 jobs in September, the most in five years! The jobless rate was unchanged from August at 6.1 percent but up from 5 percent as recently as April.
September’s unemployment data followed a 73,000 decline in jobs during August and showed that America’s economy – the world’s largest economy – may be headed for bigger job losses as consumers and companies cut back and economize on just about everything.

Obama strongly supports an economic recovery package. Following Friday’s jobs report, Obama said:

“Instead of Sen. McCain’s plan to give tax breaks to CEOs and companies that ship jobs overseas, I will rebuild the middle-class and create millions of new jobs by investing in infrastructure and renewable energy that will reduce our dependence on oil from the Middle East. I also call on Congress to pass an immediate rescue plan for our middle-class that will provide tax relief, save one million jobs, and save our local communities from harmful budget cuts and painful tax increases.”

McCain opposes a stimulus package for working families and did not take part in the Senate vote on the first stimulus bill last spring.

As bad as the new jobs data are, the underlying picture is even worst because the number of long-term unemployed workers (those jobless for more than six months and may have stopped looking for work) grew to 2 million in September, an increase of 728,000 over the past 12 months.

Senator Obama would create 2 million new jobs by investing in rebuilding crumbling infrastructure, roads, bridges, and schools, Strickland said. He would give tax breaks to companies that create jobs in America, he said.

Obama yesterday criticized Governor Palin for saying in the vice-presidential debate Democratic economic policies would “kill jobs.”

“When Senator McCain and his running mate talk about job killing, that’s something they know a thing or two about,” Obama said yesterday at a rally outside Philadelphia. “Because the policies they’re supporting are killing jobs every single day.”

Earlier in September, a Bloomberg/Los Angeles Times poll showed more respondents said Obama would do a better job handling the financial crisis than McCain, and almost half of the voters said they believed he had better ideas to strengthen the economy than McCain does.

















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