Journalism in the Public Interest

What Letter Was McCain Referring to?

Oct. 10: This post has been updated.

John McCain (Stan Honda/AFP/Getty Images)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. 10/10 Update: The campaign did send the letter. See it here (PDF).

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:

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…and the sheer magnitude of these companies and the role they play in the housing market….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.

But until we see his letter, we can’t be sure.

Adding to the confusion is a statement he made during a November 2007 interview with the New Hampshire Keene Sentinel, which touched on, among other topics, the subprime mortgage crisis:

“I don’t really know of hardly anybody who, with the exception of a handful, that said, wait a minute this thing is getting completely out of hand and is overheating. So, I’d like to tell you I did anticipate it, but I have to give you straight talk. I did not.”

For those interested in reading up on the two candidates’ positions on market reforms, see our complete rundown.


As I recall the late Sen Joe McCarthy waved a sheet of paper which he said was a list of subversive persons employed at a federal agency in a letter from another federal agency.  It was later found that there no such letter. Joe McCarthy’s name became mud.
No 2 Senators (McCain & Obama) claim that each 1 wrote a letter to Treas Secty Paulson warning of problems which led to the melt-down of 9/15/08.  Bothe men said they wrote & sent their letters to Secty Paulson in 2007.  Neither man has produced a copy of the letters which each 1 claims he’d sent to Paulson in ‘07.  Nobody at the Dept of the Treas has found a copy of either originals which each candidate claims that he sent to Paulson.  Politicians have a reputation of exaggerating & down right lying.
What happens if neither candidate ever sent Paulson the letter(s) which each 1 claims to have sent to Paulson?
It will be interesting if neither candidate has a file copy of any letter sent to Paulson, much less a letter warning of problems which led to the melt-down of 9/15/08 & nobody at Treas, including Paulson, knows of the letters from each candidate for POTUS.  A lot of people will call both candidates liars.  The candidates may choose to call Paulson a liar.
What else is new?  Politicians do lie.  We’re sure to have a liar in the White House.  What else is new?  America, what a country?  We’re sure to have the finest POTUS money can buy as POTUS #44.  What’s new?

For what it’s worth Obama posted the text of his letter on his website when he sent it in early 2007. You can see it here:

There is no image so I guess there is still a need for verification. I’d like to hear the press ask Bernanke and/or Paulson about Obama’s and McCain’s claims. Maybe that would be the easiest way to verify this information.

Thank you, Mr Halpern.  It’s more than Sen McCain has produced.  I wonder if the Messrs. Paulson &/or Bernanke would respond to such questions from the media.  Avoiding the questions would give us a clue to what an answer might say.  Any questions or answers could produce spin.  Thank you for the last paragraph of your comment.  It is very useful.

One thing I find absent from that the Right’s rants regarding Fannie & Freddie is a coherent explanation of HOW Fannie & Freddie are responsible.

It was Bush who went to the Republican, at the time, Congress to get authority that would allow the FHA (Federal Housing Authority) to guarantee loans for the full purchase price of the home, plus down-payment costs. Bush and the Republicans allowed the FHA to guarantee mortgages as high as 103% of the value of the underlying property.

It was also Bush’s SEC appointee who allowed Banks to scrap the old Capital/Debt ratios that also led to the crisis.

The St. Louis Fed also wrote a White Paper on the causes of the meltdown; Fannie & Freddie didn’t even the list.

Fannie & Freddie didn’t make the loans. Fannie & Freddie didn’t rate junk securities as AAA. Fannie & Freddie worked just fine for 70 years till Bush implemented failed Rightwing economic policies.

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