When You've Got Nothing True to Say . . .

John McCain's response the current economic crisis has been remarkable. He literally has no legitimate arguments that he can credibly make, so he's forced to make some profoundly unserious and hypocritical ones. Let's look as at his radio address this morning.

"Good morning. This is John McCain, speaking to you from Green Bay, Wisconsin. Here and all across our country, people are wondering what exactly is happening on Wall Street. And with good reason, they want to know how their government will meet the crisis. Clear answers are hard to come by in Washington.

There are certainly plenty of places to point fingers, and it may be hard to pinpoint the original event that set it all in motion. But let me give you an educated guess. The financial crisis we're living through today started with the corruption and manipulation of our home mortgage system. At the center of the problem were the lobbyists, politicians, and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac.

Let me stop here for a second. This is, quite simply, an astoundingly inaccurate diagnosis of the problem. Fannie Mae and Freddie Mac are, at best, a peripheral part of this story. As this industry expert points out, Fannie and Freddie were "nowhere near the biggest culprits in the recent credit bubble. They may finance most of the home loans in America, but most of the home loans in America aren't the problem; the problem is that very substantial slice of home loans that went outside the Fannie and Freddie box." The bad assets at the heart of this credit collapse are the mortgages that weren't sold to Fannie and Freddie, but were instead packaged and commoditized and sold to everyone else. The only reason McCain is focusing on Fannie Mae and Freddie Mac is because he thinks he can make a tenuous connection between those companies and Obama. It's all about distraction. Let's go back to his radio address:

These quasi-public corporations led our housing system down a path where quick profit was placed before sound finance. They institutionalized a system that rewarded forcing mortgages on people who couldn't afford them, while turning around and selling those bad mortgages to the banks that are now going bankrupt. Using money and influence, they prevented reforms that would have curbed their power and limited their ability to damage our economy. And now, as ever, the American taxpayers are left to pay the price for Washington's failure.

This is utter hogwash. Fannie and Freddie weren't leading anything. They were constrained by law to only accept certain kinds of loans. The problem was that a bunch of sub-prime lenders appeared on the scene and started selling new types of loans to people who couldn't afford them. If those lenders had been regulated the way Fannie and Freddie were, we wouldn't be in this mess. These sub-prime lenders flourished in the non-regulated environment Republicans allowed to occur and developed the sort of "innovative products" that McCain praised as recently as this month.

Back to the radio address:

Two years ago, I called for reform of this corruption at Fannie Mae and Freddie Mac. Congress did nothing. The Administration did nothing.

That would be the Republican administration and Republican Congress, right? Plus, two years ago the housing bubble was already bursting. Action needed to be taken 7 or 8 years ago. And again, while Fannie and Freddie could have been regulated better, they weren't really the problem. The reason Fannie and Freddie eventually had to be taken over was because the housing slump got so bad that even home owners with conforming loans began to default.

Senator Obama did nothing, and actually profited from this system of abuse and scandal. While Fannie and Freddie were working to keep Congress away from their house of cards, Senator Obama was taking their money. He got more, in fact, than any other member of Congress, except for the Democratic chairman of the committee that oversees them.

Good grief. First, Fannie and Freddie were not a house a cards. The cards here were the mortgage-backed securities held by everyone else. Second, McCain's claim that Obama was taking money from Fannie and Freddie is dishonest as hell. He's basing this claim on the fact that some employees of the two mortgage giants have given money to Obama's presidential campaign (just like employees from every other company in America have). Obama hasn't taken a dime from any industry lobbyists. Moreover, as CNN just pointed out (I'll try to find a link), McCain has taken WAY more money from Fannie and Freddie executives, board members, and lobbyists than Obama has (the figures CNN used were $169,000 for McCain compared to $16,000 for Obama).

This is the problem with Washington. People like Senator Obama have been too busy gaming the system and haven't ever done a thing to actually challenge the system. The crisis on Wall Street started in the Washington culture of lobbying and influence peddling, and he was square in the middle of it.

The amount of chutzpah it takes to say something like this is truly remarkable. As McCain constantly points out, Obama hasn't been in Washington very long. He was only there for about two years before this campaign started. McCain was there for 26 years.  And not only that, but his campaign is literally run by former Fannie Mae and Freddie Mac lobbyists.  Rick Davis, his campaign manager is one of them.  And the notion that Obama spent his limited time in Washington in bed with lobbyists and influence peddlers is preposterous and not based on any actual facts.  Obama's chief legislative accomplishment was passing an ethics reform bill that the limited the influence of these people.   

The financial services industry -- and there are many honest and honorable people who work in it -- plays a vital role in our economy. Yet it's clear financial firms have lost the trust of the American people. Government has a clear responsibility to act and to defend the public interest. That is exactly what I intend to do.

I'm glad that McCain has had an epiphany and now sees a vital role for the government in regulating the banking industry, but there's just no getting around the fact that this is a major change in philosophy for him. As I noted earlier, McCain praised the deregulation of the banking industry in an article that was published this week. And he suggested we should bring the same deregulatory approach to health care. Meanwhile, Obama has been calling for tighter regulation of the mortgage industry since the day he joined the Senate and has long discussed the need for government regulation of financial markets.

What we're seeing here is a candidate who has absolutely nothing honest to say on this issue, the most important issue of the day. McCain's response to this crisis has been to completely distort not only his own record and that of his opponent, but to lie to voters about the nature of the very problem itself. This is a profoundly unserious and dishonest man who is flailing right now and doing anything he can to waive voters away from the obvious conclusions they should be reaching.

UPDATE: To be clear, I don't mean to absolve Fannie Mae and Freddie Mac of all responsibility for this mess. They played their part and pushed the envelope and definitely contributed to the problem. But it's ludicrous for McCain to suggest that these entities were The Problem or even the primary culprits. They just weren't. And claiming that they were is deeply misleading and cynical.