L'Ombre de l'Olivier

The Shadow of the Olive Tree

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24 September 2008 Blog Home : September 2008 : Permalink

Freddie Mac's Incompetent Lobbying

The NY Slimes, that paragon of liberal leaning journalism had a hit piece yesterday on Senator McCain, to which his campaign responded. While the obvious intent of the piece is to highlight (non-existant) sleaze in the McCain campaign what it actually shows is that Freddie Mac were very good at wasting money, possibly as much as half a million dollars.

The hit piece refers to McCain's campaign manager Rick Davis, a former lobbyist and former part owner of a lobbying firm. The rebuttal makes clear that while Rick Davis may, once upon a time, have been a lobbyist he hasn't benefitted from that as a source of income for some years:

As has been previously reported, Mr. Davis separated from his consulting firm, Davis Manafort, in 2006. As has been previously reported, Mr. Davis has seen no income from Davis Manafort since 2006. Zero. Mr. Davis has received no salary or compensation since 2006. Mr. Davis has received no profit or partner distributions from that firm on any basis -- weekly, bi-weekly, monthly, bi-monthly, quarterly, semi-annual or annual -- since 2006. Again, zero. Neither has Mr. Davis received any equity in the firm based on profits derived since his financial separation from Davis Manafort in 2006. [...] Mr. Davis has not served as a registered lobbyist since 2005.

I shall ignore other parts of the rebuttal because I can't see that they can be easily proven. The above however is sufficiently straight forward and factual that it is unlikely to be false. Now let's have a look at the NY Times:

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.

 [...] 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.

[...] 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.

So even by the Times' own admission Freddie Mac paid 15,000 a month from the end 2005 until (presumably) August 2008. Assuming the "end of 2005" means the first payment was in December 2005 and that the last was in August 2008 then this means 33 months of payments by my calculatioms. 15,000 * 33 = $495,000. For that $495,000 Mr Davis spoke to a PAC once in October 2006 and his firm did absolutely nothing whatsoever (apart apparently from cashing the checks).

It is possible that in October 2006 Mr Davis was still receiving financial benefits from his consulting firm but it seems clear that if he was then that arrangement ended shortly afterwards, and from the context of the McCain rebuttal and this WaPo article from earlier this year it sounds like his separation was earlier than that. If (worst case) Davis quit the firm in December 2006 then Freddie Mac wasted 20 months of payments or $300,000.

[Note: that since the McCain campaign was not launched unti February 2007 and/or April 2007, depending on how you count things, there would be no ethical conflicts involved in Mr Davis receiving money from Freddie Mac in October 2006 when he does not appear to have been a McCain employee.]

Yet, in the hopes of influencing McCain via Davis, Freddie Mac continued to throw money at his firm even though he had left it and had no financial interest in it. This seems to be indicative of major cluelessness by whichever Freddie Mac exec was in charge of bribinginfluencing congress. It is even more idiotic given that McCain spoke out against maintaining the Freddie Mac status quo in 2006 (and earlier and later). Hence, given McCain's tendency to be stubborn about things, it seems unlikely that he would change his mind because a member of his campaign team was formerly employed ba a lobbying firm that received money from Freddie Mac.