HAYWORTH CONTRIBUTED TO HOUSING COLLAPSE

FOR IMMEDIATE RELEASE:

Contact: Brian Rogers

Friday, May 7, 2010

(602) 604-2010

HAYWORTH CONTRIBUTED TO HOUSING COLLAPSE

J.D. Voted Against Reform Of Fannie, Freddie

Phoenix, AZ – On Thursday, Senator McCain, along with Republican colleagues Judd Gregg (NH) and Richard Shelby (AL), introduced an amendment that would end the government conservatorship of Fannie Mae and Freddie Mac. Fannie and Freddie played a key role in the housing debacle that is plaguing Arizona and the entire country. These two companies used their Washington clout and insider status to bolster their own bottom lines at a huge cost to the American public. Fannie and Freddie have already cost taxpayers $126.9 billion in federal bailout money, and Freddie has asked for an additional $10.6 billion just this week.

Americans for Tax Reform and the editorial boards of the Wall Street Journal and Washington Times have endorsed the McCain amendment. Ironically, the amendment contains two key reform
provisions – allowing a regulator to strengthen capital standards for GSEs, and greater restrictions on the size of mortgages Fannie and Freddie can purchase – that former Representative J.D. Hayworth voted against as a Member of Congress.

In 2005, Hayworth voted against an amendment that would have given regulators more authority to impose capital strictures on Government Sponsored Enterprises. This amendment was supported by Arizona Republican Congressmen Jeff Flake, John Shadegg and Trent Franks. Also that year, Hayworth voted against and amendment that struck language in a bill which raised the maximum size mortgages Fannie and Freddie could buy. This amendment was also supported by Congressmen Flake, Shadegg and Franks.

In light of Congressman Hayworth’s record of opposition to reform of Fannie Mae and Freddie Mac, McCain 2010 Communications Director Brian Rogers released the following statement:

“Congressman Hayworth already had his chance to cast responsible votes in 2005, by backing common-sense reform efforts supported by Arizona Republican Congressmen Jeff Flake, John Shadegg and
Trent Franks. But instead of standing up for fiscal conservative principles, Congressman Hayworth decided to vote against his colleagues in the Arizona Republican delegation, and side with mortgage giants Fannie Mae and Freddie Mac and the Washington insider crowd. It is supremely ironic that Congressman Hayworth – a man who now rails against government bailouts – voted against
measures that could have prevented the need for those bailouts in the first place; measures that in retrospect look prophetic. Congressman Hayworth was completely wrong about Fannie and Freddie while Senator McCain has long led efforts to reform these institutions.”

– McCain 2010 Communications Director Brian Rogers

FACT CHECK: CONGRESSMAN HAYWORTH VOTED AGAINST EFFORTS TO REFORM FANNIE MAE AND FREDDIE MAC

Congressman Hayworth Voted To Raise The Maximum Size Mortgages Fannie And Freddie Could Purchase:

In 2005, Rep. Scott Garrett (R-NJ) Offered An Amendment To The Federal Housing Finance Reform Act That Would Have Nixed A Provision In The Bill Which Raised The Maximum Size Mortgage Fannie Or Freddie Could Buy In Certain Parts Of The US. Garrett: “My amendment would strike the language in the bill that raises the conforming loan limits for certain parts of the United States. H.R. 1461 would raise by 50 percent the maximum size mortgage Fannie Mae and Freddie Mac could buy. This language hurts the very basic functions of GSEs to provide liquidity and help lower-income home buyers.” (Congressional Record – House, 109th Congress, 1st Session, 10/26/05, Page 9185)

Rep. Garrett Said His Amendment Was Intended In Part To Address “The Systemic Risks That The Size Of Fannie And Freddie's Portfolios Pose To Our Nation's Housing Market.”

Garrett: “Chairman Greenspan and Secretary Snow have consistently raised their concerns about the systemic risks that the size of Fannie and Freddie's portfolios pose to our Nation's housing market. And if we allow them now to participate in the jumbo loan market as well, they will only continue to further exacerbate this dire situation. We should ask, why was it even proposed that Fannie get this added power to help high-income home buyers? Was there a problem that needed to be fixed? No such evidence was ever presented at any of the committee hearings.” (Congressional Record – House, 109th Congress, 1st Session, 10/26/05, Page 9186)
Garrett’s Amendment Was Defeated 57-358, With Hayworth Voting ‘Nay.’ (109th Congress - 1st Session, House Roll Call Vote #545, 10/26/05)

53 Of The Amendment’s ‘Yea’ Votes Came From Republicans, Including Arizona Congressmen Jeff Flake, John Shadegg And Trent Franks. (109th Congress - 1st Session, House Roll Call Vote #545, 10/26/05)

Congressman Hayworth Voted Against Strengthening The Capital Requirements Of Government Sponsored Enterprises:

During The Same Debate, Rep. Jim Leach (R-IA) Introduced An Amendment That Would Have Given A Regulator More Authority To Impose Capital Strictures On Government Sponsored Enterprises. Leach: “So what this amendment does is strengthens the capital standard provision. Minimum capital is the amount of capital needed to protect financial institutions against broad categories of business risk, so when a crisis strikes, there is a reserve to fall back upon. Capital is especially important for GSEs because their short-term obligations are large, and they are single-industry-intensive.” (Congressional Record – House, 109th Congress, 1st Session, 10/26/05, Page 9179)

Leach Said The Amendment Was Necessary Because Any Problems With Capital Markets

Affecting Fannie And Freddie Could “Become Very Large, Very Quickly.” Leach: “Fannie Mae and Freddie Mac, for instance, have debt obligations due within a year of about 45 percent of their debt liabilities. Any problem with capital markets affecting these firms could become very large, very quickly. What might ‘very quickly’ mean? Because of the scale of short-term obligations of the GSEs, the GSEs are rolling over many billions of dollars of obligations each week. For this reason, a market crisis could become acute in a matter of days, and this is something the country has to think through.” (Congressional Record – House, 109th Congress, 1st Session, 10/26/05, Page 9179)

· Leach: “In the 1980s, without sufficient capital, S&Ls grew larger and entered new lines of business as their capital basis shrunk, and, when things got bad, the taxpayer was on the hook for $250 billion. Fannie and Freddie today operate on a capital base much less than S&Ls did just before their collapse in the 1980s.” (Congressional Record – House, 109th Congress, 1st Session, 10/26/05, Page 9179)

Federal Reserve Chair Alan Greenspan Supported The Leach Amendment.

Leach: “Let me just describe what the Federal Reserve says about this. In a letter dated October 5, 2005, Chairman Greenspan wrote, ‘This amendment would improve the proposed legislation... The regulators for the GSEs should have a free hand in determining ... minimum risk-based capital standards for these enterprises. Your amendment would give the regulator greater discretion in this critical area.’” (Congressional Record – House, 109th Congress, 1st Session, 10/26/05, Page 9180)

The Leach Amendment Failed 36-378, With Congressman Hayworth Voting ‘Nay.’ (109th Congress - 1st Session, House Roll Call Vote #542, 10/26/05)

31 Of The Amendment’s ‘Yea’ Votes Came From Republicans, Including Arizona Congressmen Jeff Flake, John Shadegg And Trent Franks. (109th Congress - 1st Session, House Roll Call Vote #542, 10/26/05

The Wall Street Journal And Washington Times Have Praised Sen. McCain’s Amendment To Reform Fannie And Freddie:

The Wall Street Journal: “One sign that the White House financial reform is less potent than its advertising claims is that it doesn't even attempt to reform the two companies at the heart of the housing mania and panic, Fannie Mae and Freddie Mac. So we're glad to see that yesterday GOP Senators John McCain, Richard Shelby and Judd Gregg introduced a Fan and Fred reform amendment that will let Democrats show if they're serious about reducing reckless lending and taxpayer risk. … In short, the McCain amendment precisely targets the problems that caused the mortgage crisis: If the housing giants are no longer subsidized, they will become small enough to fail. That means they will stop lending money to people who cannot afford to pay them back, and in turn they will stop endangering taxpayers. This is a genuine anti-bailout vote, and you would think Democrats would be more than happy to go along given their claims that they want to stop bailouts.” (Editorial, “A Fannie Mae Political Reckoning,” The Wall Street Journal, 5/6/10)

The Washington Times: “It's also time to take taxpayers off the hook for the reckless government-sponsored enterprises responsible for creating much of our current financial mess.

Sen. John McCain, Arizona Republican, has offered an amendment that eliminates the affordable-housing mandates that encouraged Fannie and Freddie to back hundreds of billions of dollars in risky loans that collapsed when the housing bubble burst. Mr. McCain's measure also includes a number of common-sense oversight provisions, loosely borrowed from legislation introduced in the House by Rep. Jeb Hensarling, Texas Republican, a longtime advocate of reform of government-sponsored enterprises. Without fixing Fannie and Freddie and restoring the bankruptcy process, the financial-reform bill remains little more than a government power grab.” (Editorial, “A Bailout By Any Other Name,” The Washington Times, 5/7/10)

Read the full details of the McCain/Shelby/Gregg amendment here.