McCain: Fannie, Freddie staging 'one of the great scams in American history'

In a blistering speech on the Senate floor Thursday, Sen. John McCainJohn McCainNY Jets owner said to back Trump McConnell sets up vote to begin debate on defense policy bill RGA finance chair: Trump won't be 'competitive financially' MORE (R-Ariz.) assailed the “outright corruption and blatant abuse of the American taxpayer that’s been taking place at the hands of Fannie Mae and Freddie Mac.” 

The latest round of corruption, McCain said, was the approval of $12.9 million in bonuses for Fannie and Freddie executives. 

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"It’s unconscionable,” he said. “It’s been proven time and time again that Fannie and Freddie are synonymous with mismanagement, waste, outright corruption and fraud, and their federal regulator has the audacity to approve $12.9 million in executive bonuses to people who make $900,000 per year.”

On Thursday, Freddie Mac reported $4.4 billion in third-quarter losses and requested an additional $6 billion in government aid. Taxpayers have spent $169 billion to bail out the government-controlled mortgage giants so far, and those losses are expected to grow.

In the animated, 15-minute floor speech, McCain at times pounded the podium as he singled out Federal Housing Finance Agency director Edward DeMarco for continuing the tradition of outsized executive pay. 

“Who in the world is the Federal Housing Finance Agency to award these bonuses?” McCain asked. 

“The first guy that I think ought to go is the guy who approved of these payouts,” he said. “Mr. Edward J. DeMarco.”

DeMarco has argued that generous executive pay helps lure qualified executives who could return the companies to solvency. Freddie Mac CEO Ed Haldeman, who announced last month that he would resign, received a bonus of $2.3 million on top of his base pay of $900,000 this year. Haldeman took home $3.9 million in compensation in 2010. 

“This body should be ashamed if we let this happen, especially in these economic times,” McCain continued. “Everyday more and more Americans are losing their jobs and their homes, and we’re allowing these people to take home annual salaries of $900,000 and bonuses of millions of dollars, all the while they ask the taxpayers for $6 billion today.” 

A March report by the FHFA said the agency lacks key controls to monitor executive compensation and doesn’t have written procedures to evaluate the bonus packages. McCain said he plans to offer an amendment on the appropriations bill to curb executive pay at the government-held conservatorships.

“One of the great scams in American history is going on and the people responsible for it have never been held responsible,” he said. “I may be a bit of an idealist, but I bet you there are some patriotic, talented Americans that would be willing to serve on Fannie and Freddie without being paid $900,000 a year and millions of dollars in bonuses, I really believe that.”

McCain said stories like this were what stoked the anger of the Occupy Wall Street protestors.

“People are sitting in around the country,” he said. “And yes I don’t agree with a lot of their agenda, but when they read of things like this, their anger is justified."

DeMarco and the FHFA have also been under fire from a growing number of House Democrats who contend the agency hasn't been aggressive enough in its efforts to prevent foreclosures. Behind Reps. Elijah Cummings (D-Md.) and Dennis Cardoza (D-Calif.), some of those lawmakers have suggested that DeMarco step down.

"Either do something or get out of the way," Cardoza said of DeMarco after meeting with the housing chief last month. "And if you're incapable of doing it, then find somebody who isn't."

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Democrats don't place all the blame on DeMarco, noting that his influence is limited because he's not a political appointee. Senate Republicans blocked the last nominee for the job, North Carolina Banking Commissioner Joseph Smith. Sen. Richard Shelby (R-Ala.), the ranking member of the Banking Committee, called Smith an administration "lapdog."

In January, Smith withdrew his name from consideration, and President Obama has yet to name a possible replacement.

— Mike Lillis contributed to this report.

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