Candidates weigh in on Fannie, Freddie rescue

updated 6:08 p.m. ET Sept. 6, 2008

TERRE HAUTE, Ind. - The historic takeover of Fannie Mae and Freddie Mac, which could come as soon as this weekend, moved to the forefront of the presidential campaign Saturday as candidates and congressional leaders seized on the enormous implications for taxpayers and the economy.

Democratic presidential nominee Barack Obama said Saturday that any government takeover of the troubled mortgage giants must put the interests of taxpayers and homeowners first. His opponent, Republican nominee John McCain, said it was essential to restructure the mortgage giants.

"Any action we take must be focused not on the whims of lobbyists and special interests worried about their bonuses and hourly fees, but on whether it will strengthen our economy and help struggling homeowners," Obama told reporters after a campaign stop in Indiana.

He stopped short of making detailed proposals, saying "we need to carefully address" the possible impact on community and regional banks. "But we must not allow government intervention to protect investors and speculators who relied on the government to reap massive profits," he said.

McCain said in an interview for CBS "Face The Nation" to be aired Sunday that the mortgage giants need to be restructured. His running mate, Alaska Gov. Sarah Palin, said a "McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need them." Palin, speaking in Colorado Springs, Colo, where the candidates were campaigning, did not elaborate.

"I think that we've got to keep people in their homes," McCain said. "There's got to be restructuring, there's got to be reorganization, and there's got to be some confidence that we've stopped this downward spiral. It's hard, it's tough, but it's also the classic example of why we need change in Washington. It's an example of cronyism, special interest, lobbyists, a quasi-governmental organization where the executives were making hundreds of — some billion dollars a year while things were going downhill, going to hell in a hand-basket. This is the kind of cronyism, corruption, that's made people so justifiably angry."

Fannie Mae and Freddie Mac together hold or back half of the nation's mortgage debt, and have played an increasingly important role in the real estate market since the credit crisis started in August 2007. A government bailout could cost taxpayers around $25 billion, according to the Congressional Budget Office.

Treasury Secretary Henry Paulson and two other regulators are working on a plan to put the troubled mortgage finance companies into a conservatorship and remove Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron, according to Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee.

Obama, talking of possible changes to Freddie Mac and Fannie Mae, said: "We can't have a situation in which, during boom times, management and investors are soaking up huge profits, taking extraordinary risks, and thinking to themselves that if they get into trouble because of these risky investments that somehow the taxpayers are going to be there to bail them out."

What took place at the two institutions, he said, "was in many instances irresponsible," even if it was legal. "They were boosting profits as a priority," he said, which produced management bonuses. "I think that has led to some of the problems," he said.

Obama restated his call for a second stimulus package this year, which would involve a tax rebate for individuals and aid to states for education, health care and other costs.

Obama and McCain said Paulson briefed them on the mortgage crisis and the administration's steps toward a government takeover of the two financial companies.

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