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Freddie Mac Paid Aide, Insiders Say

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The New York Times

Published: September 24, 2008

WASHINGTON - 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 Sen. John McCain's campaign manager, according to two people with direct knowledge of the arrangement.

The disclosure undercuts a statement McCain made on Sunday night that the campaign manager, Rick Davis, had had no involvement with the company for the past several years.

Davis' 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 Davis 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 Davis' firm, Davis & Manafort, had been kept on the payroll because of Davis' close ties to McCain, the Republican presidential nominee, who by 2006 was widely expected to run again for the White House.

Davis took leave from Davis & Manafort for the presidential campaign, but as a partner and equity-holder continues to benefit from its income.

No one at Davis & Manafort other than Davis was involved in efforts on Freddie Mac's behalf, the people familiar with the arrangement said.

A Freddie Mac spokeswoman said the company would not comment.

Jill Hazelbaker, a spokeswoman for the McCain campaign, did not dispute the payments to Davis' firm, but she said Davis had stopped taking a salary from his firm by the end of 2006 and that his work did not affect McCain.

"Sen. McCain's positions on policy matters are based upon what he believes to be in the public interest," Hazelbaker said in a statement.

The revelations come at a time when McCain and Sen. Barack Obama, the Democratic nominee, are sparring over ties to lobbyists and special interests and seeking political advantage in a campaign being reshaped by the financial crisis and the plan to bail out investment firms.

McCain has been running a television commercial suggesting that Obama takes advice on housing issues from Franklin Raines, the former chief executive of Fannie Mae, a contention flatly denied by Raines and the Obama campaign.

Freddie Mac's roughly $500,000 in payments to Davis & Manafort began immediately after Freddie Mac and Fannie Mae in late 2005 disbanded an advocacy coalition that they had set up and hired Davis to run, the people familiar with the arrangement said.

From 2000 to the end of 2005, Davis had received nearly $2 million as president of the coalition, the Homeownership Alliance, which the companies created to help them oppose new regulations and protect their status as federally chartered companies.

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