John McCain (and 19 other GOP senators), issued a prophetic warning in May 2006:
We are concerned that if effective regulatory reform legislation for the housing-finance government-sponsored enterprises (GSEs) is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddy Mac pose to the housing market, the overall financial system, and the economy as a whole. . .
Today, almost half of the home mortgages in the U.S. are guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would pay this debt if Fannie or Freddy could not?
Substantial testimony calling for improved regulation of the GSEs has been provided to the Senate by the Treasury, Federal Reserve, HUD, GAO, CBO, and others. . . It is vitally important that Congress take the necessary steps to ensure that these institutions benefit from strong and independent regulatory supervision, [and] operate in a safe and sound manner. . . Most importantly, Congress must ensure that the American taxpayer is protected in the event either GSE should fail.
(Emphasis original.) Sadly, it wasn’t heeded.