The Federal Reserve and the Treasury Department announced plans today to throw troubled mortgage giants Fannie Mae and Freddie Mac a lifeline, granting the Federal Reserve Bank of New York authority to lend money to the companies for the first time. The companies were created by the federal government to broaden access to home ownership. Both have since transitioned from government owned to privately owned companies. Together, they hold or guarantee $5.3 trillion in mortgage debt, nearly half of the outstanding mortgages in the United States. A loan backed by either Fannie or Freddie implicitly carries a federal guarantee, potentially putting taxpayers on the hook for the debt if the companies fail.

Treasury Secretary Henry Paulson downplayed the possibility of a takeover of either mortgage guarantor, saying that Fannie and Freddie play a vital role in the housing market.

"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction."

Shares of both companies are down close to 75% since the beginning of the year, raising concern amongst investors that neither company would have enough cash available to back all the loans they hold, should they come due.

The Washington Post reports that the Obamas received a discounted rate on their personal mortgage from Northern Trust Bank. The loan was on the Obamas' Georgian-style mansion that has been the subject of some controversy for the campaign. Obama received a $1.32 million loan from Northern Trust at a discounted interest rate of 5.625%, approximately three tenths below the average rate for similar loans in the Chicago area at the time. The Post reports that the Obamas paid no extra fees or discount points for receiving the lower rate.

While there are no allegations that the Obamas did anything wrong or received any special treatment due to his status as a U.S. Senator, the revelation could be damaging to the Obama campaign. Last month it was revealed that two prominent Obama backers, Sen. Christopher Dodd (D-CT) and Sen. Kent Conrad (D-ND), and a member of Obama's Vice-Presidential selection committee, Jim Johnson, received special deals from Countrywide Financial on their personal mortgages. Obama has spoken out against Countrywide and labeled the mortgage services giant, "the folks who are responsible for infecting the economy and creating, helping create a home foreclosure crisis."

The Senate adjourned for the Fourth of July Recess without taking action on several important pending bills, including a mortgage bailout, the Foreign Intelligence Surveillance Act reauthorization, and the war funding supplemental. Democratic leaders complain that minority Republicans have deliberately stalled legislation in an attempt to create a "do-nothing Congress" against which to run in the fall. But Democrats have short memories, forgetting that when they were in the minority, they adopted much the same tactics to prevent bills that they opposed from advancing. Then, filibusters were a precious right of the minority, vital to the functioning of a democracy and a sacred method of preventing a tyrrany of the majority.

Ironically, Republicans did not hold up the FISA bill or the war supplemental. Those bills are delayed by infighting among factions in the Democratic caucus. Liberals like Sen. Russ Feingold (D-WI), oppose the measures both on principle and as a result of pressure from their political base and wish to offer amendments to soften their impact. The mortgage bailout is opposed by more conservative members in the Republican caucus, but will likely pass by a large majority when it does come up for a vote. Republicans argue that by stalling work in the Senate, they are protecting their minority status from an uncooperative majority which often denies them the chance to amend legislation or offer alternatives.

The back and forth battle is nothing new in Washington politics. Both parties engage in it just as vigorously as they decry its results. But in the short run, it appears that Republicans have been particularly successful at frustrating the Democratic leadership, as well as preventing legislation that their base would find difficult to accept. In an election year that is shaping up to very bad for Republicans, they may have to take their solace anywhere they can find it.

Is there a bigger mortgage scandal a'brewin' in Washington? By now you've read about Senators Chris Dodd (D-Conn.) and Kent Conrad (D-N.D.), who -- they say unknowingly -- received VIP treatment on their home loans from Countrywide. Now Politico is wondering how widespread the problem is. Politico has asked all 100 senators to reveal the details of their mortgages. "Seventy-seven senators have complied so far. Twenty-three have not."

Senate ethics experts say the controversy over the special mortgages received by Dodd and Conrad has opened a window into the clubby world where senators can dial up major banking executives and discuss their financial needs, as Conrad did.

"This short list of senators who did not disclose is where I would start an investigation," said Keith Ashdown, a vice president of Taxpayers for Common Sense. By failing to disclose, he said, senators are "not only in the cross hairs of investigators, but they're also making this a political issue in an election year, because it looks like they have something to hide."

Right now senators don't have to disclose home loan details unless they're getting rental income from the property, but now with the Dodd and Conrad controversies Senate Majority Leader Harry Reid wants to change the rules and make such information public.

Jim Johnson, a member of Sen. Barack Obama's Vice-Presidential search committee, resigned from the campaign last week after revelations that he received preferential treatment on mortgages from Countrywide Financial came to light. Now, the scandal is widening, snaring two more prominent Obama supporters, as well as a former Bush Administration official and two former Clinton Administration cabinet members.

Obama supporter Sen. Kent Conrad (D-ND), admitted Saturday that he received a discounted mortgage from Countrywide under the same "friends of Angelo" program as Johnson, although he claimed not to have had knowledge of the special deal. "Angelo" is Countrywide CEO Angelo Mozillo. "It appears Countrywide waived one point on my mortgage,'' Conrad said in a statement. "Although I did not ask for or know that I was receiving a discount, and even though I was offered a competitive loan from another lender, I do not want to have received preferential treatment.'' That claim seems a little specious, since Conrad would have seen the rate and paid the points at the loan closing. Either he did not read the details of the papers he was signing, or he is not telling the whole truth. Conrad also said that he received a loan on an eight-unit apartment complex in Bismarck from Countrywide, although the lender typically only writes loans on buildings of four-units or less.

Another Obama backer, Sen. Chris Dodd, may have more explaining to do. Dodd (D-CT), a former presidential candidate himself, is the Chairman of the Senate Banking Committee, and the sponsor of a major piece of housing relief legislation slated to be sent to the president for his signature soon. According to reports, Dodd benefited from Mozillo's Countrywide largess, too; and his position on the Banking Committee creates the appearance of a conflict of interest over the mortgage bailout he is sponsoring.

John McCain wasted no time responding to Barack Obama's firing of a key vetter for his Vice Presidential pick:

"Jim Johnson's resignation raises serious questions about Barack Obama's judgment. Selecting the vice presidential nominee is the most important decision a presidential candidate can make and one even Barack Obama has said will 'signal how I want to operate my presidency.' By entrusting this process to a man who has now been forced to step down because of questionable loans, the American people have reason to question the judgment of a candidate who has shown he will only make the right call when under pressure from the news media. America can't afford a president who flip-flops on key questions in the course of 24 hours. That's not change we can believe in." -McCain spokesman Tucker Bounds

"We're going to go through a process in the vice-presidential search where I look at a whole range of options. This is one of the most important decisions I can make, and I think I'll signal how I want to operate my presidency." (Barack Obama, Interview With NBC's Brian Williams, 6/4/08)

Jim Johnson, a member of Sen. Barack Obama's Vice-Presidential selection committee embroiled in a controversy over discounted mortgages he received from mortgage giant Countrywide Financial, resigned his position with the campaign today. Sen. Obama released a statement announcing the resignation and said that Johnson did not want his service to the campaign to become a distraction.

"Jim did not want to distract in any way from the very important task of gathering information about my vice presidential nominee, so he has made a decision to step aside that I accept."

When asked about the controversy yesterday, Sen. Obama initially tried to defend Johnson, saying that the members of the running mate selection committee, "aren't folks who are working for me," and that the accusations against Johnson were part of a, "game that can be played," with members of the campaign and their associations. The McCain campaign jumped on those assertions, calling them, "preposterous."

Johnson was reported to have received special loan rates on loans totaling nearly $6.3 million from Countrywide under a program that granted special below market mortgages to friends of Countrywide CEO Angelo Mozillo. The loans were a problem for the Obama campaign because Sen. Obama has railed against Countrywide and its executives specifically as, "the folks who are responsible for infecting the economy and creating, helping create a home foreclosure crisis." Johnson's continued presence on the campaign would have called Obama's credibility on the mortgage issue into question, and it was only a matter of time before he was pushed out once the information about his special mortgage dealings was made public.

Johnson is the third high-level Obama staffer to leave the campaign amidst controversy after initially being defended by Sen. Obama. Samantha Power left the campaign after a British television interview in which she called Sen. Hillary Clinton a "monster," while Sen. Obama's Middle East adviser Robert Malley was similarly let go after reports that he had been regularly meeting with Hamas officials surfaced. In each case, Sen. Obama first decried the questions about the controversies as a distraction before sacking the offending staff members.

The housing market claimed another victim recently when California Congresswoman Laura Richardson's Sacramento home was foreclosed upon by her mortgage lender and resold at auction to another mortgage banker. Richardson (D) won election to Congress last August in a special election to fill the seat of the deceased Los Angeles area congresswoman Juanita Millender-McDonald. Although she is from suburban Los Angeles, Richardson purchased the home in Sacramento after she was elected to the California State Assembly in November 2006.

Richardson disputes the foreclosure sale, claiming that she had renegotiated the terms of her loan and planned to pay it off in full. She says that the home was sold at auction without her knowledge and in violation of the terms of the renegotiation. Her mortgage lender, Washington Mutual, said in a default notice in March that Richardson owed $578,384 on the home she purchased for $535,000. As a member of Congress, Richardson earns a $170,000 salary. Washington Mutual sold the property to James York, owner of Red Rock Mortgage Inc. of Sacramento, for $388,000. In addition to the loan delinquency, Richardson is also in arrears for $9,000 in local property taxes. Richardson blames in part her status as a lawmaker for her financial troubles. She told the Associated Press that lawmakers like herself are required to maintain two residences instead of one.

And no, I'm not talking about the ongoing soap opera called "Hillary v. Barack." I'm talking about the credit crunch.

Voters in both Indiana and North Carolina last night said the economy was their top concern in deciding who to vote for in the Democratic primary; 67 percent in Indiana and 60 percent in North Carolina. So perhaps they will breathe a sigh of relief to know that the worst of the credit crisis, at least, may be over. There are also signs today that inflation pressures may be easing, and the value of the dollar is also up a bit against other major global currencies.

(However, we still have those pesky dark spots, like The National Association of Realtors today saying pending sales of existing homes fell in March by 1 percent, disappointing the market., and oil prices rising above $122 a barrel, among other concerns.)

The Wall Street Journal reports today that Treasury Secretary Henry Paulson said financial markets are emerging from the credit crisis. "There's no doubt that things feel better today, by a lot, than they did in March," Paulson said, although he was careful to predict that there would be further "bumps along the road," and that it will take "some months longer" for the market problems to disappear completely.

President Bush again pledged today to veto legislation scheduled for debate in the House today that would see the government buy up $15 billion of abandoned homes and help an estimated 500,000 homeowners facing foreclosure. The bill is expected to receive significant Republican support, but the White House argues the Democrats' plan would open taxpayers to too much risk.

The New York Times is reporting that GOP Presidential hopeful John McCain has done an about-face on the issue of Federal intervention in the mortgage crisis.

Senator John McCain, who drew criticism last month after he warned against broad government intervention to solve the deepening mortgage crisis, pivoted Thursday and called for the federal government to aid some homeowners in danger of losing their homes, by helping them to refinance and get federally guaranteed 30-year mortgages.

Mr. McCain, an Arizona Republican, had been painted as uncaring by Democrats, and drew murmurs of concern from some Republicans, after a speech in California last month in which he cautioned that "it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers," and noted that the crisis had been brought on by both lenders and borrowers.

Many will paint this as a flip-flop on McCain's part, but I welcome his change of heart, and congratulate Senator McCain on his continued effort to catch up with the rest of the class. Although his proposal falls well short of what the Democratic candidates are offering, it is a far cry from the Duncan Hines plan he outlined in California.

Who knows? Perhaps, if elected, McCain will have warmed up to the idea of The New Deal by the end of his first term.