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Davis’ Firm on Freddie Payroll

The lobbying firm of Rick Davis, Sen. John McCain’s (R-Ariz.) campaign manager, remains on the payroll of mortgage giant Freddie Mac, according to two sources with knowledge of the arrangement.

The firm, Davis Manafort, has collected $15,000 a month from the organization since late 2005, when Freddie Mac and Fannie Mae dissolved a five-year-old advocacy group that Davis earned nearly $2 million leading, the sources said.

The relationship is coming to an end, however, as Fannie and Freddie’s new federal caretaker zeroes out its contracts with political consultants.

“All lobbying activity has stopped, and all political consulting contracts at Fannie Mae and Freddie Mac are in the process of being terminated,” said Stefanie Mullin, a spokeswoman for the Federal Housing Finance Agency, which assumed control of the troubled mortgage giants earlier this month.

The news comes in the wake of a Monday report in the New York Times detailing Davis’ work for the mortgage companies that sparked an aggressive response from the McCain campaign. That report suggested that Davis Manafort ended its work for the companies once they decided to shutter the advocacy group, called the Homeownership Alliance.

Fannie Mae terminated its relationship with the firm after the Homeownership Alliance disbanded, company spokeswoman Amy Bonitatibus said.

Davis Manafort has remained on Freddie Mac’s payroll, however, although it is not clear what work Davis Manafort has performed in order to earn its paycheck.

Sharon McHale, a Freddie spokeswoman, declined to comment, citing the company’s policy of not discussing its relationships with vendors. Officials with the firm and the McCain campaign did not respond to requests for comment.

“I never saw that Rick was asked to ever do anything. And certainly after the Homeownership Alliance faded away, there was no indication of any real action on his part,” one source familiar with the deal said.

Davis still owns a partial stake in the lobbying shop, but the McCain campaign has repeatedly said he no longer receives income from it. Asked in a Sunday interview with the Times and CNBC about Davis’ work for the mortgage companies, McCain said it had ended. “And my campaign manager has stopped that, has had nothing to do with it since, and I’ll be glad to have his record examined by anybody who wants to look at it,” he said.

Both mortgage companies were forced to dissolve their muscular lobbying teams earlier this month under the terms of their federal takeover. Davis Manafort appears to have hung on a little longer because the firm never directly lobbied for the company, instead providing public affairs help.

Fannie Mae and Freddie Mac emerged as issues in the presidential race last week because of turmoil in the financial markets. In a radio address from Green Bay, Wis., on Saturday, McCain blamed the companies and their political clout for creating the housing mess now roiling Wall Street. “At the center of the problem were the lobbyists, politicians and bureaucrats who succeeded in persuading Congress and the administration to ignore the festering problems at Fannie Mae and Freddie Mac,’’ he said. “Using money and influence, they prevented reforms that would have curbed their power and limited their ability to damage our economy. And now, as ever, the American taxpayers are left to pay the price for Washington’s failure.’’

The McCain camp has attacked Democratic presidential nominee Sen. Barack Obama (Ill.) for his ties to Fannie Mae, noting that the Democrat tapped former Fannie executive Jim Johnson to lead the search for his vice presidential nominee — until controversy over Johnson’s home loans forced him to quit. And the campaign has criticized Obama for receiving advice on housing issues from former Fannie chief Franklin Raines, a charge the Democrat’s campaign denies.

McCain’s inner circle has its own ties to the companies. Among the newest revelations: William Timmons, a lobbyist reportedly expected to lead McCain’s presidential transition team, has earned $260,000 this year lobbying for Freddie, Bloomberg News reported Tuesday.

The Times story on Monday detailed Davis’ turn as president of the alliance, a group that also included nonprofit organizations such as Habitat for Humanity and the Urban League but was reportedly bankrolled largely by the mortgage giants. At its helm, Davis helped advance the companies’ arguments promoting homeownership and discouraging stricter regulations. A former Fannie official said Davis did little for the paycheck and was hired because of his ties to McCain.

The report prompted an angry response from McCain senior adviser Steve Schmidt, who accused the paper of being a “pro-Obama advocacy organization.”

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