Sens. Mitch McConnell (R-Ky.), Richard Shelby (R-Ala.) and Judd Gregg (R-N.H.) (EPA/ZUMApress.com)

For the past year, Republicans have insisted that Congress take up legislation to stop the losses at Fannie Mae and Freddie Mac — the government-sponsored enterprises that buy up and repackage mortgages, keeping loan prices stable. Fannie and Freddie have incurred more than $150 billion in losses since the burst of the housing bubble. “In my view, it’s simply not acceptable for some on the other side to suggest that we have to rush this [Wall Street] bill through Congress, but that it’s okay to wait another year to address the GSEs, which we all know played a central role in the financial crisis,” Sen. Mitch McConnell (R-Ky.), the minority leader, argued earlier this month, a contention often repeated.

[Economy1]But the Republicans never said how they thought the GSEs should be reformed — until now. Last Wednesday, Sen. John McCain (R-Ariz), Sen. Judd Gregg (R-N.H.) and Sen. Richard Shelby (R-Ala.) proposed an amendment to Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill, the GSE (Government Sponsored Enterprise) Bailout Elimination and Taxpayer Protection Amendment.

Releasing the proposal — with numbers, dates and directives aplenty — Gregg commented, “Fannie Mae and Freddie Mac are synonymous with mismanagement and waste and have become the face of ‘too big to fail.’ The time has come to end Fannie Mae and Freddie Mac’s taxpayer-backed slush fund and require them to operate on a level playing field.”

But housing market experts describe the Republicans’ proposal as disastrous. Analysts from both sides of the aisle contend that the proposal would unwind Fannie and Freddie so quickly and precipitously that it would destabilize the entire housing market: pushing mortgage prices up, pulling support from low and middle-income Americans and ending the nascent — if at all extant — housing recovery.

The GSE amendment would effectively shutter the mortgage giants, which together backstopped 97 out of 100 new mortgages in the first three months of the year, according to Inside Mortgage Finance. It would keep keep the current government conservatorship in place for 24 months (or 30 months, if the Federal Housing Finance Agency determines that market conditions are “adverse”). Then, it would begin begin the process of dissolution.

Were Fannie and Freddie to prove “viable” as private institutions (a term left ambiguous) after 24 or 30 months, they would become highly regulated institutions for three years, before the expiry of their charters. They would have no affordable housing goals, would have to reduce their mortgage assets yearly, could not purchase mortgages exceeding median-home values and could only buy mortgages with certain minimum down payments — among other provisions. Additionally, they would have to pay taxes. Were Fannie and Freddie not “viable” in two years — likely, given that Fannie reported yesterday that it does not see itself reporting a profit for the “indefinite future” — the amendment puts them into receivership.

Housing experts say that the bill would impact every participant in the housing economy, including builders, buyers, developers, lenders and banks. It would make vanilla mortgages — such as 30-year, fixed-rate mortgages — much more scarce, and would make all mortgages more expensive. It would remove a major source of liquidity in the mortgage market, causing credit problems at mortgage-reliant banks. It would also rapidly reduce the number of homebuyers.

Experts describe the McCain-Gregg-Shelby amendment’s transition as too much, too soon and too blunt. Kenneth Posner, who analyzed Fannie and Freddie for Morgan Stanley and is the author of Stalking the Black Swan, describes the plan as going “cold turkey” when it might be better to “use methadone.”

“The issue is that what Fannie and Freddie issue is considered close to government debt, and there is no limit on their ability to grow. That was fine a long time ago when they were small. But now, they’re big — we’re creating trillions of dollars of Treasury-like debt,” he explains. “We’re also dealing with the reality that too much stimulus for the housing market is a bad thing. That’s what the Republican [proposal] is getting at. But it does not answer the question of the transition [away from that support].”

Barry Zigas, the director of housing policy for the Consumer Federation of America, is blunter. He says that the Republican approach takes a “meat-axe” to an extremely fragile market. “It takes a very prescriptive and dangerous approach to a problem that at this point does not require it,” he says, noting that the Senate has not even held hearings on how to deal with Fannie and Freddie yet.

“It puts any housing recovery in jeopardy — the amendment is a huge gamble that forces the government to quickly and radically restructure these two companies without providing a clear path to a stable mortgage market in the future,” he says. “For one, it would raise down-payment requirements precipitously, which would be injurious to low-income communities and communities of color.

“This is a very heavy-handed and ultimately very unhelpful approach to a complex problem.”

“Some of it is serious. Some is trying to stir up trouble,” says Dean Baker, the co-director of the Center for Economic and Policy Research. “It doesn’t make sense to talk about dismantling Fannie and Freddie yet — and we’d really have to think this through more thoroughly. It does not, for instance, explain how it would sell off Fannie and Freddie’s assets, or in what form. Who would back them? What is the benefit to rushing this?” Baker says. “The risk is so obvious that the proposal seems strange.”

And with such obvious risks and despite Republican pressure, Democrats have punted on the question of how to reform Fannie and Freddie. This spring, the Treasury Department released a set of seven questions it said it was attempting to answer — stating that it was working on reform but needed more time. And yesterday, Sen. Mark Warner said the administration plans to release its Fannie and Freddie proposal next year.

“I think it’s a fair claim to make to say we haven’t done enough to address Fannie and Freddie,” Warner said. “It is the big elephant in the room that hasn’t been addressed.” But, “We’ll come back next year and take on Fannie and Freddie in a more thoughtful way.”

$1 million for Shipment and storage of oil shale core samples

Oil shale research is wasteful? I don’t know many Republicans who agree with this. Does McCain think the word “shale” is funny or is he a skeptic?

What if this was boxed together with fresh new ideas like a corporate income tax cut, a promise to put country first, and a fresh-faced mavericky governor from an oil-rich arctic state of some kind? Toss in a joke about DNA testing for bears (I don’t know if it was a paternity issue or a criminal issue…) and you’re on the road to victory.

Fairbanks:

Republicans are also imitating McCain’s dogged attempts to cultivate a kind of breezy, off-the-cuff hipness–Eric Cantor’s Aerosmith mash-up recalls buzzy McCain YouTubes like “Celeb.” But in the process, they’re aping his incompetence at the task, too. Aerosmith demanded Cantor pull his video (which celebrated Republicans’ rejection of the stimulus with giant zeroes flying across a black screen set to the call girl ode “Back in the Saddle”). McCain, for his part, got cease-and-desist requests from the Foo Fighters, John Mellencamp, Jackson Browne, Van Halen, Bon Jovi, Heart, and even Paris Hilton (well, kind of).

I spent a few minutes trying, and failing, to find a McCain ad that also demonstrates the strategic problem here. On September 15, McCain gaffed and said that “the fundamentals of our economy are strong,” while Wall Street was in a panic. When Democrats attacked him, McCain explained that he considered “American workers” the “fundamentals” of the economy, which was nonsense. But McCain released a quick TV ad anyway, looking at the camera and informing “you, the American worker,” of the new “fundamental” status.

It was incredibly ham-fisted, but it was all about winning the news cycle — with little recognition that voters were not paying attention to the “fundamental/worker” spin. The ad was just strange. Similarly, Republicans sound strange when they attack the president for tiny spending outlays and unemployment benefits when most Americans are only aware of the local news stories they see about where the stimulus money is going, locally.

This is a problem. What would happen if — a totally random example here — a senator introduced a campaign finance law that, according to many constitutional scholars and the president of the United States, violated the First Amendment? What if the Supreme Court had to decide whether or not the law was constitutional? That would be crazy. A Republican who wrote a law like that probably couldn’t even win Indiana.

From top left: Norm Coleman, Sen. John McCain, Pervez Musharraf, Tony Blair, Tom Ridge and Jose Maria Anzar

RELATED: Bush’s leadership failures, foreign edition.

Two weeks ago, Florida’s former Gov. Jeb Bush announced that he wouldn’t run for Senate in 2010. A sense of sad Republican resignation swirled through the conservative movement. It was a shame, many thought, that the fumbling and general nation-wrecking of Bush’s brother, the president, should hamper (perhaps snuff out) the career of the brilliant Jeb. If his last name wasn’t Bush, said Mitt Romney, Jeb would have been the man to beat in the 2008 presidential race.

This isn’t wholly true—what start would the man have ever had in politics if he was merely Jeb Smith, or Jebbrey Dahmer? But it’s hard to argue that Jeb is the highest-profile Republican whose ambitions have been shredded by connection to George W. Bush. While the president was riding high, from 2001 through 2005, many Republicans tied themselves to Bush or benefited from his popularity. Some of the party’s rising stars rose higher and faster by working with Bush or riding to office on his coattails. As he fell, he brought some of the party’s future leaders down with him. As Barack Obama takes office, here are the pols who have been burned most badly from that decision.

Norm Coleman
January 2001: Coleman is finishing up his second term as the Democrat-turned-Republican mayor of St. Paul.

The Bush Years: Coleman wanted another chance at statewide office after 1998, when he lost the governorship in a freakish upset to Jesse Ventura. He was laying the groundwork for another gubernatorial bid when Karl Rove convinced him to run for U.S. Senate, with the backing of the president and the national party. Coleman was on track for a narrow loss to his former ally, Democrat Paul Wellstone (Coleman had chaired his 1996 campaign before turning coat), until Wellstone died in a plane crash, was replaced by former Vice President Walter Mondale on the ballot, and was memorialized in a raucous public rally that turned public opinion against the Democrats.

Coleman accepted his new role with all the class you’d expect from an opportune party-switcher. In early 2003 he admitted that “to be very blunt and God watch over Paul’s soul, I am a 99 percent improvement over Paul Wellstone. Just about on every issue.” After John Kerry lost the presidency and returned to the Senate Foreign Relations Committee, Coleman took a gratuitous whack at his colleague: “Some of us are overjoyed you’re back.” Coleman kept a moderate record in the Senate (he was one of the half-dozen least conservative Republicans) that got more moderate as it became clear that George W. Bush’s support would be poison in 2010.

January 2009: Two months after the election, 225 votes down to Al Franken, he is refusing to quit until his last lawsuit is dismissed and his fingers can be pried off his Senate office doorknob.

Rick Santorum
January 2001: Santorum is re-elected to the Senate from Pennsylvania and chosen as Republican conference chairman.

The Bush Years: With his party in the White House, the canniest politician on the religious right was able to work around the margins to make reproductive law more restrictive. In 2002 he passed the Born-Alive Infants Protection Act; in the next two years he helped shepherd the Partial-Birth Abortion Ban Act and the Unborn Victims of Violence Act through the Senate. But he and Bush could be bad for each other. Santorum went out on a limb on the Iraq War, calling Bush’s leadership “Lincolnesque.” When Bush campaigned for Social Security privatization, Santorum ran his own town halls for the project in Pennsylvania, as giddy young Republicans chanted “Hey ho, hey ho, Social Security’s got to go.”

Santorum went on to hype the Bush-supported, congressional intervention into the Terri Schiavo scandal, appearing at the Schiavo hospice in Florida and telling reporters that keeping her alive through congressional fiat was “about trying to do right by a woman who legally is being wronged by the system.” After the public turned on Congress for its bizarre and heavy-handed intervention in the case, Santorum was left to the wolves, fighting an uphill re-election race against anti-abortion Democrat Bob Casey who neutralized social issues and spent a year painting Santorum as a rubber-stamp for the White House, which had began losing steam. Santorum’s 18-point defeat was the one of the worst drubbings of a non-scandalized incumbent in modern politics.

January 2009: Santorum is a senior fellow at the Ethics and Public Policy Center, running the Program to Protect America’s Freedom, which he founded. (The program, not the freedom.) He’s writing a column for Philadelphia’s second-largest newspaper.

Tom Ridge

Tom Ridge
January 2001: Ridge is an immensely popular governor of Pennsylvania, whose state had just hosted the Republican National Convention.

The Bush Years: Burned by missing the lottery to become vice president or a high-powered cabinet secretary, largely because of his pro-choice views, Ridge had a horrible stroke of luck on September 11, 2001. United Flight 93 crashed into Shanksville, Penn. Weeks later, President Bush tapped him to lead the Office of Homeland Security. “He’s a patriot who has heard the sound of battle,” said Bush. “He’s seen the reach of terror in a field in his own state. He’s a man of compassion who has seen what evil can do.”

Ridge proceeded to go out front on the most risible policies of the Bush administration. He introduced the terror alert color code. He announced threat warnings at suspicious, politically convenient moments, expressing shock when the latter point was brought up. At the end of 2004 Ridge resigned, his reputation in tatters, bolstered only temporarily by the even worse disaster of the Bernie Kerik nomination.

January 2009: Ridge missed out on a Republican presidential ticket slot once again, although is probably less bothered about it after viewing the 2008 electoral map. He consults with foreign governments and companies about, naturally, improving their security.

Christie Todd Whitman

Christie Todd Whitman
January 2001: Whitman was serving her final year as governor of New Jersey.

The Bush Years: Whitman was picked for the cabinet-level leadership of the Environmental Protection Agency based on her enforcement of “firm and clear standards for the protection of New Jersey’s environment and the New Jersey shoreline,” which was nice. A supply-sider who happened to be pro-choice, Whitman was seen as one of Bush’s most liberal cabinet members. Indeed, she was the only prominent voice in the administration for carbon caps. But as the Bush environmental policy became an energy industry-managed joke, so did Whitman. Her reputation took on heavy damage in the aftermath of September 11, as more and more was learned about the poisonous air that she assured New Yorkers and rescue workers was safe to breathe.

Whitman resigned early, in the summer of 2003. In 2005 she published a book about the GOP’s rightward drift that critics mocked as nearsighted and hastily argued so soon after the Bush re-election triumph. During the president’s second term she explained to anyone who would listen that it was her disagreements with Dick Cheney that pushed her out of the White House.

January 2009: Her main work is lobbying for the Whitman Strategy Group; politically she’s a has-been figurehead of the Republican Leadership Council, taken about as seriously by the party’s base as Street Mimes for AMT Reform. She also, ominously, endorsed President-elect Obama’s EPA nominee.

Jim Leach, Chris Shays and Lincoln Chafee

January 2001: Three safe, respected, liberal Republicans serving in the House and Senate, respectively.

The Bush Years: The relationships between Rep. Jim Leach (R-Iowa), Rep. Christopher Shays (R-Conn.), Lincoln Chafee (R-R.I,) and the White House were complicated. In the first years of the Bush presidency, with its slim Republican majority in the House and temporarily Democratic Senate, they were important deal-makers whose legislation brought as many Democrats as Republicans on board. (Chafee, the least well-regarded of the three, was mostly important as a swing vote.) In 2002 Shays was decisive in beating an amendment to make Homeland Security employees join unions, and Leach was helpful in passing the president’s tax cuts. But Leach and Chafee voted against the Iraq War, and as the Republican majority expanded, Shays became a critic of the party’s rule changes (“the power has gotten to our heads,” he said in opposing a rule that would have let Tom DeLay keep leading the party in the House after indictment), and Chafee became a dependable vote against Bush judicial nominees, as well as against the U.S. Representative to the United Nations, John Bolton, who briefly held the job thanks to a recess appointment.

None of it saved them from their fate. Leach was ousted in a 2006 upset by a college professor, Dave Loebsack, who’d won his nomination as a write-in candidate. Chafee lost to well-funded, brainy Democrat Sheldon Whitehouse, telling supporters that “the rage toward our president proved insurmountable.” Shays hung on in squeaker 2004 and 2006 races, eventually coming out for withdrawal from Iraq, before losing in the Obama wave.

January 2009: Jim Leach, who endorsed Obama in 2008, is a Harvard Kennedy School professor. Chafee, who called Sarah Palin a “cocky wacko,” published a book that attacked his old colleagues and now teaches at Brown University. Shays now works for the Campaign Legal Center, a money and politics watchdog group.

Sen. John McCain (R-Ariz.)(WDCpix)

John McCain

January 2001: The most popular politician in America of either party, and a nigh-unstoppable presidential candidate.

The Bush Years: It’s so easy to forget where John McCain stood at the start of the Bush presidency. A March 2001 Gallup Poll put his approval rating at 61 percent to only 15 percent disapproval. As McCain voted against the Bush tax cuts and finally got a presidential sign-off on campaign finance reform, Washington buzzed that McCain might run for president as an independent. In the summer of 2004, plenty of Democrats wanted John Kerry to pick John McCain as his running mate. An August 2005 Gallup Poll showed McCain defeating Hillary Clinton—the obvious Democratic nominee—by 5 points, and John Kerry by 14 points.

We know what else happened in August—besides Bush bringing McCain birthday cake. The Republican decline started to accelerate. But McCain was still seen as the most electable Republican left. His problem was that he supported Bush on immigration reform, which Republicans opposed, and (post-surge) supported Bush on Iraq, which everyone who wasn’t a Republican opposed. McCain pushed past the sad contenders for the Republican nomination having become the candidate of the Iraq surge and Bush’s tax policy. When the economic crisis hit, Bush dragged McCain down a little further, but the candidate had already stripped away the independence that made him likable in the first place.

January 2009: According to Rick Santorum, McCain is going to be Barack Obama’s patsy in the Senate, as a not-so-secret way of becoming liked by the Washington elite again. Despite the source, this seems reasonable.

RELATED: Bush’s leadership casualties, foreign edition.