“Whatever we do, we need to see that, in the future, people who make bad decisions feel the pain of those decisions.”

— U.S. Senator Lindsey Graham

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Jessica Nelms

Lindsey Graham, right, made a surprise visit Monday afternoon to the Oconee County Republican Headquarters in Seneca. Graham, shown here with local GOP volunteer Phil Soper, brought cookies but wasn't talking sweet when it came to bailing out Fannie Mae and Freddie Mac.

SENECA — Lindsey Graham came bearing cookies, but there wasn’t much sweetness in his voice when asked to comment on Sunday’s U.S. government takeover of troubled mortgage giants Fannie Mae and Freddie Mac.

Graham delivered cookies as the Oconee County Republican Party headquarters officially opened for the election season Monday.

The office on W.N. First Street will be open from 10 a.m.- 2 p.m., Monday through Friday through the Nov. 4 election.

Graham greeted volunteers with sweets but turned dead serious when asked to comment on the weekend’s decision by the Bush administration to place both of the giant mortgage institutions in conservatorship.

“We can’t let these institutions fail. There would be a strong ripple effect on the economy. But, if we (Congress) don’t act to see that they are reformed and fundamentally changed, shame on us,” he said.

Graham said Fannie Mae and Freddie Mac are prime examples of how lobbying has gotten out of hand and how private investors have chosen to live for today and not worry about tomorrow.

“This is the worst of both worlds,” Graham said. “We have federal involvement and private sector laziness and arrogance because they knew the federal government would back them up.

“Whatever we do, we need to see that, in the future, people who make bad decisions feel the pain of those decisions.”

The historic move announced Sunday won support from both presidential campaigns, but private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

While the government’s action could end up costing taxpayers billions of dollars, Treasury Secretary Henry Paulson said allowing the companies to fail would have extracted a far higher price on consumers by driving up the cost of home loans and all other types of borrowing.

“Effectively, the federal government has now become the nation’s mortgage lender,” said Mark Zandi, chief economist at Moody’s Economy.com. “This takes a major financial threat off the table.”

The companies, which together own or guarantee about $5 trillion in home loans, about half the nation’s total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover.

The Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke, in exchange for senior preferred stock. The Treasury will immediately be issued $1 billion of such stock from each company, which will pay 10 percent interest. The government, which will receive warrants representing ownership stakes of 79.9 percent in each company, is hoping that its moves will reassure nervous investors that they can continue to buy the debt of the two companies.

South Carolina’s other senator, Jim DeMint, announced plans to seek Senate approval of legislation banning Fannie Mae and Freddie Mac, now government-controlled entities, from lobbying Congress.

“For years, these two mortgage giants have used taxpayer guarantees to gain enormous profits and lobby Congress to look the other way while they failed homeowners,” Demint said. “Now that the federal government has taken control of them, the time has come to stop their lobbying practices and make sure American tax dollars are not being used to win more favors with politicians.”

DeMint echoed Graham’s call for fundamental restructuring of the two firms.

“These mortgage giants must be broken up and forced to survive in the marketplace without taxpayer guarantees. Allowing them to survive into the future with explicit government backing will only bring more harm to American homeowners and greater debt to American taxpayers.”

Congressman Gresham Barrett, R-Westminster, a member of the Financial Services Committee, said it is unfortunate that we found ourselves in this situation, noting that he has long supported greater controls on Fannie Mae and Freddie Mac to force them to control their balance sheets.

“I am hopeful that partisan bickering does not get in the way of doing what is best for the American taxpayers, and I am actively exploring options that would eventually allow the federal government to reduce taxpayer exposure to these entities, while decreasing systemic risk to the financial markets,” Barrett said. “We should take this chance to learn our lessons about the proper role of government mandates in the markets so this situation does not repeat itself in any other arenas.”

Graham said he expects bipartisan support for reform, adding, “I won’t vote for any kind of bailout without reform.”