Biden more or less right on McCain's subprime surprise

On two occasions in the vice presidential debate, Sen. Joe Biden alleged that Sen. John McCain said some time ago that the mortgage crisis had taken him by surprise.

"Two years ago Barack Obama warned about the subprime mortgage crisis," Biden said early in the Oct. 2, 2008, debate. "John McCain said shortly after that in December he was surprised there was a subprime mortgage problem."

Then a few minutes later Biden said: "John McCain said as early as last December, quote – I'm paraphrasing – 'I'm surprised about this subprime mortgage crisis.'"

This was likely an attempt to mute McCain and Gov. Sarah Palin's recent touting of McCain's advocacy in 2006 for stricter oversight of Fannie Mae and Freddie Mac, the federally sponsored mortgage companies. McCain has cited that position to suggest he saw the mortgage crisis coming. (Indeed McCain did support more oversight of Fannie and Freddie, as we reported here .)

But is it true that McCain said he was "surprised" at the mortgage crisis?

We believe Biden was referring to McCain's remarks in this interview with the editorial board of the Keene Sentinel , a newspaper in New Hampshire, on Nov. 4, 2007.

Turning to the subject of the mortgage crisis, one of the journalists asked him: "The dimension of this problem may be surprising to a lot of people, but to many people, many others, there were feelings that there was something amiss, something was going too fast, something was a little too hot, going back several years. Were you one of them? Or, you're a busy guy, you're looking at a lot of things, maybe subprime mortgages wasn't something you focused on every day. Were you surprised?"

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McCain: "Yeah. And I was surprised at the dot-com collapse, and I was surprised at other times in our history – I don't know if 'surprised' is the word, but –"

Question: "S&L's?"

McCain: "Yeah the S&L –"

Question: "Is this bigger than that?"

McCain: "You know, I don't know the dimensions of this. It's hard to know what the dimensions of it are. As I say, I never thought I'd pick up the paper and see a city in Norway somehow dramatically impacted by it. When I say 'surprised,' uh, I'm not surprised when in capitalist systems that there's greed and excess. I think it was Teddy Roosevelt who said unfettered capitalism leads to corruption or something like that..."

McCain went on to say that a handful of people, including an adviser of his, Doug Holtz-Eakin, did sense something amiss in the economy. But he concluded with this: "I'd like to tell you I did anticipate it, but I have to give you straight talk, I did not."

So yes, McCain said the mortgage crisis surprised him. And he concluded by acknowledging flat-out that he did not anticipate the crisis. So there is certainly truth to Biden's accusation.

But McCain also said he didn't know if 'surprised' was the word. And he issued a blanket caveat about how greed and excess among capitalists never surprised him. So the context undermines Biden's claim a bit. (Not to mention that Biden flubbed the month that McCain made his comments.) We give Biden a Mostly True.