In an interview broadcast on Sunday, John Harwood asked John McCain about his campaign manager, Rick Davis's lobbying work on behalf of Fannie Mae and Freddie Mac. McCain's response was to insist that Davis's involvement had concluded long ago:

My campaign manager has stopped that, has nothing to do with it since and I'll be glad to have his record examined by anybody who wants to look at it.

Careful what you wish for, Senator.

On Monday, The New York Times reported that Davis had been paid more than $30,000 a month over 5 years (almost $2 million) by Fannie Mae and Freddie Mac to "defend them against stricter regulations."

As if that weren't bad enough, The Times followed that up today with a new bombshell: that in fact Davis was still receiving payment as recently as last month from Freddie Mac.

Mr. Davis's firm received the payments from the company, Freddie Mac, until it was taken over by the government this month along with Fannie Mae, the other big mortgage lender whose deteriorating finances helped precipitate the cascading problems on Wall Street, the two people said.

They said they did not recall Mr. Davis's doing much substantive work for the company in return for the money, other than to speak to a political action committee of high-ranking employees in October 2006 on the approaching midterm Congressional elections. They said Mr. Davis's firm, Davis Manafort, had been kept on the payroll because of his close ties to Mr. McCain, the Republican presidential nominee, who by 2006 was widely expected to run again for the White House.

Mr. Davis took a leave from Davis Manafort for the presidential campaign, but as an equity holder continues to benefit from its income.

What this means is that either John McCain was blatantly lying in his interview with Harwood on Sunday or had no idea what his campaign manager was up to. Pick which is worse.

As MaryScott says, this should be absolutely devastating to McCain's bid for the presidency. At the very least, I really don't see how Davis continues on as McCain's campaign manager after tomorrow.

This is how David Donnelly, director of the watchdog group Campaign Money Watch, put it in a statement to The Huffington Post:

"John McCain's campaign manager and Freddie Mac essentially had a secret half a million dollar lay-a-way plan. For almost three years, they made secret, monthly payments of $15,000 to Rick Davis for apparently no other work than for him to provide special access to a future McCain White House in exchange. If McCain knew about this, his presidential campaign should be over. If he didn't know about it, he ought to fire Rick Davis immediately."

In a nice piece of poetic justice, I love that the sources for the story only came forward in response to the McCain campaign's own attempt to smear Barack Obama with a false guilt by association charge of their own.

But last week the McCain campaign stepped up a running battle of guilt by association when it began broadcasting commercials trying to link Mr. Obama directly to the government bailout of the mortgage giants this month by charging that he takes advice from Fannie Mae's former chief executive, Franklin Raines, an assertion both Mr. Raines and the Obama campaign dispute.

Incensed by the advertisements, several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain's campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000. Some who came forward were Democrats, but Republicans, speaking on the condition of anonymity, confirmed their descriptions.

One has to wonder if this story would have even come to light if the McCain campaign hadn't tried to play a bit too fast and loose with the truth. Ain't karma a bitch?