DOBBS: In the midst of our housing crisis, the Bush administration's top housing official today resigned. Housing and Urban Development Secretary Alphonso Jackson is by the way leaving for family reasons, as he put it. He is also under criminal investigation for giving lucrative government contracts to personal friends. Jackson today said he is resigning to spend more time, as I said, with his family. Louise Schiavone has the real story.

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LOUISE SCHIAVONE, CNN CORRESPONDENT (voice-over): Amid historic turmoil in the nation's housing market, the secretary of housing and urban development has decided to quit.

ALPHONSO JACKSON, HUD SECRETARY: There comes a time when one must attend diligently to personal and family matters. Now is such a time for me.

SCHIAVONE: That following calls for Jackson's removal, the latest from two key senators stating quote, "we are deeply troubled by the growing number of allegations of impropriety on the part of HUD Secretary Alphonso Jackson. We call on you to immediately request Secretary Jackson's resignation", end quote.

At issue, charges of cronyism and falsehoods beginning with the 2006 speech by the HUD secretary in Dallas where he said he denied federal business to a contractor who said he didn't like George Bush. Jackson later said that was basically a lie, but his troubles didn't end there. Ethics watchdog group lawyer, Melanie Sloan.

MELANIE SLOAN, CITIZENS FOR RESPON. & ETHICS IN WASH.: There has been lots of controversies with Mr. Jackson getting involved in contracting issues.

SCHIAVONE: Questioned, HUD contracts in New Orleans and the Virgin Islands to Jackson friends, and accusation by the Philadelphia housing authority that Jackson threatened to withhold federal dollars after it rejected a deal with another friend, and questions from some members of Congress over whether he's been completely forthcoming with them.

SEN CHUCK SCHUMER (D), NEW YORK: Certainly, he leaves under a cloud and this is the worst kind of cloud to leave under in terms of how you did these contracts, not doing them on the up and up.

SCHIAVONE: HUD's inspector general found no quote, "direct evidence" of political favoritism, but did note that in many cases where Jackson interjected himself in a contract decision, the contractor had quote, "Democratic affiliations".

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SCHIAVONE: Jackson spokesman at HUD said there will be no comment on the various accusations, but Lou critics say Secretary Jackson's tenure as HUD secretary has made it all the more remarkable by the fact that he's been almost invisible, and the administration's response to the housing crisis, sidelined perhaps by reported federal probes into his own problems. Lou?

DOBBS: Yes, it's not likely that many people could have even named the secretary of housing and urban development. Thank you very much, Louise Schiavone from Washington.

KATIE COURIC,anchor: John McCain was savoring what's become a cake walk to the Republican presidential nomination when a bundle of morning newspapers came crashing down in his path. It was today's New York Times questioning his ethics, but McCain says the front page story suggesting he had an improper relationship with a lobbyist is not true. And now his supporters and others are questioning the Times' journalism and motivations. Nancy Cordes is covering this still-developing story. Nancy:

NANCY CORDES reporting: Katie, the campaign put out everyone it had today to combat this article, starting with the candidate himself.

Senator JOHN McCAIN (Republican Presidential Candidate): Obviously, I'm very disappointed in the article, and it's not true.

CORDES: The front page article quotes two unnamed former associates who say they confronted the senator nearly a decade ago when they became "convinced" his relationship with a female lobbyist "had become romantic." The lobbyist, Vicki Iseman, had Telecom clients with business before his Commerce Committee. The anonymous sources tell the Times "McCain acknowledged behaving inappropriately and pledged to keep his distance" from her.

Sen. McCAIN: At no time have I ever done anything that would betray the public trust, nor make a decision which in any way would not be in the public interest.

CORDES: Iseman, now 40, denies the relationship, too. Her firm today released a statement saying "the story is based upon the fantasies of a disgruntled former campaign employee." The head of the Project for Excellence in Journalism says the gray lady wandered into a gray area with this one.

Mr. TOM ROSENSTIEL (Project For Excellence In Journalism): So this is an odd situation where anonymous sources are not alleging something. They're alleging their feelings about something.

CORDES: New York Times executive editor Bill Keller turned down interview requests today saying in a statement, "We think the story speaks for itself. On the timing, our policy is, we publish stories when they are ready." The article was in the works for months, but only went to press, the McCain campaign argues, because the left-leaning magazine New Republic was working up its own story about internal debate at the Times over whether to print the sensitive allegations. In the Times, former McCain strategist John Weaver acknowledges he "met with Ms. Iseman at Union Station in Washington to ask her to stay away from the senator." He says he was concerned about "her conduct and what she had allegedly told people," but he does not say there was an affair.

Ms. CINDY McCAIN (Candidate's Wife): My children and I not only trust my husband, but know that he would never do anything to not only to disappoint our family, but more--but disappoint the people of America.

CORDES: The Times writer's used the rumored relationship to examine whether McCain always meets his own high ethical standards. In 1991, the Senate reprimanded him and four other senators, the infamous Keating Five. Together they had interfered in the regulation of a savings and loan on behalf of a campaign contributor. It cost some of them their careers. McCain survived by turning his experience into a crusade against special interests and lobbying in Washington. His positions on congressional earmarks and campaign finance reform have made him a hero to good government advocates.

Ms. MELANIE SLOAN (Citizens for Responsibility and Ethics in Washington): Once you're setting yourself up as a paradigm, as the example, the best example of how an ethical member of Congress should behave, then you've got to know people are gunning for you if you're going to make a mistake.

CORDES: McCain's opponents did their best to avoid the flap today.

Mr. MIKE HUCKABEE (Republican Presidential Candidate): I only know him what I know him to be, and that's a good and decent and honorable man.

CORDES: As conservative commentators rushed to his defense. Even Rush Limbaugh took a break from bashing McCain to take on another favored target.

Mr. RUSH LIMBAUGH (Radio Host): The New York Times endorsed that candidate while they sat on this story, and now with utter predictability, they are trying to destroy him.

CORDES: And that's an argument the campaign is hoping it can ride all the way to the bank. Already, Katie, they've put out this fundraising letter asking donors to help them combat the liberal establishment and The New York Times.

COURIC: And, Nancy, how does the McCain campaign feel about the way this story is playing out so far?

CORDES: Well, believe it or not, Katie, they're actually pretty upbeat. They feel like they've weathered the storm and succeeded in turning the attention on the Times. As one very senior aide put it to us today, `the story isn't about us anymore. It's about The New York Times.'

COURIC: All right, Nancy Cordes in Washington tonight. Thanks, Nancy.