Congress Slams Fannie, Freddie

Zachary Roth | December 9, 2008, 5:10PM

The House Oversight committee held hearings today on the role of Fannie Mae and Freddie Mac in the housing crisis and financial meltdown. And, no surprise, committee members didn't exactly heap praise on the troubled mortgage giants.

Committee chair Henry Waxman: "The CEOs of Fannie and Freddie made reckless bets that led to the downfall of their companies. Their actions could cost taxpayers hundreds of billions of dollars."

GOP Rep. Darrell Issa: "Outright fraud and greed wasn't isolated to just Wall Street. Fannie and Freddie shared in this disgrace as it drove much of the poor decision making that have led us to where we are today."

From the Wall Street Journal:

Lawmakers cited thousands of documents collected by the committee that Waxman said "show that the companies made irresponsible investments" that destabilized the firms and forced the government to put the companies in conservatorship in September.

Specifically, the panel released a June 2005 presentation made by former Fannie CEO Daniel Mudd that suggested the firm should move away from the traditional mortgage market in order to take advantage of the growing subprime and non-prime loan businesses.

"If we do not seriously invest in these 'underground' type efforts and the market changes prove to be secular, we risk: becoming a niche player; becoming less of a market leader; becoming less relevant to the secondary market," the presentation slides say.

Fannie, the slides continue, could "meet the market where the market is" by accepting higher risk and more volatile earnings

Daniel Mudd, CEO of Fannie Mae, offered this defense to the committee: "We couldn't afford to make the bet that the changes were not going to be permanent," he said.

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Topics: Bailout, Eric Holder, Fannie Mae, Freddie Mac, Henry Waxman

Bailout

Gingrich's Ties To Fannie, Freddie Go Even Deeper

Zachary Roth | December 8, 2008, 2:26PM

Earlier today we reported that Newt Gingrich had recently been on Fox denouncing Democatic lawmakers for ties to Fannie Mae and Freddie Mac -- despite himself having worked as a consultant for Freddie back in 2006, helping to fight off potential regulation.

But it turns out that the Newt-Freddie relationship goes even deeper.

A July 1999 story in the American Banker, a banking trade publication (via Nexis), reports that the former House Speaker had recently been hired by Freddie "to provide strategic counsel on a range of issues," according to a company spokesman.

The same story adds that Gingrich's former chief of staff, Arne Christenson, was hired that year by Fannie Mae as senior vice president for regulatory policy.

Just to remind you, Gingrich is the guy who was saying in September:

what you have today is that the rich in Wall Street and the powerful at Fannie Mae and Freddie Mac had so many politicians beholden to them that, in fact, nobody was going to check them. And so they got away with things that were absolute bologna, and it's a tragedy.

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Topics: Bailout, Fannie Mae, Freddie Mac, Lobbyists, Newt Gingrich

Bailout

Gingrich Slammed Pols "Beholden" to Fannie and Freddie -- But Shilled For Freddie Himself

Zachary Roth | December 8, 2008, 11:27AM

We already knew Newt Gingrich doesn't lack for chutzpah. But this looks like a whole new level...

Back when Congress was debating the bailout package this fall, Gingrich was bravely sounding the alarm about the nefarious influence wielded in Washington by mortgage giants Fannie Mae and Freddie Mac.

Here he is talking to Bill O'Reilly on Fox News in late September:

One of the provisions that I wanted to put into any kind of financial package is that no company that gets money from the Treasury in this process be allowed to hire a lobbyist. I mean, what you have today is that the rich in Wall Street and the powerful at Fannie Mae and Freddie Mac had so many politicians beholden to them that, in fact, nobody was going to check them. And so they got away with things that were absolute bologna, and it's a tragedy.

Gingrich was particularly vocal about some Democratic politicians' ties to Fannie and Freddie:

In Dodd's case, he is the largest single recipient of money from Freddie Mac and Fannie Mae. Barack Obama was No. 2. The fact is that to have Dodd preside over writing this bill, I think, is absolutely disgusting. I am appalled that Harry Reid appointed him to sit in there. But it is the nature of politics up there right now. And I think it's very, very bad for the country.

Now, one of the major reasons that Fannie and Freddie had "so many politicians beholden to them", of course, is that they hired people to work those politicians and to make public arguments that dovetailed with Fannie and Freddie's interests. And one of the people they hired, it turns out, was Gingrich.

The Associated Press reports today that in 2006, Freddie Mac paid the former House Speaker $300,000 to help fight off potential regulation. "Gingrich talked and wrote about what he saw as the benefits of the Freddie Mac business model," says the wire service.

So, in Gingrich world: Democratic politicians getting campaign contributions from Fannie and Freddie -- bad! Republican lobbyists getting paid by Fannie and Freddie to make the case against regulating the mortgage giants: good!

It's nice to be Newt...