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TechnoratiFannie, Freddie Spent $200 Million To Buy Influence
If you want to know how Fannie Mae and Freddie Mac have survived scandal and crisis, consider this: Over the past decade, they have spent nearly $200 million on lobbying and campaign contributions.
But the political tentacles of the mortgage giants extend far beyond their checkbooks.
The two government-chartered companies run a highly sophisticated lobbying operation, with deep-pocketed lobbyists in Washington and scores of local Fannie- and Freddie-sponsored homeowner groups ready to pressure lawmakers back home.
They've stacked their payrolls with top Washington power brokers of all political stripes, including Republican John McCain's presidential campaign manager, Rick Davis; Democrat Barack Obama's original vice presidential vetter, Jim Johnson; and scores of others now working for the two rivals for the White House.
Fannie and Freddie's aggressive political maneuvering has helped stave off increased regulation and preserve special benefits such as exemption from state and local income taxes and the ability to borrow at low rates.
When their stock prices took a dive last week, their government allies extended another helping hand with a plan for the Treasury Department, the Federal Reserve and, possibly, Congress to shore up the companies.
The housing crisis is sure to linger into the next administration, when the mortgage companies will inevitably be well-represented - no matter who's in the White House.
Fannie and Freddie's political contacts exist deep in the two presidential campaigns.
At least 20 McCain fundraisers have lobbied on behalf of Fannie Mae and Freddie Mac, netting at least $12.3 million in fees over the past nine years.
Political insiders Arthur B. Culvahouse Jr., picked by McCain to vet his vice presidential nominees, and Jim Johnson, picked by Obama to perform the same function, once worked for the mortgage giants.
And for years, Rick Davis served as president of an advocacy group led by Fannie Mae and Freddie Mac that defended the two companies against increased regulation.
So far this election cycle, Freddie Mac's political action committee and employees have contributed $555,567 to Senate and House candidates, and Fannie Mae's PAC and employees have given more than $1.1 million, according to the Center for Responsive Politics.
In total, the two companies have spent $170 million on lobbying over the past decade, according to the Center, although they have scaled back in recent years. Last year, they paid $14.1 million in lobbying fees, a significant decrease from a high of more than $26 million in 2004. The connections of both campaigns to the well-entrenched mortgage companies highlight the difficulties the candidates face in selling voters on an outsider message.
McCain's campaign denied that its political connections have affected his view on the issue.
"I have written every word that has to do with Fannie and Freddie in this campaign, and I don't know who the people are that are linked to the companies," said McCain's economic adviser, Douglas Holtz-Eakin.
"Sen. McCain has favored GSE reform in the past and continues to favor GSE reform," Holtz-Eakin said. "That's unchanged."
McCain has called the government's weekend intervention in the struggling companies "correct," saying he hoped that the action would "preserve the ability of Americans to obtain loans in order to buy a home and be able to afford mortgage payments they're having to make."
A spokesman for the Obama campaign declined to comment, noting only that former Fannie Mae CEO Jim Johnson stepped down from his campaign post in June. His resignation came in the wake of charges that he collected more then $7 million in home loans at special, below-average rates.
On Sunday, Obama shied away from commenting on the specific proposals, but cautioned regulators to give top priority to the interests of homeowners.
"That should be our No. 1 priority, not just shareholders, investors or CEOs of companies," he said.
Fannie and Freddie own or guarantee almost half of the country's $12 trillion in mortgage debt. Over the past few months, their shares of the housing market have grown as private companies curtailed their mortgage lending in the wake of massive subprime-related losses.
Critics have long argued that both Fannie and Freddie operated with too small a capital cushion to adequately offset financial risk. But the mortgage giants have consistently beaten back congressional efforts to increase oversight, even after a major accounting scandal in 2003 resulted in a $400 million fine for Fannie.
Fannie's government relations operations dramatically expanded in the mid-1990s, when then-CEO Johnson recruited Washington A-listers Robert Zoellick, who served in the Reagan and Bush administrations; Lawrence M. Small, former secretary of the Smithsonian Institution; and William M. Daley, commerce secretary in the Clinton administration.
Johnson spearheaded an aggressive campaign to create a local grass-roots network of company advocates. Under his leadership, Fannie opened more than 50 partnership offices in cities and rural communities. At the same time, the Fannie Mae Foundation, a private nonprofit financed by the mortgage giant, contributed generously to local charities, arts institutions and housing organizations, giving Fannie influence in lawmakers' home districts.
Both Fannie and Freddie made large and visible commitments to low and moderate-income housing, quieting criticism from advocacy groups. With the companies in trouble, their political ties are under new scrutiny.
Johnson headed Fannie Mae from 1991 to 1998, leaving with a $21 million payout. Even after he left, Fannie continued to pay him an annual fee of at least $300,000 a year for consulting services and a $71,000 monthly pension, according to filings with the Securities and Exchange Commission.
From 2001 to 2005, Fannie also paid for Johnson's support staff, communications services and provided him a car and driver.
McCain tapped Culvahouse, the former Reagan administration official, to head his search for a running mate.
Currently a partner at O'Melveny & Myers, Culvahouse lobbied on behalf of Fannie Mae in 1999, 2003 and 2004, according to Senate records.
The campaign connections to the two mortgage companies go far beyond vice presidential vetters.
McCain campaign manager Davis headed the Homeownership Alliance, a lobbying association that included Fannie, Freddie, nonprofit groups, real estate agents, homebuilders and consumer advocates. The group's stated goal was to increase affordable housing. But it also worked to oppose congressional efforts to tighten controls on Fannie and Freddie.
In July 2003, Davis wrote to the American Banker, taking issue with an opinion piece by Leslie Paige of Citizens Against Government Waste, arguing that Fannie and Freddie should operate with greater transparency.
"Several of Ms. Paige's assertions bear correction," Davis wrote, defending Fannie and Freddie on behalf of the group. "The GSEs are subject to an innovative and stringent risk-based capital stress test - the toughest in the financial services industry."
Other McCain aides with ties to the two companies include economic adviser Aquiles Suarez, who worked as Fannie's director of government and industry relations; congressional liaison John Green, who lobbied for Fannie from 2004 to 2007; and finance co-chairman Frederic V. Malek, a former Freddie board member.
Jamie S. Gorelick, deputy attorney general in the Clinton administration and a chief policy adviser to Hillary Rodham Clinton, is rumored to be a possible attorney general in an Obama administration. She was vice chairman of Fannie Mae and sat on its board of directors.
© 2008 Capitol News Company, LLC
32 Comments so far
Show Allgreenerthanthou [July 17th, 2008 12:24 pm] wrote: "Obama has spoken out against Social Security!"
Oh, for gawd's sake -- when and in what context did Obama ever speak out against Social Security? Provide some solid proof for that extraordinary claim.
greenerthanthou [July 17th, 2008 12:24 pm] wrote: "Those who fall back on the Supreme Court argument, you know, that it is vital that we not have a Republican submitting fascists for a Democratic Senate to confirm, are grasping at straws."
So then it's 'grasping at straws' to prefer another Ruth Ginsberg to another Antonin Scalia, McCain's favorite SC justice? I think it's vital to the future of the country that we have another moderate liberal on the SC to stop the future erosion of our Constitutional rights. Besides, what's your alternative -- vote for Nader or McKinney so that McCain can win? Neither one of them is even on enough ballots to get a sufficient number of electoral votes to win the presidency at the present time, so it's impossible for McKinney to become president. President McKinney? Keep dreaming.
greenerthanthou [July 17th, 2008 12:24 pm] wrote: "And, instead of fighting back, we see pathetic democrats afraid to do anything but complain, and then vote democrat."
You mean 'pathetic Democrats' like Dennis Kucinich, Louise Slaughter, Russ Feingold and others? Do you want to get rid of them as well? How is Cynthia McKinney going to fight back when she can't get elected? She would have done more good staying in her Georgia Congressional seat than running for president. Talk about grasping at straws.
Does anybody here remember Warren G. Harding and the Teapot Dome Scandal? Harding was as corrupt and careless as Junior, although not quite as warlike. (This is a guy who bet the White House china on a poker game.) Harding was succeeded by Republicans Coolidge and Hoover, both do-nothing presidents who thought the business of America is business. I've talked to people who were around in the 20s and 30s -- they said the corruption between business and state was rampant, there was no regulation on business, and no one thought FDR would do much to alter it -- after all, he was a wealthy aristocrat, so what did he know about the suffering of the common folk? But at least FDR was a change from the hated Hoover. they were pleasantly surprised at what FDR did once in power. We may be as well, if Obama is elected, but even if he turns out to be a moderate Dem, that's still better than Crazy-Eyes McCain.
matti [July 16th, 2008 2:46 pm] it's 15 percent in the polls to be eligible for inclusion in the presidential debates, last I checked. Each state has its own threshold for ballot access.
Shiva [July 16th, 2008 1:13 pm], excellent quote. Thanks.
And NativeSon, why should the people have to outbid the lobbyists to influence their public servants? We elect people to represent us, and we pay them a very good salary, more than the vast majority of people in this country make.
Lobbyists must be outlawed. I will never "pool my money" to supply prostitutes and golf vacations to congress members. They need to represent me, as outlined in the Constitution, or be replaced.
Vote Green!
Yeah, Obama and McCain are bought and paid for by financial interests, Obama at TWICE the rate of McCain. Clearly, the answer is to vote for Obama, then everything will change.
Not.
How much money are the bankers giving Cynthia McKinney? That would be nothing.
It is pathetic to see dems clinging to Obama, believing that the dems of today have any allegiance to the reforms of Roosevelt. Obama has spoken out against Social Security! Whose interests is he representing?
Those who fall back on the Supreme Court argument, you know, that it is vital that we not have a Republican submitting fascists for a Democratic Senate to confirm, are grasping at straws.
The only reason Roosevelt gave us reforms was that a sizeable minority of the US working class was REVOLUTIONARY!! They gave us a little to protect the existing property relations.
But Reagan came in and started attacking those rights, backed by an enormous right wing noise machine. And, instead of fighting back, we see pathetic democrats afraid to do anything but complain, and then vote democrat.
I'm not falling for that lesser of two evils bullshit. I'm voting for Cynthia McKinney.
Paulson hails from Goldmann-Sachs, which is now taking a hit for possibly helping foment the downfall of Lehmann Bros.
Freddie and Fannie....Fuck em!
Good idea Native Son. A referendum backed by cash.
Don't expect Henry Paulson to save us, the fact that he most closely resemble Nosferateau doesn't exactly fill me with confidence in his opinions, Sec. of the Treasury or not...
Heads they win, tails we all bail them out, all the while the CEO's take home $10 million per year. It should have remained a government run program. As a for profit it is backrupting us.
Does it really matter who is elected to office? As long as the system is so corrupt, then new elections could be held each year, for one year terms and "the money" would still get in to make it work for those who pay to have it work for them.
Take "the money" out of it FOR the Politicians, and "the money" will have to do something else to take control, but at least they will not have bought their way through the elected officials.
I've suggested in other postings that the "poeple', should pool their money, and OUTBID the "special interests", you know the "lobbyiests", THEN WE WOULD WANT THE MOST CORRUPT POLITICIANS MONEY COULD BUY IN OFFICE.
Don't OUTLAW lobyists, just OUTBID them.
If money talks in Washington, get there early with the most money.
Just a thought......
People are clever when they want to be, and when enough people want to make the system work for them, instead of "the money"-----it will happen very rapidly.
21M payout , 71K month for a pension, and 300K annual consulting fees. Can this get more obscene?
The Greens and Pat Lamarche and the Libertarians
have yet to raise a legit issue. They are in for the publicity. Common Cause should ignore
Pat Lamarche, she gets enough free time in the
Bangor Daily news..Let her keep hugging trees.
The country has been destroyed by do-nothing and say nothing politicians. The Democrats have become enablers of the Bush Regime. There are plenty of issues to raise.
matti,
I enjoy your posts a great deal. You always have solid reasoning underlying your ideas and you leave me with a good bit to ponder.
Thanks!
http://robertreich.blogspot.com/2008/07/fannie-freddie-and-pending-taxpayer.html
Let McSame win and there will be plenty of fun... New supreme court picks, and he knows how to fix our economy, win wars and give the rich the biggest tax breaks.
All Fun stuff.
And if you care about "that the "post-war" realities that have shaped our culture for the last 60 years are becoming out-moded -in everything from "our" economic dominance, "our" military power, "our" diplomatic influence, and "our" majority quality of life."
Let McSame win, it should be a blast!
Try to unite a new force of 3rd parties under McSame and the divisions we see among progressives everyday here on Common Dreams will be higher than ever, a divide of bitterness like we ain't seen yet!
Go in 30 different directions at once and call it "Principals" and let McSame win.
Brilliant!
If that is solidarity, have Lots of fun.
We bailed out the savings and loan scandles, including slapping the wrist of Neil Bush, and now it is time to bail out the fat cats who have screwed the public again and again. The question is: How many banks and mortgage companies can the public bail out before there isn't one cent left. Or is that the plan?
Economics - Politicians and other tools of the oligarchy using big impressive words to manipulate the people so they can be easily exploited.
Science has proven that economists have a worse record of correct prediction than bookies.
Studies show that the people make the right decisions much more often than politicians.
Direct democracy. It's the real thing:
www.nationalinitiative.us
The U.S. Gov't should not give a penny to FNMA or FDMC unless they receive stock at fair market values to be held by the U.S. Treasury.
The argument for voting for the Greens or the Libertarians would be that the current Electoral rules require a Party to get some percentage (is it 5?) of the Vote in the Presidential race in order to skip all the hoops and B.S. and get on a more even plane with the GOP and the Dems.
The argument that ANY vote not for the Dem candidate for Prez. would help McCain win -and that that would be an utter disaster- misses a couple of important points, I think.
1. It completely subverts the Idea of Democratic Representation -people should vote for who they want to see in office, no one else.
2. It neatly ignores the fact that the Dems have had the power in Congress to stop all of Bush's shennanigans for nearly two years -AND HAVE FAILED TO DO SO.
If McCain's "McSame-i-ness" stems from his likely continuation of Bush's particular brand of Executive priviledge and power, then the obvious check to this in a fully functioning system would be to simply ensure the retention and the increase of the Dem Majorities in Congress.
Congress would then be able to Overide Vetoes, call hearings and investigations, halt appointments, and utilize all its other myriad powers to interrupt the "unitary executive".
So, I would recommend to people that are hung up on this -they want to vote "3rd party" but are fearful of a McCain Presidency- that they should vote Green or Lib or even Nader for Prez (especially if they live in a district that is highly likely to go for Obama) and then vote for a Democrat for Congress.
Of course I know that I will get the "Dems are complicit in all this too, so screw them" response -even though I've alluded to that myself and therefore know it quite well. My response to that presumed response is:
If you believe the system to be that broken and corrupted, why are you "voting" at all? Or better yet why are you spending time on the Internets discussing "voting"? There are other ways to try and influence things, y'know.
I don't mean that or any of this as an indictment or anything. It has just become baffling to me how people discuss this election and politics in general. As if it is a matter of life and death -that they will do little about and that can only be "won" by totally abandoning one's principles- or that it is a uniquely complex and mystifying subject that must be discussed -day in and day out- for more than a YEAR, just so we can all go do what we would have done previous to any discussion -vote Democrat or Republican, based mostly on where we grew up and who raised us.
Tying this to the Article, I would hope that the imminent Failure and temporary "bailout" of Fannie Mae and Freddie Mac AT THE VERY LEAST demonstrates to people that the "post-war" realities that have shaped our culture for the last 60 years are becoming out-moded -in everything from "our" economic dominance, "our" military power, "our" diplomatic influence, and "our" majority quality of life.
This should be a wake up call for all of us.
Let's hope it is.
Have Fun,
-matti.
Good for you, You will help McSame and you will deserve every minute of him.
That is your idea of Solidarity...
Thanks for your help and maybe you can unite the 3rd parties because they don't have a lick of solidarity between them.
If they can't unite, a vote for them gives you more Chaos.
Solidarity is about uniting for a common cause, 3rd parties are about splitting the votes of progressives so that the Fannies and the Freddies can keep screwing us. But you are fed up OK I understand that but put some reason behind your anger and you may not have to keep getting screwed.
jim glover-right on! SOLIDARITY! VOTE THIRD PARTY ALWAYS! the dems will never again recieve my vote after the total capitulation to the Bush White House. They were given those seats of power to stand up to this sick administration; only to use those seats to further the administrations' agendas!!!THE BETRAYAL!THE HYPOCRICY!NEVER AGAIN!!!
Yes...
McSame is regressive.
If you need more punishment let him win.
Now lets here from the "non satanic voters"
I think we are about to do something that resembles that. It's called an ELECTION. Are YOU really working for change? Here's the deal: As soon as any amount of 'scandal' has been found in the lives of ANY of Obama's 'head honchos'-they leave or are asked to resign. NONE! Absolutely NONE of McCain's have done the same, including Mr. "It's all in your head" Gramm. Since Sen. McCain seems to have memory problems-WHO is going to RUN THE COUNTRY? Yeah! You got it! Those same 'advisors'. McCain=Bush III
Yes Shiva,
Now the people must learn how to form coalitions... the words of our Forefathers do not give us anything that we do not have to figure out how to get there step by step.
This is an evolutionary process mixed with setbacks, revolution and War.
When the 3rd parties start to realize that progressives must unite, we will be on our way.
Solidarity must be reclaimed, without it we have chaos...NOW chaos reigns.
"Government is instituted for the common good; for the protection, safety, prosperity, and happiness of the people; and not for profit, honor, or private interest of any one man, family, or class of men; therefore, the people alone have an incontestable, unalienable, and indefeasible right to institute government; and to reform, alter, or totally change the same, when their protection, safety, prosperity, and happiness require it." -John Adams,
what part of this is not understandable?
If average Americans worked hard enough to afford Gas again, they may be lucky enough to afford a house some day.
It will be during Obama's term that finally the American people will face the fact that it is the Central private bankers who have robbed the people of the right to make and issue their own money according to the Constitution. Now we only have the right to borrow and pay higher and higher interest. There is no way out but what we see...and It is on the way out and maybe we can survive it.
We are at the crossroads.
We may have the Government declare bankruptcy and start over with a Banking system owned by the people. It is gonna be a revolution like no one has ever seen before.
The worst congress money can buy!
The whole reason for the subprime loan, ARM crisis is the fact housing remains unafforable at current prices. Its really simple but no one mentions this. Let prices fall back to affordability and people will buy again. Apparently the powers that be want to keep housing affordability out of the reach of most Aemricans.
I think it's time to throw out the baby with the bathwater and the tub too. There comes a time in human events when the table must be overturned so the world can start anew sans these avoricious robbers and despototic lunatics. Constitutional Convention anyone?
Henry Paulson and Senator Larry "Wide Stance" Craig: separated at birth?
Maybe someday that big revolving door in Washington D.C.,will be spinning so fast it will start kicking some of these people to hell, where many of them belong.
This is why we can't trust our government.
Why the Bail-Out of Freddie Mac and Fanny Mae is Bad Economic Policy
nationalize 'em and replace the officers with career employees.