How Fannie, Freddie Became Kings Of The Hill
Homeowners might think of Fannie Mae and Freddie Mac as just the big dogs of the mortgage business, but in Washington, D.C., they're known as big players in lobbying. The two companies managed to stave off government regulation for years by lobbying hard — and spending generously.
In the first three months of the year alone, Fannie Mae and Freddie Mac spent a combined total of about $3.5 million on lobbying and hired 42 outside firms. Their lobbying reports were analyzed by the Center for Responsive Politics.
That kind of clout, coupled with huge mortgage portfolios reaching into every corner of the country, illustrates why they have never lacked for confidence on Capitol Hill.
Former Rep. Jim Leach (R-IA) is an old nemesis of Fannie and Freddie. In Congress, he helped lead efforts to rein them in.
"There've been a lot of rhetorical efforts to tighten regulation, but Fannie and Freddie have both done a pretty deft job of fending that off," Leach says. "Muscular" is another word he uses to describe those efforts.
Fannie and Freddie have kept their profiles high because of their odd situation: They're not government agencies, but they're not regular corporations either. As government sponsored enterprises, or GSEs, they're often thought to have guarantees of federal support. It lets them get discounts when they borrow money.
To maintain that advantage and others, they hire well-placed politicos for big salaries.
A rival lobbyist once described Fannie Mae as a political organization that happened to be in the mortgage business.
Past executives include Democratic operatives and appointees. Former CEO Jim Johnson made headlines last month after reports that he may have received preferential treatment in real estate deals forced him out as head of Illinois Sen. Barack Obama's vice presidential search team.
It's a similar story over at Freddie Mac: Former Rep. Susan Molinari (R-NY) is a contract lobbyist, and Democratic operative Harold Ickes used to be on the board.
And the two GSEs are famous for campaign contributions to both parties.
Leach, who is now the director of Harvard University's Institute of Politics and chairman of the watchdog group Common Cause, says he finds that especially troubling.
"They have done an awful lot in terms of the money game that have caused the kinds of conflicts of interest that have bedeviled the American political system," he says.
In 2006, Fannie farmed out almost a million dollars in contributions, while Freddie forked over more than $600,000. That same year, the nation's biggest lender, Countrywide, gave $250,000.
The GSEs also raise money from others. Five years ago, a Freddie Mac document described an 18-month push by the company's lobbyists in which they held more than 75 fundraising events for members of one House committee.
Freddie Mac later was forced to pay the Federal Election Commission a record-setting $3.8 million fine.
Even now, Fannie Mae and Freddie Mac's recent troubles may not dim their influence on Capitol Hill, says Mike House, director of FM Policy Focus, a lobbying group that's campaigned for years to regulate the GSEs more strictly.
"They'll have clout because of the role they have," House says. "Whether it's more or less, we'll just have to see."
The GSEs are waiting to see, as well. Spokespeople at Freddie Mac didn't return requests for comment Monday. And executives at Fannie Mae weren't talking.
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