Lobbying for Freddie Mac Against Regulation, the Truth Finally Betold

Cross posted at Politics and Critical Thinking

The MSM is reporting that back in 2005 while there was growing concerns on the Hill about the need for regulation of Freddie Mac. The over-bloated and severely corrupt GSE started fighting back with an underground lobbying campaign that cut its opponents attempts off at the knees. Sad part is, most in the bloggin’ world already knew this, now the information is rather moot, but here is the story anyway.

From the AP

WASHINGTON – When the Washington Nationals played their first-ever baseball game in the nation's capital in April 2005, two congressmen who oversaw mortgage giant Freddie Mac had choice seats — courtesy of the very company they were supposed to be keeping an eye on.

Efforts to tighten government regulation were gaining support on Capitol Hill, and Freddie Mac was fighting back. The baseball tickets for home opener were means of influence.
The two Representatives in question were Bob Ney, R-Ohio, and Paul Kanjorski, D-Pa. Ney is currently serving federal time for accepting gifts and political donations in exchange for favors in the Jack Abram off scandal.
Internal Freddie Mac budget records show $11.7 million was paid to 52 outside lobbyists and consultants in 2006. Power brokers such as former House Speaker Newt Gingrich were recruited with six-figure contracts. Freddie Mac paid the following amounts to the firms of former Republican lawmakers or ex-GOP staffers in 2006:

_Sen. Alfonse D'Amato of New York, at Park Strategies, $240,000.

_Rep. Vin Weber of Minnesota, at Clark & Weinstock, $360,297.

_Rep. Susan Molinari of New York, at Washington Group, $300,062.

_Susan Hirschmann at Williams & Jensen, former chief of staff to House Majority Leader Tom DeLay, R-Texas, $240,790.
I must say, until this point I have had a certain affinity for Newt Gingrich, although, that has changed rather radically with advent of this report.

We have been expounding here that the Subprime bust, which is the cause of our present economic woes, was directly caused by more than one group or person. It was further facilitated by the greed of Washington Pols, power brokers, and lobbyists as well as Wall Street. Everyone was to caught up in the populism of the election to give a damn. So, now we are going to be trillions in debt just because everyone had to be right. Ain’t ego a bitch?
The records obtained by the AP reflect growing concern within Freddie Mac over a chorus of criticism from Republicans worried that Freddie Mac and Fannie Mae had grown too big. The two companies owned or guaranteed over $5 trillion in mortgages.

The Bush administration and Federal Reserve Chairman Alan Greenspan were sounding the alarm about the potential threat to the nation's financial health if the fortunes of the two mammoth companies turned sour. They did eventually, when they took on $1 trillion worth of subprime mortgages and when their traditional guarantee business deteriorated. Commercial banks regarded Freddie Mac and Fannie Mae as competitors and were anxious to pick up business that would result from scaling back the two companies.

Pushing back, Freddie Mac enlisted prominent conservatives, including Gingrich and former Justice Department official Viet Dinh, paying each $300,000 in 2006, according to internal records.

Gingrich talked and wrote about what he saw as the benefits of the Freddie Mac business model.

Dinh wrote a legal analysis of private property rights that viewed a hypothetical government-enforced sale of Freddie Mac assets as constitutionally suspect.
Bush has a long history of just plain screwing up, however, for some reason there is a sense of justification due to this. They knew what was wrong, but a severe case of blitzkrieg lobbying eliminated the effort almost before it could get off the ground.
The AP previously described, in October, how Freddie Mac thwarted efforts to bring a tough regulatory bill sponsored by Republican Sens. Chuck Hagel of Nebraska, John Sununu of New Hampshire, Elizabeth Dole of North Carolina and John McCain of Arizona to a full Senate vote.
Interestingly enough, with all of the names up there one is retiring in 09’, two have been defeated politically, and the last, well we know his story all too well. It makes you wonder about lobbying and the ferocity at which they go after their nemeses . Most of the attempts on Palin’s political career have been brought on by Washington insider Republicans. Why not those who sought to thwart a trillion dollar industry's expansion with regulation and oversight?
At a meeting days after Hagel's bill went to the full Senate, Syron and McLoughlin berated the company's in-house lobbyists for failing to keep Hagel's bill corralled in committee, said the four people familiar with events at Freddie Mac at the time.

Freddie Mac shifted into high gear, secretly paying a Republican consulting firm, Washington-based DCI Group, $2 million to kill Hagel's legislation. The covert lobbying campaign targeted Republican senators in 2005-06.

According to the newly obtained records, DCI's deployment was part of a broader campaign that targeted mainly Republicans on Capitol Hill.

The internal Freddie Mac documents show that 17 of the lobbying firms and consultants paid in 2006 were specifically directed to focus on Republicans and four on Democrats, with varying targets for the rest.
The main focus of the lobbying campaign seemed to be targeted at the Republicans due to the amount of fervor and opposition some in the party were calling for. I have found no evidence of Democrats calling for the regulation of Freddie Mac or Fannie Mae. Rather there were calls from Chris Dodd and Barney Frank for its expansion. Now that their man Flint is safely tucked away in the White House and the Collectivists have firm control of Congress, the truth can be released. Frank and boys had just better keep their sucks shut about this one or they might drown with the rest of the rats.

Now, this fact about the Dems does not in anyway shape or form relinquish the Republicans of their responsibility in the matter. This was bigger than most could imagine and now that the election is over, maybe people will start seeing that, for all the good it will do.

Comments :

4 comments to “Lobbying for Freddie Mac Against Regulation, the Truth Finally Betold”
Blueskyboris said...

"The AP previously described, in October, how Freddie Mac thwarted efforts to bring a tough regulatory bill sponsored by Republican Sens. Chuck Hagel of Nebraska, John Sununu of New Hampshire, Elizabeth Dole of North Carolina and John McCain of Arizona to a full Senate vote."

Now this is interesting! Basically justifies my arguments pointing to corporate support of the deregulatory laws that led to the financial crisis. DEREGULATION>>>

Critical Thinker said...

No, actually it doesn't. You were arguing for the regulation of companies that were private sector. HUGE difference between them and a GSE. This is actually further proof that the nationalization of private institutions results in abysmal failure.

How funny is it that the very concept of nationalizing private companies, the same idea that assisted in the SUBPRIME bust, is now being offered as a solution to it. When are you Lefties gonna quit repeating the same mistakes over and over and over?

Blueskyboris said...

GSEs are owned privately, but chartered publicly. The federal government has little involvement.

"In 1968, the government converted Fannie Mae into a private shareholder-owned corporation in order to remove its activity from the annual balance sheet of the federal budget."

I'll also point out that at least 50% of the lending companies that lent out the bad loans were privately owned and privately chartered.

CriticalThinker said...

I will start off with suggesting you quit getting your information from Wikipedia. As that is the opening statement of this article. If you are going to live in a "pedia" world at least go to Investopedia for Godsakes. Doing your work for your is like arguing with myself.

"GSEs carry the implicit backing of the U.S. Government, but they are not direct obligations of the U.S. Government. For this reason, these securities will offer a yield premium over Treasuries. Some consider GSEs to be stealth recipients of corporate welfare."

Which leads us into our next definition, a "legal monopoly."

"A company that is operating as a monopoly under a government mandate. A legal monopoly offers a specific product or service at a regulated price and can either be independently run and government regulated, or government run and regulated."

For a more explicit explanation of how they differ from the private sector and government influence is exerted on them.

"Fannie Mae and Freddie Mac are called GSEs because they lie somewhere between an
independent corporation and a program explicitly funded by Congress. They issue publicly
traded stock and their economic viability is not explicitly guaranteed by the U.S. federal
government. Some obvious government connections remain, though. They hold government
charters, and they have a line of credit with the U.S. Treasury. The president of the United
States appoints five of Fannie Mae's 18-member board of directors, and deposit-taking
institutions can take larger positions in these agencies’ debt than they can in corporate debt.
Because of such relationships, many experts believe that the government will bail out a GSE that
fails. Fannie Mae and Freddie Mac are also probably more likely to experience direct
government intervention than other public companies."


Problem with GSE's

"GSEs are hybrid institutions that combine characteristics of public and private organizations. Their ownership and control is private, but government provides them with significant subsidies, including tax and regulatory advantages, and permits them to fund their activities with an implicit government guarantee, almost as if they were part of the government. The GSEs operate in markets where their non-GSE competitors do not receive such government benefits."

With that in mind the GSE's were influenced by the government in 1995, through incentive payments, to increase acquisition of subprime loans. The amount the acquired increased 25% per year fro 1994-2003. Again this is because of the influence that the government has within the GSE versus a private institution. Which is not subject to the entitlements of government subsidies as GSE's are.


HUD (An American Government Agency, I only say this because I would not expect a Canadian to know what it is.) specified that Fannie Mae and Freddie Mac would have 42% of their holdings be subprime. Hmm that looks suspiciously like government influence being exerted on a Congressionaly chartered organization.


Oh and of September 2008 they are back under full governmental control or Conservatorship. I got a million more to bury you with if you want. I suggest taking a few days off and doing some research to refute me with, not Wiki.