Former House Speaker Newt Gingrich helped broker a “special arrangement” between Congress and Freddie Mac in which the semi-private mortgage giant continued to enjoy subsidies as long as it made housing more “affordable” for low-income and minority borrowers, according to Freddie Mac insiders who spoke to WND on condition of anonymity.
In fact, Gingrich championed the “affordable-housing” policies he now criticizes for helping inflate the housing bubble that burst painfully in 2008. The one-time Freddie consultant joined Democrats in shielding the agency from reforms that would have reined in its risky mortgage underwriting.
As Freddie fed the subprime mortgage bubble last decade, Gingrich helped its chief lobbyist fend off efforts by fellow Republicans to dismantle, or at least better regulate, the now-failed agency. They devised a two-pronged strategy: buy off Republican critics of its subsidies and affordable-housing mission with donations and fundraising events, while currying favor with Democrats, who sought to protect such government benefits in return for easier financial credit for their constituents.
“As long as we focused on affordable housing,” one Freddie insider said, “our position was secure.”
The government benefits, which included a multibillion-dollar line of credit from the Treasury and exemption from both state and federal taxes, gave Freddie an edge over market competitors.
Gingrich denies lobbying for Freddie and claims he only consulted for the quasi-governmental agency as a “historian.”
While records show the longtime GOP lawmaker never registered as a lobbyist, former Freddie officials say he helped the agency’s chief lobbyist – Craig C. Thomas – defeat two key GOP-sponsored pieces of legislation designed to toughen oversight of Freddie and its twin, Fannie Mae, less than three years before the mortgage crisis.
One bill, the Federal Housing Enterprise Regulatory Reform Act, authorized the creation of a new watchdog agency to approve mortgage products underwritten by Freddie and Fannie. The other, the Federal Housing Finance Reform Act, limited the mortgage agencies’ portfolios and hiked their capital reserve requirements.
Coached by Gingrich, who was under a $600,000 retainer at the time, Thomas lobbied hard against the bills, neither of which made it to the floor of the Senate for final vote. Top GOP targets included Rep. Spencer Bachus of the House Financial Services Committee, who records show pocketed at least $55,000 in campaign donations from Freddie and Fannie; and Sen. Richard Shelby of the Senate Banking Committee, who also received at least $55,000.
Also opposing the measures were key Democrat leaders – including Rep. Barney Frank and Sen. Chris Dodd – who argued tighter regulation of Freddie and Fannie would cut into their public mission to finance low-income and affordable housing.
As part of his lucrative contract, Gingrich also publicly defended what he saw as the benefits of the Freddie business model in several articles and talks. Freddie sources say he regularly circulated among members of Congress during this period.
Freddie Mac, now in government conservatorship, denied requests to furnish for examination any “deliverable” materials, including drafts of reports written by the Gingrich Group, as cited under the contract drawn up in the mid-2000s.
Internal Freddie records show Gingrich wasn’t the only GOP power broker hired back then to target Republican reformers. Others included Sen. Alfonse D’Amato and Reps. Susan Molinari and Vin Weber, as well as Susan Hirschmann, former chief of staff to House Majority Leader Tom DeLay. GOP political consultant Frank Luntz was also retained by Freddie as part of its overall $12 million campaign at the time to beat back GOP efforts to privatize Freddie and Fannie and take away their government advantages.
Gingrich’s past activities, both in public and behind the scenes, contrast starkly with remarks the GOP presidential contender has made about Freddie and Fannie on the campaign trail.
Last October, during a presidential debate sponsored by Bloomberg News and the Washington Post, Gingrich blamed the government-sponsored lenders for a major role in the subprime lending crisis and argued they should be “broken up.” He also fingered Democrat champions of affordable housing who took cash contributions from Freddie and Fannie; and who, in turn, helped protect them from regulatory oversight and contributed to a loose lending “environment.”
“If you want to put people in jail, you ought to start with Barney Frank and Chris Dodd who created the environment,” Gingrich said. “Let’s look at the politicians who profited from the environment, and the politicians who put this country in trouble.”
In the 1990s, however, Gingrich supported the Clinton administration’s aggressive campaign to use Freddie and Fannie to boost in his own words, “affordable housing,” and home ownership among minorities.
In 1994, for example, Gingrich attended a Fannie event in Atlanta celebrating its commitment to lending to poor minority communities there.
“Fannie Mae is an excellent example of a former government institution fulfilling its mandate while functioning in the market economy,” he said. “Fannie Mae has had a regional presence in Atlanta for over 40 years, and the announcement of a partnership office demonstrates its continued commitments to affordable housing in the Atlanta metropolitan area.”
Five years later, Gingrich stepped down from Congress and immediately joined Freddie as a consultant on “strategic planning and public policy,” securing a $25,000-a-month contract. At the same time, Gingrich’s chief of staff, Arne Christenson, became a paid lobbyist for Fannie.
Freddie’s chief lobbyist at the time, Mitchell Delk, said in a recent interview that the 1999 contract required Gingrich to provide, among other things, advice on issues such as “expanding home ownership among Hispanics” and other minorities.
All told, Gingrich earned as much as $1.8 million during his two contract periods with Freddie Mac.