Gingrich and Freddie Mac

So, where was Gingrich when Fannie Mae and Freddie Mac started to fail – right in the thick of it (1978 – end of 1998). Here’s the history of the programs. The Federal National Mortgage Association, commonly known as Fannie Mae, was founded in 1938 by amendments to the National Housing Act after the Great Depression as part of President Franklin Delano Roosevelt’s New Deal. It was to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing; it made it possible for banks and other loan originators to buy Federal Housing Administration (FHA) insured mortgages. In 1954, an amendment known as the Federal National Mortgage Association Charter Act split ownership of Fannie Mae; the government held the preferred stock while private investors held the common stock. In 1968 the Government National Mortgage Association (Ginnie Mae) was added. Ginnie Mae remains a government organization, supports FHA insured mortgages as well as Veterans Administration (VA) and Farmers Home Administration (FmHA) insured mortgages. As such Ginnie Mae is the only home loan agency explicitly backed by the full faith and credit of the US government. In 1970, the government authorized Fannie Mae to purchase mortgages not insured by the FHA, VA or FmHA and created the Federal Home Loan Mortgage Corporation, known as Freddie Mac (FM), to compete with Fannie Mae and facilitate a more robust and efficient secondary mortgage market (mortgage backed security). In 1992 President George HW Bush signed the Housing and Community Development Act which amended the charter of Fannie Mae and FM to reflect the ‘affordable housing goals’ set by the Department of Housing and Urban Development (HUD) and approved by Congress. In 1999 Fannie Mae was pressured to expand mortgage loans to low and moderate income borrowers and the primary mortgage market (banks, etc.) pressured Fannie Mae to ease the credit requirements on the mortgages that Fannie Mae was willing to purchase (enabled the market to make loans at interest rates higher than conventional loans) which led to Fannie Mae taking on more risky loans. The initial goal of the government sponsored enterprises (GSEs) was 30% of the total number of dwellings financed by mortgage purchases and it increased to 55% by 2007. In 1999 the New York Times reported the risk in Fannie Mae’s direction; this was echoed again in 2003 by Alex Berenson and Mike Stathis. Congress, controlled by the Republicans during this period, did not introduce any legislation aimed at bringing change until the Federal Housing Enterprise Regulatory Reform Act of 2005 which did not proceed out of committee to the Senate. In 2006 John McCain pointed out that Fannie Mae’s regulator reported that profits were “illusions deliberately and systematically created by the company’s senior management” and the reform act was never passed; instead McCain supported SB190 which provided tax credits to companies for the job training given to employees.

Immediately after leaving Congress Gingrich, in 1999, was on FM’s payroll as a historian and strategic advisor, per his campaign - getting $30,000 a month up to September 2008 (the very month that FM began getting a $54 billion bailout (11/16 - ABC News – said FM got more bailout money than any of the big banks). On the November 16^th Mark Levin radio show Gingrich said “they paid a fee which is a relatively standard fee for Washington for that kind of advice”. FM personnel said Gingrich was hired for only one reason – his political influence.

In the years off FM’s payroll ABC News said on numerous occasions Gingrich slammed FM, blaming it for making too many risky loans that led to the housing bubble that almost ruined the economy. During the last campaign Gingrich hammered Obama for taking contributions from people who worked at FM, during a recent debate Gingrich said prominent Democrats should be jailed for their ties with FM and start with Barney Frank and Chris Dodd. According to candidate Bachmann, Gingrich took money to influence senior Republicans to be favorable to Fannie Mae and FM. I wonder what Gingrich thinks ought to happen to Republicans like himself that have influenced the treatment of FM.