Fannie Mae, Freddie Mac wielded big clout in Washington
The mortgage giants used everything from lobbying to charity to maintain their special status.
Subscribe Today to the Monitor
As government-sponsored enterprises, Fannie and Freddie owned or guaranteed some $5 trillion in residential mortgages – a cushion for creating two of the most extensive lobbying operations in Washington.
At its peak – last week, just before the Treasury Department announced a government takeover – the operations ranged from campaign contributions and outright lobbying to a grass-roots charitable giving operation that covered nearly every congressional district.
"They were the most powerful companies in the country, and literally controlled the Congress," Peter Wallison, a senior fellow at the American Enterprise Institute. "Congress would not do anything they did not want Congress to do – and that came through some very sophisticated political activities and public relations that made it very difficult to challenge them."
Since 1990, Freddie Mac has contributed more than $9.7 million to federal campaigns. Fannie Mae's political action committee chalked up more than $2.9 million since 2004, according to the Center for Responsive Politics. Together, they spent some $7.4 million in lobbying in the first six months of 2008 alone.
That's just the beginning. What's most remarkable about the influence operation is its sheer vastness.
Over the last decade, Fannie and Freddie together hired nearly every lobby shop in Washington – so many, in fact, that opponents complained that they had trouble finding someone to represent their interests.
In addition, Fannie and Freddie supported a vast network of charities, often specifically linked to members of Congress.
Some of the biggest movers and shakers in Washington graced their mastheads. James Johnson, chairman and CEO of Fannie Mae from 1991 to 1998, is a Democratic insider who chaired Walter Mondale's presidential campaign. His successor, Franklin Raines, was former director of the US Office of Management and Budget during the Clinton administration.
"When you have leaders who are so well connected and so much of the power structure of Washington, it's not surprising that people would think that these institutions were being well looked after by responsible people," says Ross Baker, a political scientist at Rutgers University in New Brunswick, N.J.