Ex-Freddie Mac official said Newt Gingrich paid $1.5 million for consulting
The former Speaker of the US House and current GOP presidential candidate defended himself Wednesday after news that he received money from the now-troubled government mortgage giant.
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In last Wednesday's Republican presidential debate, Gingrich sought to explain his role at Freddie Mac as that of an "historian" sounding dire warnings about the company's future. He said Freddie Mac officials told him "we are now making loans to people that have no credit history and have no record of paying back anything, but that's what the government wants us to do." He said his advice was to tell them, "this is insane."Skip to next paragraph
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"I said at the time, this is a bubble ... this is impossible. It turned out unfortunately I was right," Gingrich said.
Former Freddie Mac executives dispute Gingrich's description of his role.
Four people close to Freddie Mac say he was hired to strategize with his employer about identifying political friends on Capitol Hill who would help the company through a very difficult legislative environment. All four people spoke on condition of anonymity to be able to discuss the personnel matter freely.
Freddie Mac executives hoped that would speak positively about the company and its business model as he circulated among conservative groups and help to build intellectual support within his party.
Freddie Mac executives were looking to Gingrich to offer up new, inventive ways to think about old problems, the officials said, but that didn't materialize.
Gingrich's hiring was a small — but because of his name, important — piece of a much larger initiative by the company. Freddie Mac and its larger competitor, Fannie Mae, are government-sponsored enterprises, created by Congress to buy up mortgages so that the housing industry has a ready flow of funds.
The two companies had long been the darlings of Democratic politicians in Washington, hailed as the champions of affordable housing, but they had few supporters on the political right.
Freddie Mac executive Hollis McLoughlin sought to remedy that by hiring a stable of conservative consultants, including Gingrich.
Before Gingrich was hired, Freddie Mac paid $2 million to a Republican consulting firm to kill legislation that would have regulated and trimmed both companies.
The $2 million was money well spent. The legislation died without ever coming to a vote on the Senate floor. But the danger of regulation wasn't dead, so Freddie Mac hired more consultants, Gingrich among them.
Internal Freddie Mac budget records show $11.7 million was paid to 52 outside lobbyists and consultants in 2006, all of them former Republican lawmakers and ex-GOP staffers. Besides Gingrich, the hires included former Sen. Alfonse D'Amato of New York, former Rep. Vin Weber of Minnesota and Susan Hirschmann, the former chief of staff to ex-House Majority Leader Tom DeLay, R-Texas.
By September 2008, amid the collapse of the housing industry, Freddie Mac and Fannie Mae were in disastrous financial condition, were both taken over by the government and remain in conservatorship.
IN PICTURES: Newt, now and then