In his 2011 book, "To Save America", GOP presidential candidate Newt Gingrich wrote the following (from Bloomberg):
[The two companies, Freddie Mac and Fannie Mae] “are so thoroughly politicized and preside over such irresponsible lending policies that they need to be replaced with smaller, private companies operating without government guarantees, whose leaders focus on making a profit, not manipulating politicians".
I certainly agree with that. As I've detailed on this blog, government manipulation of the mortgage market is what led to our current financial crisis. The government created the housing casino market over a period of many years.
But Newt has some 'splainin' to do to Republican primary voters, and most especially to Tea Partiers who want to dismantle the ties between government power and private enterprise that transform free markets into government-manipulated markets, resulting in markets driven by politics rather than sound business decisions. Newt has to explain why his consulting firm, The Gingrich Group, was paid between $1.6-$1.8 million over a period of eight years for consulting services Gingrich rendered to none other than Government Sponsored Enterprise (GSE) Freddie Mac. Freddie and big sister GSE Fannie Mae got into big trouble in the housing market, and the taxpayers have bailed them out to the tune of $150 billion and counting. Fannie and Freddie are both asking for more bailout money, even as Congress is slamming F&F for paying millions of dollars in bonuses to F&F executives, as F&F lives on the taxpayer dole. F&F are poster children for crony capitalism.
Gingrich had this to say about some of his consulting fees from Freddie:
When asked at the debate what he did to earn a $300,000 payment in 2006, the former speaker said he “offered them advice on precisely what they didn’t do,” and warned the company that its lending practices were “insane.”
If that's true, good for Newt...but unnamed Freddie Mac officials are disputing that account:
None of the former Freddie Mac officials who spoke on condition of anonymity said Gingrich raised the issue of the housing bubble or was critical of Freddie Mac’s business model.
We should withhold judgement until we find out who these anonymous Freddie Mac officials are. After all, Gingrich is running for President, and the anonymous officials could be Democrats looking to derail Gingrich's presidential train. We've already seen what happens to GOP presidential contenders when they make a significant showing in the polls. When Perry was riding high, there was the ridiculous charge about the racist word on a rock at his family's hunting lodge in the 1980's. When Cain reached the top, all of a sudden 14-year old charges of sexual harrassment arose. And how many more times does the media have to discuss the fact that Romney is a Mormon ? That has become particularly nauseating.
There is one former Freddie official who has spoken about Gingrich's work with Freddie on the record:
Gingrich’s first contract with the mortgage company was in 1999, five months after he resigned from Congress and as House speaker, according to a Freddie Mac press release.
His primary contact inside the organization was Mitchell Delk, Freddie Mac’s chief lobbyist, and he was paid a self- renewing, monthly retainer of $25,000 to $30,000 between May 1999 until 2002, according to three people familiar with aspects of the business agreement.
During that period, Gingrich consulted with Freddie Mac executives on a program to expand home ownership, an idea Delk said he pitched to President George W. Bush’s White House.
“I spent about three hours with him talking about the substance of the issues and the politics of the issues, and he really got it,” said Delk, adding that the two discussed “what the benefits are to communities, what the benefits could be for Republicans and particularly their relationship with Hispanics.”
That sounds like a pretty far cry from Gingrich calling Freddie policies "insane", and it's no secret that Bush was on board with the goal of increasing home ownership as part of his Ownership Society initiative.
The Bloomberg account makes it clear that Gingrich was never a lobbyist for Freddie Mac, but in the early years of his association with the GSE, it sounds like Gingrich wasn't raising any red flags. It sounds like he was working in concert with Freddie Mac's goals.
As for the later years of Gingrich's Freddie association:
Former Freddie Mac officials familiar with his work in 2006 say Gingrich was asked to build bridges to Capitol Hill Republicans and develop an argument on behalf of the company’s public-private structure that would resonate with conservatives seeking to dismantle it.
He was expected to provide written material that could be circulated among free-market conservatives in Congress and in outside organizations, said two former company executives familiar with Gingrich’s role at the firm. He didn’t produce a white paper or any other document the firm could use on its behalf, they said.
Gingrich's mission was to "build bridges" with disapproving conservatives of the wisdom of Freddie's policies ??? Hmmm. It seems to me that Gingrich SHOULD HAVE BEEN one of those disapproving conservatives.
In summary - AFTER the housing meltdown, Newt Gingrich became a big critic of Fannie and Freddie's loose lending practices. Lots of politicians with their fingers in the wind fall into that category, and we shouldn't trust them for obvious reasons. Newt's problem is, he might be one of them.
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