Fannie Mae and Freddie Mac continue to be expensive to U.S. taxpayers because of their profligate ways, steep losses, and costly takeovers in 2008 by the federal government. Now it turns out that Freddie Mac paid Republican presidential candidate Newt Gingrich as much as $1.8 million as a consultant.
Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.) are publicly traded companies that operate under federal charters. They played a prominent role in the bailout of banks and other lenders in the housing catastrophe that started three years ago. Fannie and Freddie got $170 billion of taxpayer money in the bailouts.
The two companies still have a critical role in the fragile housing market. They own or guarantee half of all U.S. mortgages and nearly all new mortgage loans. Fannie is asking for another $8 billion and Freddie another $6 billion in public aid to cover their losses.
But even as both companies have been under attack in the past three years, Fannie and Freddie have continued to pay their senior executives jumbo, Wall Street-type compensation. Freddie's CEO, Charles Haldeman, Jr., made $5.24 million in 2010, while Fannie's CEO, Michael Williams, was paid $4.84 million.
Freddie also paid Mr. Gingrich, a former U.S. House speaker, as much as $1.8 million for consulting work between 1999 and 2008. It's hard to imagine what counsel Mr. Gingrich could have offered that would have been worth that stunning sum. Unnamed sources told The Associated Press he was hired to strategize with Freddie Mac about identifying political friends on Capitol Hill.
Mr. Gingrich's exorbitant fee calls Freddie's leadership further into question. No analysts appear ready to predict that either company's finances will see daylight before 2015. Congress should at least link their request for another $14 billion to reforms that would bring sanity to their excessive executive compensation and consultant practices.