Fierce Lobbying Deflected Warnings on Fannie, Freddie

Mortgage giants deflected calls for stricter capital requirements
By Nick McMaster,  Newser Staff
Posted Jul 14, 2008 1:44 PM CDT
In this Thursday, July 10, 2008 picture, U.S. Treasury Secretary Henry Paulson testifies before the House Financial Services Committee hearing on systemic risk and the financial markets.   (AP Photo/Manuel Balce Ceneta)
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(Newser) – For years, critics have warned that Fannie Mae and Freddie Mac’s special status as government-sponsored enterprises allowed them to shoulder risk far beyond their minimal capitalization requirements, the Washington Post reports. The firms have used their unique position in the financial system, and high-intensity lobbying efforts, to quash any attempt at stricter regulation.

Warnings from Alan Greenspan and others about the firms’ uniquely low capitalization went unheeded, in part because mortgages were seen as a safe bet, but also because of extensive lobbying. Freddie alone raised $3 million for members of the House Financial Services Committee in over 75 fundraisers one year. “We always won,” wrote Fannie’s CEO in a 2004 internal memo. “By virtue of our peculiarity…we have written rules that worked for us."