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Freddie Mac Gets Nailed

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from: Timothy Noah

Updated Monday, April 24, 2006, at 3:05 PM ET

On April 18 the Federal Home Loan Mortage Corporation, popularly known as Freddie Mac, paid the biggest fine ($3.8 million) ever levied by the Federal Election Commission on April 18. Two days later, Freddie Mac shelled out an additional $410 million to settle a lawsuit in which shareholders accused the company of funky accounting.

Be glad you aren't Freddie Mac.

In a way, though, you are Freddie Mac, assuming you pay taxes in the United States. Freddie Mac is a "government-sponsored enterprise" that turns home mortgages into securities. (Wait, isn't that Fannie Mae, the Federal National Mortgage Association? No, that's a separate government-sponsored enterprise. Congress invented Freddie Mac so that Fannie Mae wouldn't be a monopoly. There's also Ginnie Mae. In the unlikely event that you want to know how Ginnie differs from Sallie and Freddie, click here.) Freddie Mac is subsidized by United States taxpayers through various tax and regulatory breaks. The Congressional Budget Office estimates the combined annual value of these breaks to be in the billions.

Because Freddie Mac is, for all practical purposes, taxpayer-funded, the government has certain rules governing its behavior. Among these is that Freddie Mac is not permitted to engage in any election-related activity. In addition, Freddie Mac is governed by the same law that forbids all corporations from making direct contributions to candidates for federal office. The FEC nailed Freddie Mac because it crashed through both prohibitions with apparent impunity. This is all laid out in the "conciliation agreement" signed by the FEC and Freddie Mac (though Freddie Mac continues to claim innocence on a few matters). Until you read the excerpts below and on the next three pages, you do not know the meaning of the word chutzpah. To read my annotations, roll your mouse over the portions highlighted in yellow. If insist on reading the entire conciliation agreement, unmediated by explanation or commentary, click here.

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Robert Mitchell Delk, Freddie Mac's chief lobbyist. Delk is, as they say, no longer with the firm.
Magnificent euphemism for "shoveling cash to our congressional overseers."
See previous footnote.
No, that isn't a typo. Freddie Mac threw fundraisers for Rep. Michael G. Oxley, R.-OH, on an almost-weekly basis. Oxley is chairman of the House committee that oversees Freddie Mac.





If you have a document you'd like to suggest for this column, please e-mail me at . Please indicate whether you'd like to be mentioned by name.

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from: Timothy Noah

Updated Monday, April 24, 2006, at 3:05 PM ET
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Timothy Noah is a senior writer at Slate.
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