Fannie Mae has been called on the carpet by a key federal legislator for taking verbal swipes at Clinton Administration officials who spoke out against the big secondary mortgage market institution. And the lawmaker isn't even a Democrat.

Most recently, Fannie Mae, which has been the object of much attention of late, not all of it good, lashed out at the testimony of a high ranking Treasury Department official, calling his words "inept," "irresponsible" and "unprofessional."

A week earlier, company Chairman Frank Raines was the culprit. First, he labeled the Department of Housing and Urban Development's critical assessment of Fannie Mae's minority and low-income lending practices as "wrong," Then he reacted with outrage at the Washington Post, which he accused of "journalistic malpractice."

A government-chartered, publicly-owned corporation which is charged with bringing liquidity to the mortgage market, Fannie Mae has since stepped back from those accusations, calling them "regrettable" and "inappropriate."

But that wasn't enough to mollify Rep. Richard Baker, R-La., a member of the House Banking Committee who has introduced legislation to strengthen oversight of Fannie Mae and its sister GSE, Freddie Mac. In a strongly worded statement, Baker chided Fannie Mae's "curious but nonetheless unfortunate public relations strategy," and warned the company to "refrain from promoting the kind of rhetoric" recently employed against administration spokesmen.

Because of their public purpose, Fannie Mae and Freddie Mac keep money flowing to local lenders across the land and help keep a lid on loan rates. But because they are stockholder-held financial institutions, they also work hard to keep dividends strong and profits heading north. Hence, the reason Fannie Mae found it necessary to respond with such vigor.

Indeed, the Treasury Department's testimony triggered a sell off of the company's bonds, causing Fannie Mae to scream that the statement caused an increase in mortgage rates that hurt some 206,000 families. That claim was later disavowed, too. But Baker says it "does not diminish a dangerous conclusion implied by the remark: What's good for Fannie Mae profits is good for the American people, and vice versa."

Adds the congressman: "Perhaps the episode should spur us to consider just how comfortable we'd feel if the entire housing industry truly did balance on the fate of Fannie's profits."

Noting that mortgage rates actually fell after this latest war of words, Rep. Baker says an attack on the administrative branch amounts to an implicit attack on him, his bill, and those who have signed on as co-sponsors. And "all for the sake, I believe, of intimidating others from considering the bill."

He goes on: "It should go without saying that I, along with each of my Republican and Democratic colleagues on the House Banking Committee, will oppose any measure that results in the passing of unnecessary costs on the average American home buyer. However, I am unwilling to accept the premise that equates the questioning of Fannie Mae's lending practices, its relationship to the government, or its safety and soundness with an effort to do just that.

"The main goal of my bill is to strengthen oversight of the housing government-sponsored enterprises whose explosive level of growth many fairminded people believe has outstripped the current regulatory structures capacity for effective oversight. By contending now that the mere mention of GSE reform means turbulence for national mortgage rates, and to a lesser extent by presuming it can intimidate the very government that sponsors its activities, Fannie Mae is itself providing the strongest justification for concern over its size.

"For although the facts clearly indicate otherwise, a situation in which the stability of mortgage rates so closely relied upon the financial strength of Fannie Mae would only emphasize the need for Congress to move forward with deliberate, objective, but also timely consideration of H.R. 3703."

Published: April 11, 2000

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