URBANDALE, Iowa (AP) -- Rising in polls and receiving greater
scrutiny, Republican presidential candidate Newt Gingrich found
himself on the defensive Wednesday over huge payments he received over the past decade from the mortgage giant Freddie Mac.
Gingrich, who now is near the top in polling on the GOP race,
said he didn't remember exactly how much he was paid, but a person
familiar with the hiring said it was at least $1.6 million for
consulting contracts stretching from 1999 to early 2008. The person
spoke on condition of anonymity in order address a personnel
Long unpopular among Republicans, federally backed Freddie Mac
and its larger sister institution, Fannie Mae, have become targets
for criticism stemming from the housing crisis that helped drive
the nation deep into recession and then hampered recovery. Gingrich
himself criticized Barack Obama in 2008 for accepting contributions
from executives of the two companies.
Speaking with reporters in Iowa on Wednesday, Gingrich said he
provided "strategic advice for a long period of time" after he
resigned as House speaker following his party's losses in the 1998
elections. He defended Freddie Mac's role in housing finance and
said, "every American should be interested in expanding housing
On Tuesday, a House committee voted to strip top executives of
Freddie Mac and Fannie Mae of huge salaries and bonuses and to put them on the same pay scale as federal employees. After disastrous losses, both companies were taken over by the government in 2008, and since then a federal regulator has controlled their financial decisions.
During the 2008 campaign, Gingrich suggested in a Fox News
interview that presidential candidate Obama should return
contributions he had received from executives of the two companies.
He said that in a debate with Obama, GOP presidential nominee John
McCain "should have turned and said, `Senator Obama, are you
prepared to give back all the money that Freddie Mac and Fannie Mae
Gingrich sought Wednesday to portray his history with Freddie
Mac as a sign of valuable experience.
"It reminds people that I know a great deal about Washington,"
he said. "We just tried four years of amateur ignorance, and it
didn't work very well. So having someone who actually knows
Washington might be a really good thing."
At least one of his rivals assailed him over the matter.
"It doesn't matter if it's $300,000 or $2 million, the point is
the money that was taken by Newt Gingrich was taken to influence
Republicans in Congress to be in support of Fannie and Freddie,"
Minnesota Rep. Michele Bachmann said in a telephone interview.
"While Newt was taking money from Fanny and Freddie I was fighting
Fannie Mae and Freddie Mac buy home loans from banks and other
lenders, package them into bonds with a guarantee against default
and then sell them to investors around the world. The two own or
guarantee about half of all U.S. mortgages and nearly all new
Gingrich's history at Freddie Mac began in 1999, when he was
hired by the company's top lobbyist, Mitchell Delk. He was brought
in for strategic consulting, primarily on legislative and
regulatory issues, the company said at the time. That job, which
paid about $30,000 a month, lasted until sometime in 2002.
In 2006, Gingrich was hired again on a two-year contract that
paid him $300,000 annually, again to provide strategic advice while
the company fended off attacks from the right wing of the
Freddie Mac and Fannie Mae for years had been under scrutiny
from Republicans on Capitol Hill who opposed government involvement in the mortgage business and wanted to scale back the companies' size and impose tough regulation.
In last Wednesday's Republican presidential debate, Gingrich
sought to explain his role at Freddie Mac as that of a
"historian" sounding dire warnings about the company's future. He
said company officials told him "we are now making loans to people
that have no credit history and have no record of paying back
anything, but that's what the government wants us to do." He said
his advice was to tell them, "this is insane."
Former executives dispute Gingrich's description of his role.
Four people close to Freddie Mac say he was hired to strategize
with his employer about identifying political friends on Capitol
Hill who would help the company through a very difficult
legislative environment. All four spoke only on condition of
anonymity to discuss the personnel matter freely.
Freddie Mac executives hoped Gingrich's presence would reflect
positively on the company as he circulated among conservative
groups and would help build intellectual support within his party,
the officials said.
Before he resigned from Congress, Gingrich was working off debt
he had taken on while he was in public life. He had been paying
$1,000 per month to an ex-wife in alimony and more for child
support and college for two daughters, according to divorce records
and financial disclosure forms. The former House speaker also had
been fined $300,000 for giving misleading information to
investigators during a congressional ethics probe, which he paid
off in 1999.
Gingrich's contract with Freddie Mac in 1999 came at the start
of his most profitable years. He earned up to $50,000 for speaking
engagements, signed radio and TV deals and started his own
consulting firm, The Gingrich Group, all of which brought in
income. Gingrich had a net worth of at least $6.7 million last
year, according to disclosure documents.
His hiring by Freddie Mac was a small -- but because of his name,
important -- piece of a much larger initiative by the company.
Government-sponsored Freddie Mac and Fannie Mae have long been embraced by Democratic politicians in Washington as champions of affordable housing, but they have had few supporters on the political right.
Freddie Mac executive Hollis McLoughlin sought to remedy that by
hiring conservative consultants, including Gingrich.
Before Gingrich was hired, Freddie Mac paid $2 million to a
Republican consulting firm in hopes of killing legislation that
would have regulated and trimmed both companies. The legislation
died without coming to a vote in the Senate. But the danger of
regulation wasn't dead, so Freddie Mac hired more consultants,
Gingrich among them.
Internal Freddie Mac budget records show $11.7 million was paid
to 52 outside lobbyists and consultants in 2006, all of them former
Republican lawmakers and ex-GOP staffers. Besides Gingrich, the
hires included former Sen. Alfonse D'Amato of New York, former Rep.
Vin Weber of Minnesota and Susan Hirschmann, the former chief of
staff to ex-House Majority Leader Tom DeLay of Texas.
Fannie Mae and Freddie Mac had traditionally purchased a small
number of subprime mortgage loans, which involved borrowers with
credit problems who could not qualify for cheaper prime loans. But
starting in the late 1990s many firms started purchasing subprime
loans, and Fannie and Freddie followed suit.
Pete Yost reported from Washington. AP economics writer Derek
Kravitz in Washington and Brian Bakst in St. Paul, Minn.,
contributed to this report.
(Copyright 2011 by The Associated Press. All Rights Reserved.)