Former House Speaker Newt Gingrich (R-GA) claims he advised the government-sponsored Federal Home Loan Mortgage Corporation, otherwise known as Freddie Mac, against home loan practices that led to the housing market’s collapse in 2008 — but sources within the company tell reporters at Bloomberg News a different story.
In a report published Wednesday, Gingrich is said to have advised the bank’s executives on routes they could take to expand their home loans business, and he collected a hefty set of fees along the way.
Mitchell Delk, the bank’s top lobbyist, claimed that Gingrich was happy to discuss “the substance of the issues” the bank may face if it dramatically expanded lending. He reportedly said they discussed “what the benefits are to communities, what the benefits could be for Republicans and particularly their relationship with Hispanics.”
Gingrich was brought on by the bank as an adviser and “historian” in 1999, shortly after he left Congress. He was ultimately paid $1.6 million for his services, reporters Clea Benson and Dawn Kopecki noted.
The bank, which became insolvent amid the worst financial crisis since the crash that initiated the Great Depression, ultimately required billions in recapitalization by U.S. taxpayers, as it had over-leveraged its reserves and steeped its books with much more debt than capital. Even after years in government receivership, Freddie Mac is still losing money, and it recently asked the Treasury for another $6 billion bailout.
The Federal Housing Finance Agency estimated earlier this year that Freddie Mac and sister bank Fannie Mae could cost taxpayers up to $210 billion by 2013.
When Gingrich faced a question during a recent Republican debate about his 2006 contract with Freddie Mac, he claimed to have warned executives that their lending practices were “insane” and that they should stop before becoming insolvent.
Bank officials immediately disputed that, claiming that he was essentially an ambassador to House Republicans, to convince them that they shouldn’t seize and break up the bank.
Gingrich also previously claimed that Rep. Barney Frank (D-MA) and former Sen. Chris Dodd (D-CT) should be jailed for participating in the financial reform laws that today require banks to hold more capital and less debt.
“Well in Chris Dodd’s case, go back and look at the Countryside deals,” the former House speaker insisted. “In Barney Frank’s case, go back and look at the lobbyists he was close to at Freddie Mac. All I’m saying is that everybody in the media who wants to go after the business community ought to start to go after the politicians who have been at the heart of the sickness which is weakening this country.”
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