(Updates with comment from Gingrich spokesman and Gingrich debate remarks critical of Freddie Mac associates, starting in fourth paragraph. For more campaign news, go to ELECT.)
Nov. 15 (Bloomberg) -- Republican presidential candidate Newt Gingrich said during a Nov. 9 debate that he earned a $300,000 fee to advise Freddie Mac as a “historian” who warned that the mortgage company’s business model was “insane.”
Former Freddie Mac officials familiar with the consulting work Gingrich was hired to perform for the company in 2006 tell a different story. They say the former House speaker was asked to build bridges to Capitol Hill Republicans and develop an argument on behalf of the company’s public-private structure that would resonate with conservatives seeking to dismantle it.
If Gingrich concluded that the company’s business model was at risk and that the housing market was a “bubble,” as he said during the debate, he didn’t share those concerns with Richard Syron, Freddie Mac’s chief executive officer at the time, a person familiar with the company’s internal discussions said.
R.C. Hammond, a Gingrich campaign spokesman, said the former officials were providing “incomplete information” about the work his boss performed for the company. Hammond said he couldn’t provide a copy of Gingrich’s contract or describe details about the hours Gingrich worked or services he performed because of a confidentiality clause.
“I can’t give you any of the details,” Hammond said in a telephone interview. “It’s written into his contract with them.”
Gingrich’s role as a consultant for Freddie Mac was raised in the debate as Republicans, including House Financial Services Committee Vice Chairman Jeb Hensarling, a Texas Republican, are criticizing the $181 billion in taxpayer funds the company and its sister firm, Fannie Mae, have received since they were seized by the U.S. government in September 2008.
Gingrich has been sharply critical of housing industry loan practices and Democrats who he said “created the environment” for the meltdown. In an Oct. 11 Republican presidential debate, Gingrich said, “You ought to start with Barney Frank,” the Massachusetts congressman who serves as the ranking Democrat on the House Financial Services Committee, when talking about people to put in jail.
‘Look at the Lobbyists’
“Go back and look at the lobbyists he was close to at Freddie Mac,” Gingrich said in the debate, sponsored by Bloomberg News and the Washington Post.
Freddie Mac and Fannie Mae provide liquidity to the housing market by purchasing mortgages and packaging them into securities, with guaranteed returns.
In 2006, before subprime mortgage losses pushed the two firms toward insolvency, the companies were facing calls for stricter regulation and smaller portfolios as the Treasury Department warned about potential financial market instability if they failed to hedge their assets against interest rate shifts and other risks. The companies, which were private but had implicit government backing, also were reeling from a series of accounting scandals.
Although Freddie Mac had developed strong supporters in the Democratic caucus, the firm started a new campaign to win over allies in Republican circles. Hollis McLoughlin, a former Treasury Department chief of staff in President George H.W. Bush’s administration, was brought in to head the effort.
Republican New Hires
McLoughlin hired Gingrich and several other Republicans, including former Representative Vin Weber and political message expert Frank Luntz, to assist the cause.
A statement posted on the campaign website after the debate said Gingrich was hired to provide “strategic advice.” The former lawmaker told the company it could win over conservatives by stressing “the historical success of public-private partnerships in achieving public goods at a minimum of taxpayer money and bureaucracy.”
Gingrich already had ties to Freddie Mac and Fannie Mae.
In 1995, the then-House speaker and U.S. representative from Georgia, traveled to Atlanta to help open a Fannie Mae office promoting home ownership for low- and moderate-income families.
In a press release issued at the time, Gingrich said, “Fannie Mae is an excellent example of a former government institution fulfilling its mandate while functioning in the market economy.”
In 1999, the company hired Gingrich to provide advice on issues including lender dissatisfaction, according to news reports at the time.
Amid the growing number of Republican experts on Freddie Mac’s payroll in 2006, Gingrich was expected to identify potentially supportive party members on Capitol Hill. He wasn’t on retainer to lobby lawmakers.
Freddie Mac officials expected Gingrich to provide written material that could be circulated among conservatives on Capitol Hill and in outside organizations, said two former company executives familiar with Gingrich’s role at the firm.
And executives looked to him to help them find innovative ways to address the problems confronting Freddie Mac, said an official familiar with the company’s internal dynamics.
The former speaker attended brainstorming sessions with Freddie Mac’s management. He didn’t produce a white paper or any other document the firm could use on its behalf.
On April 3, 2007, Gingrich traveled to Freddie Mac’s McLean, Virginia, headquarters to speak before 40 or 50 people who had donated to the company’s political action committee, a fund used to make donations to federal candidates.
No Bubble Talk
Gingrich spoke about the state of the presidential campaign, the major issues, and who might win the party nominations, said a person who attended the event. Afterward, he attended a private lunch with about a dozen top executives of the firm.
None of the former Freddie Mac officials who spoke on condition of anonymity said Gingrich raised the issue of the housing bubble or was critical of Freddie Mac’s business model.
During the Nov. 9 debate sponsored by CNBC, Gingrich was asked what he did to earn the $300,000 consultant’s fee with Freddie Mac.
“I offered them advice on precisely what they didn’t do,” he said. “My advice as a historian, when they walked in and said to me, ‘We are now making loans to people who have no credit history and have no record of paying back anything, but that’s what the government wants us to do.’ As I said to them at the time, this is a bubble. This is insane. This is impossible.”
--With assistance from Lisa Lerer and Lorraine Woellert in Washington. Editors: Jeanne Cummings, Mark McQuillan.
To contact the reporters on this story: Clea Benson in Washington at firstname.lastname@example.org; Kristin Jensen in Washington at email@example.com
To contact the editor responsible for this story: Mark Silva at firstname.lastname@example.org