Report: Bond tried to stop Fannie Mae investigation
Washington – A new federal report says mortgage giant Fannie Mae got help from Senator Kit Bond in its attempt to stop a probe of the company's accounting practices.
Fannie Mae persuaded Bond to request a separate investigation of regulators in 2004 who were at the time investigating Fannie Mae.
The revelations were in this week's report from the Office of Federal Housing Enterprise Oversight.
The report does not mention the Missouri Republican by name, but it found Fannie Mae lobbyists in 2004 succeeded in generating a Congressional request for a separate probe of the regulators investigating Fannie May. That request came from Bond, who sent a letter asking the Department of Housing and Urban Development's inspector general to investigate whether OFHEO improperly leaked confidential information about Fannie Mae.
Bond chairs the Senate Appropriations subcommittee that overseas HUD's budget. Regulators said they found a draft of Bond's letter seeking the probe of Fannie Mae's regulator on Fannie Mae's computer system nearly two weeks before the actual request was sent to HUD's inspector general.
Fannie Mae has agreed to pay $400 million to settle claims that it manipulated earnings for six years so top executives could get big bonuses.
A spokesman for Bond says the senator was only trying to make sure Fannie Mae's regulators were doing their job properly.
After urging Bond to request the investigation, Fannie Mae's head lobbyist said his company began a campaign to make the HUD inspector general's report public.
"Senior management hoped that the report of the HUD inspector general's fourth investigation would accomplish the objective of discrediting OFHEO's anticipated initial report of findings of its special examination of Fannie Mae," the report said.
Bond spokesman Rob Ostrander said Wednesday that the HUD inspector general's investigation was needed to make sure OFHEO was doing its job properly. "The HUD IG report uncovered serious issues concerning OFHEO's conduct and effectiveness," Ostrander said.
"As a result of the HUD IG report, we learned that OFHEO, at a critical time, was not doing its job and nothing was being done about it. OFHEO was simply ineffective."
But regulators at OFHEO said the government-sponsored mortgage company was solely intent on undercutting the investigation of its accounting practices.
Fannie Mae eventually succeeded in getting the HUD inspector general's report published on a congressional Web site for one hour. The company then sent copies to its board members, analysts and congressional staff. "I think the company at the highest levels thought that the HUD Inspector General's report would discredit or show the lack of objectivity in the OFHEO report in September or at least the preliminary report," Duane Duncan, Fannie Mae's top lobbyist, told investigators, the report said.
Regulators were even more critical in their assessment of the company's lobbying efforts. "Fannie Mae succeeded in creating a large volume of negative publicity about the OFHEO examination report in an effort to distract attention from its multibillion dollar accounting errors," the report concluded.
Asked whether Bond has any regrets about his role in seeking the probe, Ostrander said the HUD inspector general's investigation produced valuable results. "We learned that OFHEO wasn't up to the job," Ostrander said. "If OFHEO isn't doing its job, taxpayers ultimately get hurt."
Ostrander said OFHEO officials testified in the HUD IG report "that their failure to properly regulate Freddie Mac was an 'embarrassment' which revealed the agency was 'asleep at the switch.'"
A spokesman for Fannie Mae declined to comment. In a statement Tuesday acknowledging the settlement, Fannie Mae President Daniel Mudd said the company has "learned some powerful lessons here about getting things right and about hubris and humility."