A $90 Million Package Gets Lambasted Again

Posted December 9, 2008 at 6:05pm

With his days in Congress numbered, outgoing Rep. Christopher Shays (R-Conn.) is saying his goodbyes. The last remaining GOP House Member from New England, Shays lost last month to former investment banker Jim Himes (D) and ended his 11-term career.

Now a short-timer, the lawmaker this week tried to settle a lingering score with lobbyists and former Federal National Mortgage Association Chief Executive Officer Franklin Raines, an old nemesis who sat before a Tuesday panel exploring the role of the failed federal mortgage guarantors in the nation’s ongoing economic meltdown.

“You’re getting $90 million. It’s almost surreal to be able to hear you,” Shays sarcastically said of Raines fabled compensation package before the Oversight and Government Reform Committee. “You’re not being held accountable.”

In an interview after questioning Raines, Shays said that he nearly skipped Tuesday’s hearing — perhaps his last of his 20-plus year career — because of the long-standing feud with the former Fannie Mae executive. The outgoing lawmaker recalled how Raines, backed up by the mortgage giants’ army of lobbyists, bullied him and other lawmakers who called for more oversight half a decade ago.

“He knows I can’t follow up,” Shays said.

Raines appeared before the panel, along with fellow ex-Fannie Mae CEO Daniel Mudd and former Freddie Mac CEOs Leland Brendsel and Richard Syron.

In 2002, Shays, Reps. Paul Ryan (R-Wis.) and Ed Markey (D-Mass.) co-sponsored a bill that would require the government-sponsored enterprises to comply with “registration and reporting requirements of the federal securities laws” like any publicly traded stock.The day after he introduced the bill, Shays’ phone rang.

“I got a call from Frank Raines asking, ‘What the hell have I done?’” Shays recalled. “Like I owed him an explanation.”

Shays also recalled that lobbyists for the two firms began swarming his office. An unnamed former staffer to resigned Rep. Richard Baker (R-La.) was personally assigned to the Nutmeg State lawmaker, who expressed frustration with his perception that Fannie and Freddie lobbyists were driving the agenda.

“I had lobbyists literally barging into my room,” Shays said.

And like Raines, the hired guns, too, were “incensed” with Shays for introducing the 2002 bill. One lobbyist, Shays said, dialed up the lawmaker “almost teary-eyed” to ask “how come you didn’t consult with me on this?”

“I didn’t know a Member of Congress had to consult with a lobbyist,” Shays said. “It was their job to make sure no bill was offered.”

As payback for introducing the bill, Shays said, home-buying forums in his district dried up, which stood to hurt him politically.

“I didn’t know it was quid pro quo?” Shays said. “Their tentacles were very long.”

“They were putting so much pressure on me,” he added. “It was David versus Goliath.”

Fannie Mae and Freddie Mac ultimately caved on provisions of Shays’ Uniform Securities Disclosure Act, but on their own watch, he said.

“They finally said they’d voluntarily do it,” Shays said, “which was the height of arrogance to me: ‘We’ll do it under our terms.’”

And had the GSEs agreed to the reporting requirements sooner, Shays said, Freddie and Fannie’s contribution to the mortgage mess might have been avoided. At the very least, Raines likely would not have been compensated so well.

“They were overstating income, they were cheating their stockholders,” he said. “Because they overstated income, that’s how Raines was able to get his fortune.”

During Tuesday’s hearing, Raines successfully dodged questions by some lawmakers regarding his organization’s lobbying efforts. Responding to suggestions by Rep. John Mica (R-Fla.) of excessive lobbying by his organization, Raines said that “like any other corporation owned by shareholders, we’ve come to Congress and expressed our views.”

But Raines was not alone in drawing Shays’ ire in Tuesday’s interview.

Shays also blamed Democrats and Members of his own party for not cracking down on the GSEs and giving in to their decade-long lobbying pitch to leave them alone — a campaign that Fannie Mae and Freddie Mac reportedly paid roughly $175 million to conduct.

“Republicans deserve blame on some of the interest in regulating financial markets, but there was a strong effort on the Democratic side against having Fannie and Freddie comply” with reporting requirements, he said. “This is about as corrupt as it gets and it’s a true manipulation of Congress,” Shays said.