Newt Gingrich and Freddie Mac: Is he being misleading?
By Glenn Kessler,
CNBC’s John Harwood: “Since you mentioned Fannie and Freddie, Speaker Gingrich, 30 seconds to you. Your firm was paid $300,000 by Freddie Mac in 2006. What did you do for that money? . . . Were you not trying to help Freddie Mac fend off the effort by the Bush administration to curb Freddie Mac?”
Newt Gingrich: “I have never done any lobbying, every contract that was written during the period when I was out of the office specifically said I would do no lobbying, and I offered advice. And 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, is I said — I said to them at the time: This is a bubble. This insane. This is impossible.”
— Exchange during CNBC debate, Nov. 9, 2011
“I was approached to give strategic advice.”
— Gingrich, after it was revealed that he received as much as $1.8 million from Freddie Mac, Nov. 16, 2011
Former House speaker Newt Gingrich has risen in the polls, bringing new scrutiny to his campaign. Bloomberg News, in particular, has done an excellent job of trying to figure out exactly what Gingrich did to earn his hefty consulting fee from controversial mortgage giant Freddie Mac. As more information has emerged, Gingrich’s explanations appear to have changed.
Gingrich’s initial claim during the CNBC debate that he gave “advice as a historian” now turns out to be too cute by half. After all, Gingrich’s PhD dissertation in history was “Belgian Education Policy in the Congo: 1945–1960.” We’re not sure what value such historical insights would have that would be worth so much money to the executives of Freddie Mac.
After the debate, the Gingrich campaign put out a statement titled: “The Truth About Newt’s Relationship with Freddie Mac.” Here is the full statement:
Speaker Gingrich’s consulting firm, The Gingrich Group, was retained in 2006 by Freddie Mac. To be clear, Speaker Gingrich did no lobbying of any kind, nor did his firm. This was expressly written into the Gingrich Group contracts. Instead, the Gingrich Group was hired to offer strategic advice to Freddie Mac on a number of issues.
Speaker Gingrich has always believed that America should have programs to help low income people acquire the ability to buy homes. However, as a conservative, he also believed they have to be within a context of learning how to budget and save which makes it possible for the poor to afford what they were purchasing.
Therefore, on numerous occasions in meetings with Freddie Mac, Speaker Gingrich advised that a business model that involved lending money to people with bad credit and no money down was unsustainable and a bubble, and that it was dangerous to buy securities made up of these mortgages.
The Gingrich Group also offered advice on how Freddie Mac could lower their health costs. One piece of advice offered was that Freddie Mac had the resources to adopt a Travelocity model website for prescription drugs that would inform their employees of lower cost drug alternatives.
In addition, Freddie Mac was interested in advice on how to reach out to more conservatives. The Gingrich Group stressed that Freddie Mac must be open to reform of their lending practices but that by stressing the historical success of public-private partnerships in achieving public goods at a minimum of taxpayer money and bureaucracy.
We think this statement actually buried the news in the last paragraph: “Freddie Mac was interested in advice on how to reach out to more conservatives.” While Gingrich takes great pains to stress he was never registered as a lobbyist, he clearly appears to have provided advice on how to influence the thinking of conservative members of Congress. Note also that the “historian” claim had been dropped.
Indeed, Bloomberg News reported on Wednesday that Gingrich’s “primary contact inside the organization was Mitchell Delk, Freddie Mac’s chief lobbyist, and he was paid a self- renewing, monthly retainer of $25,000 to $30,000 between May 1999 until 2002, according to three people familiar with aspects of the business agreement.” Delk told Bloomberg that he took one of Gingrich’s ideas and even pitched it to the George W. Bush White House.
“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,” Bloomberg also reported. (A Gingrich spokesman has disputed this.)
In any case, the Gingrich campaign’s statement, by focusing on the 2006 contract, conveniently left out the fact that Gingrich had been on a Freddie Mac retainer since 1999.
It also is worth noting that during the 2008 campaign, Gingrich said that then-candidate Barack Obama should return campaign contributions from the executives of Freddie Mac and Fannie Mae. Apparently, enriching your personal bank account is a different matter.
By Wednesday, Gingrich’s explanation had evolved again. “I offered strategic advice over a long period of time,” Gingrich told reporters in Iowa, in effect admitting that the relationship predated 2006. (See video clip below.) “I was speaker of the House and a strategic adviser. I was approached to give strategic advice.”
One reporter asked, “ Do you think you were sort of being bought to just be there and be a friendly voice?” Gingrich shot back: “No, I don’t think that any more than your institution is being bought by the people who advertise in it.”
We’re not sure what that analogy means. Clearly, advertisements are placed in newspapers because of the wide reach that they have among potential shoppers. Is Gingrich suggesting he was hired because of his contacts and influence among his former peers? After all, he certainly didn’t need to be a registered lobbyist to help Freddie Mac fend off demands for reform. He just had to bump into the right people around town, talking up the success of Freddie Mac’s business model.
The Pinocchio Test
Clearly, this story has legs, and Gingrich will need to reveal more about his activities for Freddie Mac to end the controversy. His answer during the debate was clearly misleading and is now open to dispute. We will monitor closely to see whether his claim of being only a long-time “strategic adviser” holds up to scrutiny.
Check out our candidate Pinocchio Tracker
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