Federal Reserve Chairman Alan Greenspan and Treasury Secretary John W. Snow have long campaigned to impose tougher oversight on both companies. Greenspan and Snow have warned that serious troubles at either company could threaten the nation's entire financial system. And lawmakers who were defeated this year in overhauling the regulatory system plan to try again next year.
Fannie has faced -- and beaten back -- vigorous challenges before. The reason: its lobbying is arrayed broadly and cleverly, its alliances with community-based groups are potent and secure, and its personal connections reach into the highest levels of both political parties.
Fannie Mae chief executive Franklin D. Raines appeared before the Senate Banking Committee in February.
(Dennis Cook -- AP)
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Close to Power Fannie Mae has given generously to both Democrats and Republicans, and spends millions of dollars each year lobbying Congress.
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_____Background_____
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Regulator Says Fannie Resisted (The Washington Post, Sep 25, 2004)
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Regulator Has No Confidence in Fannie Leadership (The Washington Post, Sep 24, 2004)
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Finance Chief Wields Broad Influence (The Washington Post, Sep 24, 2004)
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Fannie Employee Raised Concerns (The Washington Post, Sep 24, 2004)
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Report Slams Fannie Mae (The Washington Post, Sep 23, 2004)
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Warnings Shadowed Firms' Rapid Growth (The Washington Post, Sep 23, 2004)
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Probe Examining Fannie's Promises (The Washington Post, Sep 23, 2004)
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Fannie's use of contract lobbyists and its campaign contributions are also extremely aggressive. Last year it retained nearly two dozen lobbying firms and laid out $8.7 million to reach almost every interested constituency in Congress.
The company has been careful to layer its corporate suite with both Republicans and Democrats. Its top lobbyist, Duane Duncan, is a former chief of staff to Rep. Richard H. Baker (R-La.), a longtime company critic who chairs the House's subcommittee overseeing Fannie and Freddie. The company's most senior communications executive, Charles V. Greener, and its executive in charge of regulatory policy, Michele Davis, are longtime Republican operatives.
The company also employs Democrats other than Raines. Thomas E. Donilon, Fannie's executive vice president, for example, served as chief of staff to the secretary of state during the Clinton administration.
Fannie's board (part of which has been appointed by the President of the United States) and its former executives represent a bipartisan Who's Who of Washington's elite. The current board includes Kenneth M. Duberstein, a lobbyist and former chief of staff to President Ronald Reagan; Frederick Malek, an investor and former aide to President Richard Nixon; and Korologos, a former secretary of labor under Reagan. A recent former board member is Stephen Friedman, who is President George W. Bush's top economic adviser. Robert Zoellick, the current U.S. trade representative, is a former general counsel of Fannie Mae.
"Once you find serious internal control weaknesses at Fannie Mae and Freddie Mac, if that is established, then there is considerable political risk for members of Congress standing in the way of a reasonable regulatory package," said Thomas Stanton, author of a book on the potential risk the companies pose to American taxpayers, and a teacher at Johns Hopkins University. "I think Fannie Mae's political clout melts away in front of members' realization that they could be held accountable."
Notwithstanding its problems, Fannie has a powerful array of assets to call upon to fight restrictive legislation.
Rep. Baker said: "It is not going to be an easy thing to pass a bill to create a regulator of prominence."
