Making Do by Making Nice

"Our goal is to be invited back," said Duane S. Duncan, Fannie Mae's top lobbyist.

Fannie Mae lobbyists were notorious for telling lawmakers and their aides what the company's position was, and making it clear that they were expected to agree. Many lawmakers were particularly irritated by what they saw as the condescending attitude of Franklin D. Raines, Fannie Mae's former chief executive.

"He [Raines] was inflexible, had a little bit of a tin ear and was offended if it seemed like people were being critical of him," said Rep. Barney Frank (D-Mass.).

Fannie Mae once retained Kenneth W. Starr, the special prosecutor who investigated President Bill Clinton, to prevent lawmakers from disclosing a document that detailed the annual incomes of the company's senior officers. Starr threatened to sue Baker in 2003 to keep the report private, Frank said. Baker finally disclosed the list during a congressional hearing a year later, but only after consulting several legal experts who assured him that he wouldn't be held personally liable.

"I'm not a wealthy man," Baker said. "I didn't want to take what little I had and give it to Fannie Mae."

But now, Duncan said, "we're striking a different tone."

He and McBride recently met with their slimmed-down lobbying teams to admonish them against highhanded tactics. Duncan was especially pointed. Speaking to 15 lobbyists in a conference room at Fannie Mae's headquarters early this month, Duncan said the company's effort to pass the legislation was so sensitive, complex and important to the company that the lobbyists should avoid even talking to lawmakers about it. "Unless you're called on, don't engage on the bill," he said.

Fannie Mae has retreated so far that insiders say Freddie Mac is now playing the feistier role. "Fannie, which used to be the biggest junkyard dog, is taking a back seat to Freddie Mac," said Robert R. Davis, executive vice president of America's Community Bankers, a trade association of banks and savings institutions. One reason, he speculated, is that Fannie Mae's financial foul-up is fresher in lawmakers' minds. Freddie Mac owned up to its problems in 2003 and reduced its estimated earnings by $5 billion, more than a year before Fannie Mae's estimated $9 billion in earnings overstatements came to light.

Both companies have long operated in tandem with housing industry groups. But lately they have been leaning harder than ever on those allies to make their case for them. Davis said he's been getting more phone calls from company executives asking his organization to write letters to lawmakers, including one recently that objected to part of a bill by Hagel. "Compared to two years ago, we've been getting more calls from Fannie and Freddie," Davis said.

The National Association of Home Builders has been especially outspoken. The association's chief executive, Gerald M. Howard, complained that he had been excluded from a meeting last month between Frank and the chief executives of Fannie Mae and Freddie Mac. Howard told Dow Jones News Service that he was worried that the executives were in such a hurry to complete the legislation that they might be too accommodating and pinch off the supply of financing that home builders need.

Howard declined to be interviewed for this article.

The sudden reticence by Fannie Mae and Freddie Mac is the result of corporate-wide cutbacks prompted by the accounting restatements and the acknowledgment by executives that the scandals have so depleted the firms' credibility that lobbyists wouldn't be much help anyway. "No one would be surprised by the thesis that Freddie and Fannie had more impact on the outcome of legislation in the past than we do today," McBride said.

"For years, Freddie and Fannie controlled the terrain on the Hill," said Sen. Richard C. Shelby (R-Ala.), chairman of the Senate Banking, Housing and Urban Affairs Committee. But their actions and attitude these days are "light-years away."

Last year, Fannie Mae and Freddie Mac spent a total of $24.2 million on lobbying and were each among the top 20 corporate spenders in the nation on lobbying, according to PoliticalMoneyLine, which compiles political finance and lobbying information. This year they have reduced their budgets for contract lobbyists by about a third and may trim more.

Fannie Mae has also cut out the millions of dollars it spent annually on TV issue ads and has curbed its grants for housing programs in the districts and states of lawmakers whom it considered essential to legislation affecting the company.

So far, a bill to create a new oversight agency appears on track. Then again, the company's history of testiness isn't being overlooked by lawmakers.

"I've told them that I hope they will continue to support us," Shelby said. "But we'll soon know for sure whether they're with us or against us."