Lawmaker Explores Mortgage Giants' Falling Share Prices
Thursday, August 7, 2008
Rep. Henry A. Waxman (D-Calif.), chairman of the House Oversight and Government Reform Committee, has asked the mortgage finance giants Fannie Mae and Freddie Mac whether they know of any White House involvement in the recent decline in their share prices.
In a letter dated Aug. 1, Waxman told Freddie Mac chief executive Richard F. Syron that he was "evaluating" whether to "open an investigation into the circumstances that precipitated the recent distress in the shares prices of Freddie Mac."
The letter asks for documents "relating to any actual or rumored disclosure or communication by a White House official to investors, the media, or board members of a plan to nationalize, place in conservatorship, or assume control of Freddie Mac."
The letter, obtained yesterday by The Washington Post, does not identify the White House official.
A similar letter was sent to Fannie Mae's chief executive Daniel H. Mudd, a company spokesman confirmed.
Waxman has been a regular irritant to President Bush on issues ranging from the leak of a CIA officer's identity to the development of U.S. policy on greenhouse-gas emissions. He has been rebuffed by the White House on numerous occasions when he sought assistance on these and other topics.
A committee spokeswoman declined to comment on the requests to Fannie Mae and Freddie Mac, as did a Freddie Mac spokesman.
Tony Fratto, a spokesman for President Bush, said Waxman has not contacted the White House. "It's been clear that what we have been focused on is shoring up Fannie Mae and Freddie Mac and instilling confidence in them, and that's all," he said.
Waxman and his committee staff often request information about topics of interest before deciding to open a full-scale probe. Sometimes the answers to those initial inquiries dissuade Waxman from looking further, people familiar with the committee's methods said.
Fannie Mae and Freddie Mae are federally chartered, shareholder-owned companies that help finance home mortgages. Yesterday, Freddie Mac, based in McLean, reported a $821 million loss in its second quarter. Analysts expect Fannie Mae of the District to report a second-quarter loss Friday.
The sharp declines in the shares of both companies prompted Congress and the Bush administration to agree that the government would prop up the companies if they faltered. President Bush recently signed legislation that would permit the Treasury Department to make unlimited loans or equity investments in the companies if they needed such support.
Waxman is seeking documents for the period July 1 though July 31, according to the letter. During that time, Freddie Mac's share price dropped by 50 percent to $8.17 from $16.21. Fannie Mae's shares fell to $11.50 from $19.59, a 41 percent decline.
The Treasury unveiled its rescue plan for the companies on July 13. In the previous week, several major news outlets reported that Bush administration officials were so concerned about companies that they were discussing what they might do if the firms needed to be saved. Among the options reported were those listed in Waxman's letter.
Waxman said in the letter that he wanted the documents by Aug. 15.