Everyone agrees that Fannie Mae and its brethren in the mortgage-finance business need to be reined in by Uncle Sam. After a multibillion-dollar accounting scandal and the resignation of its top executives, even Fannie wants legislation that would tame its once-wild ways.
But nothing gets enacted in Washington without a little of what mobsters used to call vigorish. Vigorish is the fee charged by a bookie on a bet or the excessive interest that's paid to a usurer. In the nation's capital, vigorish is the political payoff to lawmakers that's added to just about every bill that moves through Congress these days.
Such politics of favoritism has grown to obscene dimensions, encouraged at every step by powerful lobbyists on K Street.
Lawmakers' self-dealing might even be examined in the postmortems on the levees that gave way so disastrously last week in Louisiana. Experts will want to know if politicians elsewhere in the country got federal reconstruction money over the years that might have saved New Orleans.
In Fannie Mae's case, the "vig" would work this way: The version of legislation pending in the House would set aside 5 percent of the company's profits for a fund that would funnel millions of dollars back into lawmakers' districts in the form of grants to build low-income housing. That sounds like a noble goal, but it's also a political payoff. Every time a new grant came their way, legislators doubtless would take extravagant, public credit for the largess and impress their voters.
But the payoff is more insidious than that. The fund would serve as an incentive for Fannie Mae -- and its counterpart Freddie Mac -- to do exactly what Federal Reserve Board Chairman Alan Greenspan has declared to be a dangerous risk to the broader economy: padding its profits by buying more mortgages for its own account rather than making a market for them elsewhere, which is its basic business. Lawmakers, eager for the housing fund to expand, would likely encourage Fannie and Freddie to buy additional mortgages.
A senior Bush administration official, who spoke on condition of anonymity, expressed "very strong concerns" about this double whammy. And a few brave souls in Congress have attacked the proposed arrangement as a "political slush fund." Still, some version of it could well become law this year. Such is the way Washington works -- like it or not.
Over the past decade, the number of such specially directed or "earmarked" projects appropriated by Congress each year has zoomed to roughly 14,000 from 1,000, according to Citizens Against Government Waste. That sort of vanity legislating is, by its nature, unfair. It disproportionately distributes limited federal resources to the parts of the country that are represented by the most powerful lawmakers. Merit has almost nothing to do with who wins and who loses.
The trend is getting worse all the time. Barely a month ago, Washington witnessed the biggest pig-out in its history. As Congress was about to dash out of town for its August vacation, it approved transportation and energy bills larded with literally thousands of pork-barrel projects. The highway-construction bill alone, which was the most expensive public-works legislation ever, contained more than 6,000 earmarked grants, according to Taxpayers for Common Sense.
One was a "bridge to nowhere" connecting the Alaska mainland to an island with a population of 50. Another was a thoroughfare to be named Don Young's Way after the not-so-shy chairman of the House committee that oversees transportation. We're talking billions of dollars of legislation narrowly focused on the districts of lawmakers who had enough clout to force their will, all with an eye toward guaranteeing their reelections.
These projects will produce an economic boon for the parts of the country that receive them. The California district of House Ways and Means Committee Chairman Bill Thomas and the Illinois region represented by House Speaker J. Dennis Hastert will be swamped with so much concrete and asphalt that a lot of local businesses will prosper.
On K Street, this every-man-for-himself mentality has spawned an entire industry. Cassidy & Associates' Gerald S. J. Cassidy largely cornered the market on lobbying for earmarks on appropriations bills in the 1980s. Today, dozens of lobbying firms have followed his example, including Van Scoyoc Associates Inc. and the Livingston Group LLC, which is headed by former representative Robert L. Livingston (R-La.), who once chaired the House Appropriations Committee.
Universities, counties, cities and nonprofit groups of all sorts have been hiring lobbyists at a frenzied pace to make sure they get their share (or more than their share) of the loot. As Congress returns to work this week and prepares to finish its appropriations bills and other measures, lawmakers -- aided by lobbyists on retainer -- will once again be pressing their own, limited causes.
The proliferation of such greed poisons the larger fiscal environment and makes profligate spending acceptable. No wonder the size of the U.S. government has ballooned with flagrant disregard for the availability of tax revenue to finance it. Federal budget deficits are estimated in the range of $300 billion a year, yet government has increased by 58 percent since 1996. During the Bush years alone, government has grown by a third and is still going strong.
"Virtually every part of government has been expanded; nothing has been reduced," said Brian M. Riedl, budget analyst for the Heritage Foundation. "Overall, the federal government spends $21,000 per household, which is the most since World War II in inflation-adjusted dollars."
This situation will only get more dire in the years to come. Social Security expenditures are escalating at 6 percent a year. Medicaid costs are mounting by 8 percent, and Medicare is rising by 9 percent annually. "Spending is going to take off in the next couple of years at an even greater rate than we've seen," Riedl said. "The era of big government isn't over."
But President Bush and Congress are still loath to say "no." Bush, alone among presidents of his tenure, has declined to use his veto pen even once. His rhetoric against runaway spending may be tough, but in his actions, he's been an enabler. To get his priorities approved on Capitol Hill, the president has shown he's willing to buy votes with an unprecedented level of pork-barreling.
In the House, I hear that leaders are negotiating to temper the most blatant potential abuses of the Fannie Mae housing fund. Opponents of the 5 percent housing fund argue that the whole purpose of Fannie is to make mortgages more available to low- and middle-income people, so a special fund would be redundant and wasteful. Still, I'd wager that at least a little vigorish will be tacked on in the end.
The politics of favoritism has gotten that far out of hand.
Gopher for President?
One of Washington's top association gigs is up for grabs as Edward O. Fritts plans to retire as president of the National Association of Broadcasters. One of the leading candidates is said to be Gopher of "The Love Boat" fame -- former representative Fred Grandy (R-Iowa), who is now a Washington area radio talk show host, on WMAL.
But unlike the old TV show, Grandy isn't guaranteed a happy ending. Other contenders for the plum assignment are Mitch Rose, a Disney-ABC lobbyist and a former top aide to Sen. Ted Stevens (R-Alaska); Martin D. Franks, a former Democratic aide and longtime CBS official; and David K. Rehr, president of the National Beer Wholesalers Association and a veteran Republican fund-raiser.
For the winner of the contest, stay tuned.
Jeffrey Birnbaum writes about the intersection of government and business every other Monday. E-mail him at firstname.lastname@example.org.
has competition for lobbying job.