Fannie Mae said yesterday that it would shut down its foundation, one of the biggest donors to local charities and a longtime lightning rod for criticism that the company was using tax-exempt contributions to advance corporate interests.
The District-based housing finance company said it would take over the Fannie Mae Foundation's work, and it promised to maintain or increase the overall level of giving.
Since its inception in 1979, the foundation has supported causes as varied as the John F. Kennedy Center for the Performing Arts, a food bank for the homeless and the construction of housing in depressed neighborhoods. It has spread the Fannie Mae brand name by spending tens of millions of dollars on advertisements to educate home buyers, supported causes closely associated with Fannie Mae executives and built goodwill with potential political allies in the housing world by financing their work.
Major recipients of past foundation grants have included Harvard University, where former Fannie Mae chairman Franklin D. Raines was president of the board of overseers, and Arena Stage, a District theater where Raines's wife, Wendy Farrow Raines, was board chairman.
Last year, the foundation gave out $61 million, including about $19 million in the District.
Its closing is part of a broader upheaval at Fannie Mae over the past few years that began with allegations of accounting manipulations, led to the replacement of much of the company's top management and left Fannie Mae on a tighter regulatory leash.
Chief executive Daniel H. Mudd has vowed to create a new Fannie Mae and sweep away a corporate culture that he has described as arrogant.
Mudd said yesterday that moving the charity into the company was meant to allow greater coordination between Fannie Mae's philanthropy and its business. Myriad tax rules meant to keep the foundation independent of the corporation got in the way, he said.
"This being Fannie Mae, you know I'm sure there are all sorts of conspiracy theories that go to why we might do this at this particular time," Mudd said. "But the real answer is it's pure and simple in order to do this in the simplest and best and most effective way."
Mudd said the company plans to release detailed information about the grants it issues.
Some observers noted that, unlike the foundation, the company would not be under a legal obligation to show the public how it spreads its charity.
"While there may be benefits for both Fannie Mae and investors related to closing the foundation, it is highly unlikely that increased transparency and accountability is one of those benefits," said Christine Petrovits, an assistant professor of accounting at New York University.
Sen. Charles E. Grassley of Iowa, ranking Republican on the Finance Committee, issued a statement yesterday saying that he was examining whether foundations such as Fannie Mae's engage in inappropriate political activity. Grassley raised questions a year ago as to whether Fannie Mae had abused the foundation's tax status to skirt campaign-finance and lobbying laws.
A spokeswoman for the foundation, Cindy Yeast, declined to respond. Mudd, who chairs the foundation's board, denied that the foundation served to promote corporate interests.
The foundation's board , though separate from the corporation, has been chaired by Fannie Mae chief executives and populated with other company officials. The company funded the foundation with irregular contributions -- $650 million in stock since 1995, and $12.5 million in cash late last year.
The foundation's longtime president, Stacey D. Stewart, is to head the Office of Community and Charitable Giving, a new unit within the corporation. In 2005, the last year for which figures are public, she was paid $577,282, plus $72,405 in benefits and deferred compensation.
In early 2005, during the fallout from the accounting scandal, the foundation temporarily froze grant-making and reduced its staff. It now employs 60 people, down from a peak of 105. Some of the 60 may find jobs at the company, Fannie Mae spokesman Brian Faith said.
Many organizations that have received Fannie Mae grants and other assistance over the years received an e-mail yesterday informing them of the changes.
In the message, the company said its new charity office would "build on the corporation's and the Fannie Mae Foundation's philanthropic and housing and community development work, including significant new investments and initiatives in Washington, D.C."
Fannie Mae said the foundation, which plans to wind down by April 30, would honor commitments it has already made. Local nonprofit officials said they hope to receive support from the company's new charitable operation.
"It's like they're putting one to sleep and waking up another one," said Robert E. Boone, director of the Anacostia Watershed Society. His group, which received $40,000 in 2005 and $45,000 in 2006, is trying to restore the Anacostia River and its watershed.
Some organizations were invited to a lunch yesterday at Fannie Mae, where Mudd and Stewart spoke about the new configuration. D.C. Mayor Adrian M. Fenty was in attendance, said Mafara Hobson, the mayor's spokeswoman. "Even though the foundation will be no more, the administration is grateful and confident in Fannie Mae's continued philanthropic commitment," Fenty said through Hobson.
Some groups from outside the metropolitan area expressed greater trepidation. The Champlain Housing Trust in Burlington, Vt., has a long history of receiving money from the foundation. Last year, it received a total of $100,000 from the foundation.
"We would love to continue to see funding. But it remains to be seen what the priority of the corporation will be," said Chris Donnelly, organizational development director.