FNMA/FMAC coming into the sight again?
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Friday March 9, 6:18 pm Eastern Time
Fannie Mae, Freddie Mac Probed
By MARCY GORDON
AP Business Writer
WASHINGTON (AP) -- Lawmakers are looking into allegations that officials of Fannie Mae and Freddie Mac threatened major banks with retaliation for criticizing the mortgage-market giants.
A Fannie Mae spokeswoman on Friday called the charges of intimidation ``absolutely not true''; the chairman of Freddie Mac said they were ``totally false.''
A campaign to rein in the two government-sponsored yet publicly traded companies widened, meanwhile, as a coalition of chief executives from some of the biggest banks and financial companies reportedly joined in.
The big banks and financial companies compete with -- and are often business partners of -- Fannie Mae and Freddie Mac in the multi-billion-dollar home mortgage market. Several of the companies are members of FM Watch, a group that has publicly criticized Fannie Mae and Freddie Mac for, in its view, becoming too powerful and aggressive in the market.
A member of FM Watch's board, J.P. Morgan Chase & Co. chief executive William Harrison Jr., resigned this week from the board, which was later dissolved. The action was taken because several board members including Harrison ``have been systematically approached and threatened,'' FM Watch spokeswoman Beneva Schulte said Friday.
Sen. Phil Gramm, R-Texas, chairman of the Senate Banking Committee, and Rep. Richard Baker, R-La., head of the House Financial Services subcommittee that oversees Fannie Mae and Freddie Mac, have asked their staffs to look into the allegations of harassment. The allegations were first reported in Thursday's editions of The Wall Street Journal.
``Any allegation of bullying by entities that enjoy the support of the federal government has to be taken seriously,'' Gramm said Friday.
Baker, who advocated last year stripping away some of Fannie Mae and Freddie Mac's key benefits, said Thursday he ``will examine whatever is on the public record and take such necessary steps that I find to be in the public interest.''
The two companies' benefits include their ability to borrow directly from the Treasury.
According to the financial company executives, Fannie Mae and Freddie Mac had threatened to retaliate by hurting their companies financially. No specific details have been provided.
The two mortgage-market companies have influence because they pay hundreds of millions of dollars in financing fees to Wall Street firms and also pay banks fees for the mortgage loans they buy from them.
Denis Nayden, the chairman and chief executive officer of GE Capital Services Inc., part of General Electric, said officials of his company have ``been on the receiving end of multiple communications from Fannie Mae indicating that GE would suffer financial consequences if GE remained a member of FM Watch.''
``GE remains fully committed to FM Watch,'' Nayden said in a statement in which he also said the same thing had happened to executives of FM Watch members Wells Fargo & Co. and American International Group Inc.
Officials of Wells Fargo and AIG told the Journal they had been threatened with retaliation by Fannie Mae and Freddie Mac.
Janice Daue, a spokeswoman for Fannie Mae, said Friday the allegations were ``absolutely not true.''
The companies making them ``are some of our biggest business partners,'' Daue said in a telephone interview. ``We feel good about the work we do: helping people get into homes.''
Freddie Mac chairman Leland Brendsel told reporters Thursday the allegations were ``totally false. ... We don't trade business for political support.''
The campaign against Fannie Mae and Freddie Mac appears to have expanded. The Journal reported in another story Friday that a coalition of chief executives from big banks and financial companies had decided to seek a review of way the two mortgage firms conduct their business. The newspaper cited unnamed people familiar with the discussions of the group, the Financial Services Forum.
Other members include Citigroup Inc. (NYSE:C - news), J.P. Morgan Chase, GE Capital, Allstate Insurance Co. and American Express Co.
``We've taken no position on it,'' Shirley Norton, a spokeswoman for coalition member Bank of America Corp. [NYSE:BAC - news], said Friday.
In recent years a diverse bunch of people and groups, including lawmakers, regulators, Ralph Nader and the National Taxpayers Union, have criticized Fannie Mae and Freddie Mac -- which Congress created to buy home loans from banks and other lenders to supply ready cash to the mortgage market.
Some critics believe there is an inherent conflict between the companies' government mandate and their duty to their shareholders. |
