Fannie/Freddie Love Fest reached fever pitch under Clinton

Everyone in Washington is to blame for getting led down the primrose path with Fannie Mae and Freddie Mac. All the intentions were good I'm sure, but I speak from personal experience when I say that getting into bed with someone can cloud financial judgment. A few paragraphs from a 1996 New York Times article illustrate my point:

Within the Clinton Administration, Franklin D. Raines, who was Fannie Mae's vice chairman until last year, is now the White House budget chief. The new Commerce Secretary, William M. Daley, is a former Fannie Mae board member. Treasury Secretary Robert E. Rubin is a close friend of Mr. Johnson's. All three Administration officials say they have taken steps to avoid any conflict of interest.

But critics of the company have raised questions about whether the Administration can be truly unbiased when setting policy that might affect Fannie Mae.

During last year's House banking subcommittee hearings, Representative Richard H. Baker, Republican of Louisiana, pointed to what he said were discrepancies between a draft Treasury Department report on Fannie Mae and Freddie Mac and the final version. He said the report might have been rewritten to tone down a finding that the mortgage markets could function perfectly well without any Government sponsorship.

''I am convinced that, for whatever reason, this report has been rewritten, reaches no conclusions, ignores the changes in the marketplace that have occurred and gives little direction to this subcommittee,'' Mr. Baker thundered at Deputy Treasury Secretary Lawrence H. Summers, who defended the Administration's report.

In what some describe as a telling illustration of how Fannie Mae has cultivated favor with the Administration, the company hired Walter Hubbell, a son of Webster L. Hubbell, the former Associate Attorney General who is at the heart of the Whitewater affair. Fannie Mae employed the younger Mr. Hubbell in 1994, after Mr. Johnson and other executives received calls from Administration officials -- including Mickey Kantor, who was then the United States trade representative -- urging them to do so. At the time, the White House had undertaken an effort to help the Hubbell family financially after the senior Mr. Hubbell's resignation from the Justice Department.