John on December 1, 2011 at 1:04 pm
From the WSJ:
Former House Speaker Newt Gingrich touted the virtues of Freddie Mac’s business model in an interview he conducted with the company in April, 2007, remarks that appear at odds with the candidate’s recent statements that he had warned the company of impending financial disaster.
A spokesman for Mr. Gingrich, Joe DeSantis, said the interview showed Mr. Gingrich arguing for improved regulation of Freddie Mac and its larger cousin, Fannie Mae. He said the interview “directly contradicts the erroneous reports” that Mr. Gingrich was trying to stop reforms to Fannie and Freddie.
I think it’s more fair to say Newt gave a passing nod to the idea of improving regulations even as he argued Fannie and Freddie were important to the stability of the housing market.
Mr. DeSantis said that Mr. Gingrich now advocates a more aggressive overhaul of Fannie and Freddie. “The total collapse of the global financial system has a tendency to make one look at a situation with a fresh set of eyes,” he said.
This is an important admission as it helps clarify the comparison I made here. Newt is acknowledging that his position on the viability of GSEs was strongly affected by the collapse. In other words, he was much more sanguine about the GSEs in 2007 than he is now.
I’m actually relieved to hear him (or his spokesman) say that. It lines up with the facts at hand and I think it’s a defensible position since nearly everyone was caught off guard by the scale of the collapse. It’s perfectly understandable that one would have a different view after the crisis.
That said, it doesn’t quite line up with his recollection at the CNBC debate, i.e. that he warned Freddie Mac their business model was impossible and insane. That seems like a little bit of retro-projection based on hindsight. The actual record reflects that he was a paid consultant and a Fannie/Freddie defender in 2007.
Morgen adds. I suppose I should weigh on on this as well. I’m not sure how defensible the Gingrich camp’s position really is. Their defense is that he was calling for enhanced regulation of the GSE’s? Really? Because this was one offhand phrase in a several hundred word argument which was focused on defending and justifying the very existence of Freddie and Fannie. And in the very same sentence he also said that Congress should be cautious about “fundamentally changing” them in any way. So exactly what sort of regulation was he in favor of?
And none of this addresses the fact that when confronted with this story, Newt’s response on more than one occasion was that his only advice to Freddie Mac was that their business model was flawed and they were headed for trouble. So either this is true, and yet he was still willing to leverage his name and credibility to publicly support them (for money), at the very height of the housing bubble no less, or he is not being fully candid about the work he performed for them. Neither scenario is good.
Category: Politics |