Dec. 2 (Bloomberg) -- Newt Gingrich in 2007 extolled the virtues of Freddie Mac, saying he would be “very cautious” about changing the way the mortgage-finance company’s public-private business plan operated.
In an interview placed on Freddie Mac’s website, the Republican presidential candidate said the U.S. government-sponsored enterprise, or GSE, could serve as a guide for rebuilding the hurricane-ravaged Gulf of Mexico, improving health care and funding space exploration. For decades, Freddie Mac collected profits while benefiting from an implicit taxpayer guarantee of its debt,
“I’m convinced that, if NASA were a GSE, we probably would be on Mars today,” Gingrich said in the April 24, 2007, web post.
“While we need to improve the regulation of the GSEs, I would be very cautious about fundamentally changing their role or the model itself,” he said. It “marries private enterprise to a public purpose.”
At the time of his comments, Freddie Mac and its larger rival Fannie Mae were under fire from Republicans, who said their government charters allowed them to make profits for shareholders while putting taxpayers at risk. Gingrich, a former U.S. House speaker, has voiced criticism of the companies in recent years.
The companies’ government backing made home loans artificially inexpensive and allowed the companies to squeeze private players out of the mortgage-lending business, their critics said.
Half of Home Loans
In 2008, Fannie Mae and Freddie Mac, which own or guarantee more than half of U.S. home loans, collapsed under the weight of failing subprime loans. They were forced into government conservatorship and have since survived on taxpayer aid, drawing more than $170 billion from a U.S. Treasury Department lifeline.
Gingrich was an adviser to Freddie Mac when the company published his comments. His consulting company, the Gingrich Group, received between $1.6 million and $1.8 million in fees from the mortgage company.
“I recognize that there are times when you need government to help spur private enterprise and economic development,” he said in the 2007 interview, which was previously reported by the blog Verum Serum.
Gingrich’s contract with Freddie Mac ended in 2008. Campaign spokesman R.C. Hammond said it isn’t surprising that Gingrich’s views have changed since 2007.
“As to whether Newt now advocates a more aggressive overhaul of Fannie and Freddie than he previously did -- of course he does,” Hammond said in an e-mail. “The total collapse of the global financial system has a tendency to make one look at a situation with a fresh set of eyes.”
In a book published this year, Gingrich called for broad change to the mortgage system.
Freddie Mac and Fannie Mae “are so thoroughly politicized and preside over such irresponsible lending policies that they need to be replaced with smaller, private companies operating without government guarantees, whose leaders focus on making a profit, not manipulating politicians,” he wrote in “To Save America.”
In the 2007 interview, Gingrich endorsed the public-private partnerships used to build railroads and supply telephone service and electricity to rural Americans.
“All of these are examples of government bringing about desired public purposes without creating massive, taxpayer-funded bureaucracies,” Gingrich said. “To me, that is a pragmatic and effective conservative approach.”
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