A little history from yahoo news feed.
In a maneuver to get Fannie Mae’s debt off the government’s books, President Lyndon Johnson in 1968 signed legislation transforming the mortgage agency into a company owned by private shareholders. Before the two-year transition to private ownership was completed, President Richard Nixon won the 1968 presidential election.
A Republican administration might be expected to welcome the demise of even a small piece of the federal bureaucracy. But the Nixon administration proved reluctant to let go: Mr. Nixon’s aides saw one last chance to install a friend in the top job at Fannie, a provider of funding for home mortgages.
That would involve ousting Raymond Lapin, a Democrat appointed by President Johnson. Almost immediately after President Nixon took office in January 1969, Mr. Lapin clashed with the new Republican leaders at the Department of Housing and Urban Development, or HUD — headed by George Romney, father of the current Republican presidential nominee, Mitt Romney.
View interactive on the history of Fannie Mae.
Less than four weeks after Mr. Nixon’s inauguration, White House aides were discussing the “removal” of Mr. Lapin, according to documents at the Nixon Presidential Library. Handwritten notes from Egil “Bud” Krogh, then a 29-year-old White House lawyer (later jailed for his role in the Watergate scandal), described Mr. Lapin as an “ardent Dem; ardent empire builder; autonomous.” Apparently taking notes at a meeting of Nixon aides, Mr. Krogh scrawled, “HUD needs to get control of Fannie Mae as quickly as possible.” (Mr. Krogh told me didn’t remember this episode, though he acknowledged that the memo was written by him.)
There was “much patronage,” as Mr. Krogh put it, in the form of Fannie’s awards of foreclosure work to lawyers. Harry Dent, a White House political aide, already had heard from Republican lawyers in his home state of South Carolina; they were unhappy that Democratic lawyers were getting Fannie’s foreclosure work there even though the Republicans held the White House. “I can’t explain it,” Mr. Dent fumed in a memo.
History Press
Book cover of ‘The Fateful History of Fannie Mae’
Another issue between HUD and Mr. Lapin involved allegations that he had used company postage stamps to send letters supporting a Democratic congressman, according to Lorraine Legg, who was an aide to Mr. Lapin. (Mr. Lapin died in 1986.) She told me Mr. Lapin wasn’t aware that Fannie’s postage machine had been used: “He never got involved in those kind of details.”
Without spelling out the reasons, President Nixon fired Mr. Lapin in November 1969. One White House aide cited Mr. Lapin’s “lack of cooperation” with HUD Secretary Romney. Mr. Lapin refused to go quietly and continued showing up for work. He fulminated to the press that the White House hadn’t presented any valid reason for sacking him; he accused the White House of turning Fannie into “a patronage pudding.” Mr. Lapin tried unsuccessfully to get a court order keeping him in his post. At one point during this standoff, according to former Fannie employees, the lights and phone lines went dead at Fannie – an event some interpreted as a message from the White House.
After a few weeks, Mr. Lapin gave up – clearing the way for the White House to replace him with Oakley Hunter, a former FBI agent and an ardent Nixon backer from Fresno, Calif.
Though the government proceeded with its plans to sell Fannie to private shareholders, the company retained a public housing-policy role, and investors rightly assumed that Uncle Sam would stand behind it in a financial crisis — as it did, at great expense, in September 2008.
Rather than weaning the mortgage market from dependence on Fannie, President Nixon increased it by signing the Emergency Home Finance Act of 1970. This bipartisan legislation, aimed at ending a housing slump, created a second government-backed mortgage company Freddie Mac. It also allowed Fannie to buy “conventional” mortgages, or ones not insured by a government agency. Eventually, both Fannie and Freddie focused almost entirely on conventional mortgages, the type used by most Americans to buy homes. Fannie had burst out of its niche and was on its way to a
