Edward Pinto (Former Executive Vice President and Chief Credit Officer for Fannie Mae) says:

I was the person at Fannie from 1984-1989 involved in some of the events that Stanley Kurtz alludes to in the [below] article he wrote today in NRO. During this period I was first the head of marketing (including responsibility for affordable housing) , then executive vice president and chief credit officer.

National Peoples Action of Chicago, IL (NPA) and other groups descended en mass on Fannie's headquarters around 1987 and I was asked by Fannie's CEO (David Maxwell) to find out what they wanted. I meet with them. I then worked closely with NPA from that point until 1989. Kurtz refers to these efforts in his article. As he states, we offered to work with NPA and others, however we would not agree to loans where the risk levels would lead to high levels of foreclosure. I had had broad experience in affordable housing efforts (I had spent 8 years at the Michigan State Housing Development Authority and 2 years at MGIC, the largest mortgage insurer).

Around 1988 David Maxwell hired Jim Johnson of Lehman Brothers to craft a strategy to assure that Fannie's benefits under its charter could never be changed. Johnson developed a strategy that centered on cementing political support in Congress by having Fannie undertake exactly the kind of high risk affordable housing desired by Barney Frank, ACORN and others. As Chief Credit Officer I had a veto on credit decisions. I vetoed proposed changes in Fannie's affordable housing approach, because they presented a high risk of foreclosure.

I was fired by Fannie in February 1989. I have only now learned it was probably because of my opposition to loosening Fannie's affordable housing underwriting standards. In 1990 Johnson became Fannie's vice chairman and public heir apparent in 1990 and CEO in 1991. The history after that is very public:

1991 - CEO Jim Johnson announces Fannie's $10 billion "Opening the Doors to Affordable Housing" initiative.

1992 - Congress decides it likes the "reverse earmark program", but seizes the initiative from the GSEs. The deceptively named "Federal Housing Enterprises Financial Safety and Soundness Act of 1992" is passed which, for the first time, mandates formal affordable housing goals and authorizes HUD to set, monitor and enforce them. Congress sets three goals: low- and moderate-income housing, special affordable housing, and under served areas. Congress has a new piggy bank and best of all it was off budget (or so they thought). Act also establishes a purposely weak Fannie/Freddie regulator which is housed in HUD.

1993 - HUD sets its first set of affordable housing goals.

1994 - CEO Jim Johnson announces a new goal of $1 trillion (yes trillion) for its "Opening the Doors to Affordable Housing" initiative. A pattern of one-ups man ship develops.

Over the next 10 years Johnson continued, followed by Raines, and then joined by Freddie, rained ever larger reverse earmarks on Congress to cement and strengthen support. As Peter Wallison pointed out in The Last Trillion Dollar Commitment, once Fannie was engulfed in scandal in 2004 (following on the heals of Freddie's 2003 scandal), Fannie and Freddie had to undertake massive new affordable housing efforts which were publicly announced in the Fall of 2004 and implemented in 2005-2007.

The story below may sound incredible but I assure you, it is true.

Edward Pinto
Former Executive Vice President & Chief Credit Officer
Fannie Mae