An internal Fannie document from 2004 obtained by The New York Times sheds light on this question. A “Customer Engagement Plan” for Countrywide, it shows how assiduously Fannie pursued Mr. Moziloand 14 of his lieutenants to make sure the company continued to shovel loans its way.
Nine bullet points fall under the heading “Fannie Mae’s Top Strategic Business Objectives With Lender.” The first: “Deepen relationship at all levels throughout CHL and Fannie Mae to foster alignment and collaboration between our companies at every opportunity.” (CHL refers to Countrywide Home Loans.) No. 2: “Create barriers to exit partnership.” Next: “Disciplined Risk/Servicing Management” and “Achieve Fannie Mae Profitability Goals.”
(Later in 2004, by the way, the Securities and Exchange Commission found that Fannie had used improper accounting and ordered it to restate its earnings for the previous four years. Some $6.3 billion in profit was wiped out.)
The engagement plan also recommends ways that Fannie executives should mingle with Countrywide’s top management, because “fostering more direct senior level engagements with key influencers throughout their organization will be beneficial in ensuring strategic alignment and building organizational loyalty.”
RECOMMENDATIONS included conferring with Mr. Mozilo at Habitat for Humanity golf tournaments and Mortgage Bankers Association conventions. Franklin D. Raines, then Fannie’s C.E.O., and Daniel H. Mudd, then its chief operating officer, were advised to see Mr. Mozilo twice a year. “We will be successful when Angelo influences the industry or his organization on our behalf,” the document says. Mr. Raines didn’t respond to e-mails requesting comment last Friday; he left Fannie in December 2004.
The memo advised pursuing other Countrywide executives: “Deep Rapport” should be the goal with David E. Sambol, the lender’s president, but because he did not “heavily attend outside events” Fannie executives should “look for opportunities for meetings” at Countrywide headquarters.
“We will be successful if we can foster ongoing communication channels that allow us to understand and leverage Sambol’s priorities and demonstrate our commitment to making him successful,” the memo stated. Mr. Sambol and Mr. Mozilo could not be reached for comment.
For his part, Mr. Mudd, now the chief executive of the Fortress Investment Group, said Fannie’s courting of Countrywide was not unusual. “We tried to build a program that was based on having multiple strong relationships with our main customers,” he said. “You want to be sure that the first call is not the last call, that a customer is not doing business with you anymore.”
But Representative Darrell Issa, a California Republican and ranking member on the House Committee on Oversight and Government Reform, says he has concerns about such mating dances.
“Lost in the debate over how best to legislate the aftermath of the financial crisis has been the necessity to conduct an inward examination of the too-cozy relationship between government enterprises and private industry,” Mr. Issa said. “The true nature of this strategic partnership between Countrywide and Fannie-Freddie should be exposed so we can measure the extent to which it fostered the conditions leading to the financial meltdown.”
Understanding how these companies operated is crucial if we want to avoid repeating the mistakes of our recent past. So, when you hear about Fannie and Freddie reform this fall, remember that we still don’t know the half of it.