Angered by an advertising campaign against the flat tax launched by Fannie Mae and Freddie Mac in Iowa and New Hampshire, the House majority leader has asked the General Accounting Office whether the housing finance agencies can be banned from lobbying and other political activities.
The request, sent in a Feb. 16 letter, is the latest sign that the agencies may have unwittingly made a powerful enemy of the majority leader, Rep. Richard Armey, R-Tex., through their defense of the mortgage interest deduction.
An ardent flat-taxer, Rep. Armey is taking personal affront at the ad campaign, lobbyists said. The $270,000 campaign was financed by Fannie Mae, Freddie Mac, the National Association of Realtors, and the National Association of Home Builders. It featured radio and newspaper ads as well as direct mail sent to likely voters.
Rep. Armey's annoyance is said to have claimed at least one casualty, with the home builders firing longtime chief lobbyist Robert Bannister last Thursday.
Rep. Armey has reserved his public criticism for Fannie Mae and Freddie Mac, questioning whether it was appropriate for government- sponsored enterprises to engage in partisan politics.
His request to the GAO asks whether current law could prevent further politicking by Fannie and Freddie. Mr. Armey asked the congressional research arm to what extent Fannie and Freddie are bound by the rules that govern executive branch agencies.
Those agencies, such as the Department of State and the Department of Housing and Urban Development, are forbidden from lobbying or engaging in other political activities. Rep. Armey has also asked the GAO to detail the benefits the agencies derive from their government link.
For their part, Fannie and Freddie maintain that their advertising campaign was not intended to influence voters, only to educate them.
On Wednesday, John Buckley, senior vice president at Fannie Mae, said Fannie would not be restricted in its political activities as government agencies are. "A comparison with restrictions on agencies does not take into consideration our being a shareholder-owned corporation," Mr. Buckley said.
He also said any benefits Fannie Mae receives are passed on to borrowers in the form of lower rates.
No one in Washington expects Rep. Armey's letter to translate into lobbying restrictions on Fannie and Freddie. Still, lobbyists and other longtime agency observers are scratching their heads over the wisdom of alienating Rep. Armey.
They point to the cumulative danger of angering key Republicans, who tend to be wary of government support for housing. In addition to Rep. Armey, the agencies have locked horns in the past year with the chairman of the House Budget Committee, John R. Kasich, R-Ohio, and Rep. Jim Leach, R- Iowa, chairman of the House Banking Committee.
The two agencies are hardly strangers to the game of political influence in Washington. Fannie in particular is known for its skill at neutralizing congressional critics who might impose requirements that would hurt its profits.
Fannie often calls on political heavyweights for help; currently among that group is former HUD Secretary Jack Kemp, who is said to have intervened on behalf of the agencies with House Speaker Newt Gingrich, R- Ga., to nix a Republican proposal to impose user fees on Fannie and Freddie.
The agencies also make campaign contributions to their allies on key congressional committees. These activities are seen as par for the course. But one observer said that "lobbying in an election seems to be beyond what people can accept."
