WASHINGTON — Fannie Mae said Friday it would shutter its philanthropic arm, the Fannie Mae Foundation, in April and create an office of community and charitable giving.
The foundation has been the subject of intense criticism since Fannie's accounting scandal came to light in 2004. Critics have charged the government-sponsored enterprise used the nonprofit as a marketing tool — an accusation that caused the Department of Housing and Urban Development to investigate the foundation in 2005.
But Daniel Mudd, Fannie's chief executive, said in an interview that the plan to close the foundation was not an attempt to placate critics.
"Politics aren't a factor in the decision," he said. "We're taking the efforts we've made in grant-making in the corporation and those in the foundation and putting them together to do more and be more effective."
Still, Fannie appears to have responded to lawmakers who have chided it for not disclosing where the foundation spends money. Fannie said it will issue reports on its Web site and in its annual report detailing where its charitable funds are spent.
Some industry representatives are skeptical and said they saw the plan as an admission by Fannie that it could not use the foundation to stave off political attacks.
"It wasn't working as a shield. Their use of it to advance the interests of Fannie politically just became too much of a lightning rod," said Bert Ely, an independent consultant in Alexandria, Va., and a frequent GSE critic.
But Jim Vogel, the head of fixed income research at First Horizon National Corp.'s FTN Financial Capital Markets, said he saw the planned closure as another step in Fannie's recovery from the accounting scandal.
"It makes sense that it's part of the deck-clearing from the old Fannie as it moves ahead," he said.
The move is likely to result in cost savings for Fannie. A spokesman would not specify the savings.
The GSE said Stacey Stewart, the foundation's former president and chief executive, will become a senior vice president at Fannie and will run the new charitable giving office.
The foundation was established in 1979, and its closure would result in an unknown number of layoffs. Ms. Stewart said in an interview that funding for projects would continue through yearend.
Despite the criticism its philanthropic work has drawn, Ms. Stewart said her goal is to expand her new office.
"Many of the activities will continue. We would like to grow over time," she said.
The plan won praise from several lawmakers, including Sen. Chuck Grassley of Iowa, the ranking Republican on the Senate Finance Committee, who has investigated the foundation for several years to determine if it was engaged in political activity.
"This could be a positive step toward more transparency and accountability from Fannie Mae for its charitable activities," Sen. Grassley said in a press release.
