The Blog

Culture of Corruption: The Case of Freddie Mac

The Jack Abramoff case is providing more than enough evidence of thorough corruption in the system. But now we have another case to underscore the point.
This post was published on the now-closed HuffPost Contributor platform. Contributors control their own work and posted freely to our site. If you need to flag this entry as abusive, send us an email.

When the Bipartisan Campaign Reform Act, BCRA for short and McCain-Feingold more popularly, was being debated in Congress, and after it was enacted and was heading for oral arguments in a three-judge panel and the Supreme Court, its opponents regularly scoffed at the idea that there was any corruption in the campaign finance system. Senators literally dared their colleagues who supported the reform to say they had been bribed within the system, or had encountered corruption themselves (a number of brave souls did talk in depositions about how ugly the campaign fundraising system was, using their own experiences as examples.) The assault on BCRA continues to this day, including the attacks on the notion that the system is corrupt (assaults viewed as necessary because the Supreme Court's rationale for accepting any First Amendment restrictions has always been to block corruption or the appearance of corruption.)

The Jack Abramoff case is providing more than enough evidence of thorough corruption in the system. But now we have another case to underscore the point. Yesterday, Freddie Mac, the giant quasi-public mortgage company, agreed to pay a record $3.8 million fine to the Federal Election Commission to settle charges that it had used its corporate resources to raise $1.7 million in campaign funds at political fundraisers for House Financial Services Chairman Michael Oxley (R-Ohio) and many of his committee Republican colleagues, all while the committee and Congress were considering tough measures against Freddie Mac and its counterpart Fannie Mae. Freddie Mac also contributed an illicit $150,000 to the Republican Governors Association.

Much of the money went to Oxley, and much of the rest-- raised at fundraisers where Oxley was chairman or co-chairman-- went to other Republicans on his committee. In other words, money that was channeled as if it were from Oxley's Leadership PAC. The campaign to raise the money and distribute it-- all while federal law clearly prohibited corporate contributions or resources to be used for that purpose-- was clearly and explicitly designed not just to gain access, something Freddie Mac and its lobbyists and officers had in abundance, but to shape legislation, to deflect tough oversight, to alter public policy. And of course the lawmakers were delighted to go to the fundraisers, get the checks, cash them and spend the money without asking any inconvenient questions about who might be behind it.

The settlement sounds like a lot, but $3.8 million out of Freddie Mac's corporate coffers is chump change. In return, the officers of the company, including its then-chief and its chief lobbyist, get off scot-free, with no further investigation or action in the offiing. We will see one or two days of embarrassing news stories-- this one was on the front page, above the fold, of the Washington Post-- and then the story will fade. No one will go to the slammer or face more serious discomfort for the abuse of the system.

Most companies do not abuse the system in this way, so far as I can tell. But all understand the "pay to play" mentality that has become all too pervasive in recent years, the price often required not just to get your issues on the agenda, but often to get committees to keep from holding tough hearings.

Reform has actually helped to ameliorate the problem, but even it cannot stop lobbyists or others with larceny in their hearts from abusing the campaign/Congress/money nexus that has come to dominate the dynamic on Capitol Hill. It does reflect a culture of corruption, allowed to thrive because there is no ethics committee and not effective executive enforcement against violations that could deter malfeasance. And we have little reason to hope that such entities will emerge anytime soon.