What does the nearly bankrupt federal agency that helped trigger the great recession of 2008 do when top officials want a swank new headquarters? They erect a Taj Mahal-style building that costs taxpayers 53 percent more than promised.
That’s the conclusion of Federal Housing Finance Authority Inspector General Laura S. Wertheimer, who released a blistering report Thursday on how the Federal National Mortgage Association — aka “Fannie Mae” — is building a plush new headquarters a few blocks from the White House. Fannie Mae is overseen by the FHFA.
Graham Holdings, representing the Graham family that formerly owned the Washington Post, sold the property to Carr Properties, one of top developers in the nation’s capital, for $159 million in 2013. Carr Properties in turn offered the property to Fannie Mae. The site was the home of the Post for years.
Fannie Mae is the Government-Sponsored Enterprise (GSE) that played a key role in causing the 2008 recession by selling billions of dollars worth of subprime mortgage securities of residential properties held by low-income residents who eventually could not afford to pay ballooning mortgage rates.
In 2015, still reeling from the 2008 crash and the subsequent appointment of a conservator to oversee the firm’s costly bailout, Fannie Mae’s leadership decided to relocate its national headquarters to the Washington Post property.
Fannie Mae originally agreed to pay $164 per square foot in a 700,00 square foot space for its employees. By the end of 2015, however, the price had escalated to $253 per square foot, a 53 percent increase.
Adding to the cost overrun, the new $253 per square foot price tag was for only 679,000 square feet, escalating the ultimate bill to the taxpayers from $115 million to $171 million.
Three expensive enclosed glass bridges, a spiral staircase and rooftop viewing decks, which the IG considered “extravagant” for a government building, boost the costs.
The IG warned that “there are significant financial and reputational risks” associated with the over-the-top building.
But not so, argued FHFA Director Melvin Watt, the outspoken liberal activist who was formerly a Democratic congressman from North Carolina and a prominent member of the Congressional Black Caucus.
Watt defended the 53 percent cost increase, saying “the cost of any construction project is inherently dynamic.”
As for the expensive spiral staircases, Watts said that, “while spiral staircases may sound extravagant, they take up significantly less space than regular staircases and taking stairs generally leads to better employee fitness.”
He justified the glass bridges, saying, “bridges that connect tenant spaces in different office towers facilitate employe collaboration.”
Rep. Sean Duffy, the Wisconsin Republican who is chairman of the House Financial Services subcommittee for oversight and investigations, rejected Watt’s justifications.
Noting that Fannie Mae is under conservatorship, Duffy told The Daily Caller News Foundation that “it’s ridiculous that an agency under conservatorship for its reckless mismanagement hasn’t learned any lessons from its mistakes.”
Duffy, whose subcommittee has oversight of federal financial institutions like Fannie Mae, charged that the excessive costs show “complete contempt for hardworking taxpayers,” adding that Fannie Mae has demonstrated the “careless waste of taxpayer dollars. The American people are angry at Washington, and you needn’t look any further than the antics of the FHFA and their egregious cost overruns.”
Rep. Scott Garrett, another member of the House Financial Services Committee, said “the Federal Housing Finance Authority – the entity whose sole job it is to oversee mortgage GSEs – appears to have been asleep at the wheel as costs spiraled out of control. This is the same FHFA that just last year thought it was a good idea to give GSE executives a pay raise to nearly $4 million. This complete failure by FHFA and the excess displayed by Fannie Mae are the exact reasons why the American people are disgusted by business-as-usual in Washington, D.C.”
Watt has a history of racially tinged clashes. Progressive consumer advocate Ralph Nader accused Watt in 2004 of twice uttering an “obscene racial epithet” toward him, saying he was “an arrogant f–king white man.” Watt never apologized.
Watt was also investigated by the House Office of Congressional Ethics for fundraising violations. In retaliation, he introduced legislation to slash the ethics office’s budget. The liberal Center for Responsibility and Ethics in Washington — then led by Melanie Sloan — called Watt’s effort “disgraceful.”
Even so, President Obama nominated Watt in 2013 to head up the FHFA. The nomination was held up until December of that year despite the Democratic majority that then controlled the Senate.
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