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Fannie & Freddie's Friends In High Places

It was during the Great Depression that Fannie Mae was founded - in 1938 - with a simple purpose in mind: to give lower and middle income Americans more access to the Great American Dream, owning your own home.

It did it by guaranteeing if a homeowner defaulted on a loan the bank would get paid, CBS News chief investigative correspondent Armen Keteyian reports.

Today Fannie and its smaller sibling, Freddie Mac, hold a pivotal place in the home loan market - one that has grown to include special advantages, such as:

  • guaranteed lines of credits from the U.S. Treasury
  • exemption from state and local taxes
  • limited government oversight

    Their privileged status is that of government-sponsored Fortune 500 companies, powered by a vast political machine.

    "Fannie and Freddie have probably had more influence than any set of institutions in modern times," said former Rep. James Leach.

    As the former chairman of the House Financial Services Committee, Leach tried for years to hold Fannie and Freddie to tougher financial standards.

    "You'd have people in Congress that would make it very clear that they wanted nothing to touch Fannie and Freddie," Leach said.

    CBS News has learned Fannie and Freddie now boast nearly 150 lobbyists - spending more than $5 million this year alone.

    In addition, the mortgage giants have doled out about $2 million more in campaign donations in the last four years to key member of Congress.

    "The view was always held that if they lost even a small battle, it might slide into something more meaningful," said former Rep. Richard H. Baker, R-La. "So every threat was taken seriously."

    A few years ago, Fannie was fined nearly $400 million after overstating earnings by $10 billion to maximize bonuses. In 2006, Freddie paid a record $4 million fine for illegal fundraisers.

    Both Fannie and Freddy say they've changed their ways. But, more and more, it appears two companies designed to help average Americans have, in fact, been helping themselves.

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