Plan To Buy Freddie Mac? Lawsuit Reveals Struggle To Get Mortgage Company Out Of Government Control

A lawsuit filed against the Federal Home Loan Bank of San Francisco reveals details of a plan to buy mortgage company Freddie Mac. First proposed in 2016 as a way to get the enterprise out of U.S. government control, the initiative saw various stops and starts between then and 2018, according to a Bloomberg reported.

The idea of purchasing Freddie Mac was first raised by Lawrence H. Parks and Timothy Simons, senior lobbyists at the San Francisco bank. The idea would have been to use money obtained from Wall Street settlements in the wake of the financial crisis. The idea fizzled initially but regained steam when Donald Trump took office in 2017 and his administration made getting the company out of government control a priority. The plan ultimately petered out in 2018 after Parks and Simons were fired.

Now, the two lobbyists have filed a lawsuit against their former employers, bringing many of the details about their push to buy Freddie Mac into the public eye. Parks and Simons claim in the suit that they were fired due to racial discrimination. The San Francisco bank countered by claiming the two had committed fraud.

The plan would have brought Freddie Mac back under control of the Federal Home Loan Bank system, where it originally had been before being spun off in 1989. Early on, the San Francisco bank brought in the firm McKinsey & Co. to explore the feasibility. Once a proposal was made, the idea was scrapped.

The plan was halted for a second time in September 2017. Parks and Simons allege another employee falsely stated at a major meeting that the bank, as well as two other home loan institutions, were nearing the release of a proposal. Parks docked the employee's pay as punishment and now claims the person spread allegations of fraud as payback.

Both men claim an internal investigation found no evidence they had broken any laws. According to the former lobbyists, the bank had been looking for reasons to get rid of them due to a “discomfort” with black executives in high-powered positions. The bank has denied the allegations and said it will “vigorously defend itself.”

Freddie Mac, formally known as the Federal Home Loan Mortgage Corp., and its sister company, Fannie Mae, formally known as the Federal National Mortgage Association, were brought under government control in September 2008, in the immediate aftermath of the 2007 mortgage crisis.