Fannie Mae – one of the government’s mortgage giants responsible for the Housing Crisis of 2008, has used millions in taxpayer dollars to build a new headquarters. These lavish upgrades includes a massive $250,000 chandelier.
The Inspector General for Federal Housing Finance Agency- FHFA, noted a $32 million sum in the questionable costs in an audit for the Fannie Mae’s new headquarters in Washington D.C, downtown. FHFA is responsible for overseeing the affairs of the mortgage lender.
The Midtown Center, scheduled for completion in June 2018 will be the new flagship office for the mortgage giant. The inspector General reported that the costs for the new headquarters have increased – “risen dramatically,” – to $171 million from an original budget of $115 million when the consolidated HQ was announced in 2015.
The Inspector General has blamed numerous expensive upgrades for the dramatic cost over runs, such as the third glass walkaway costing $2 million, $1.2 million “decorative wooden slatted ceilings” wooden ‘lunch hats’ and pergolas, and the garden styled pavilions in the lobbies of the massive complex.
The FHFA did not review whether any of the major upgrades were cost-effective or whether lower cost alternatives were available. The Inspector General notes, “For example, we identified an upgrade in the 80 [percent] General Contractor construction design documents identified as a $250,000 chandelier,” the inspector general said. “The expert’s representative explained that the expert first thought it was a light fixture but learned later that it was an ‘architectural feature’ for the trading room, intended to ‘evoke’ the activity in that room and assumed that this feature was part of some ‘government art program.’”
The acting deputy director of the FHFA informed the inspector general that he was “unaware” of the pricey chandelier, and he said he would definitely “question the expenditure of $250,000 for a piece of art.”
“We found no evidence, however, that FHFA has ever challenged this expenditure,” the Inspector General said.
After the Inspector General questioned the chandelier, officials scrapped the plans for a $150,000 “hanging key sculpture,” and $985,000 for, “decorative screens” in a conference room.
Fannie Mae claimed that it canceled the hanging key sculpture out of the “concern that they could create an unwarranted perception of our efforts to execute our workplace strategy in the best interest of the taxpayer.” However, it seems a little too late for that.
Rep. Bill Huizenga also highlighted the lavish spending during a recent Financial Services Committee hearing, in which FHFA Director Mel Watt was asked to account for the massive expenditures.
“You are making K Street law firms and lobby shops jealous. They want to move to 15th and L. They want to move off K Street if this your headquarters.” said Huizenga, who owns a gravel company and had worked in real estate and development in the private sector.
Other of the upgrades approved as reasonable by the FHFA expert leading the oversight of the Fannie Mae headquarters were approximately a $7.7 million on interior finishes and detailing.
FHFA’s expert found the work to be at a “very high level of quality, particularly with respect to finishes in the circulation and collaboration spaces.”
“FHFA’s expert noted that the level of detailing was ‘pretty intense’ and in the realm of ‘high end design,’” the inspector general said. “It concluded, however, that these features and finishes were ‘consistent with those found in major financial institutions or law firms and may be instrumental in attracting future employees to Fannie Mae’ and were ‘reasonable enhancements.’”
FHFA director Watt pushed back against the report and said the new Fannie Mae headquarters will “benefit taxpayers.”
“I consider the build-out features reasonable, cost-effective and consistent with my responsibilities under the law and I, therefore, did not object to them,” he wrote in response to the audit. “Some of these relate to the effective and efficient operation of Fannie Mae’s market room, which provides critical capital markets financial services to help support and sustain the U.S. housing market.”