During the housing crisis in 2008, Fannie Mae and Freddie Mac, unable to meet their financial obligations, were taken over by the federal government. Ten years later, they are still in conservatorship – with enormous risks resting on the backs of taxpayers and their ultimate fates yet to be determined by Congress. Despite their uncertain future, Fannie Mae decided it was the time to move forward with a new $115 million headquarters in downtown Washington D.C. However, like trends of the recent past, costs for the new headquarters have “risen dramatically.”
According to a recent Inspector General (IG) report, the new lavish headquarters is now expected to cost Fannie Mae $171 million. Adding to the rising costs of the building, the IG has questioned $32 million worth of “upgrades, finishes, and “architectural” design elements” that go over and above Class A office space – the most prestigious category. The Federal Housing Finance Authority (FHFA), the agency in charge of regulating Fannie Mae, did not even know these upgrades had been approved. Among the questioned upgrades are:
- $7.7 million for interior finishes including: “wood veneer finishes” ($2,500,000), “decorative wood slatted ceilings” ($1,200,000), format tile for “core wall elevations” ($750,000), and “gypsum ceiling detailing” ($540,000)
- $4.1 million for a cafeteria, which Fannie Mae’s consultant cautioned could be underutilized because of numerous nearby dining opportunities
- $2.1 million for “light-filled” Town Centers, which Fannie Mae’s expert opined would provide a much-needed sense of openness and day lighting, necessary for human interaction and productivity”
- $2 million for a third glass bridge [on floor 9] spanning the space between the two towers (There’s already glass bridges on floors 13 and 11)
- $3 million for additional generator support, despite the expert’s conclusion that “[t]his level of generator backup exceeds comparable benchmark facilities”
- $700,000 for an audio-visual (broadcast) studio which included “a whisper room, control room, server room, track for green screen, workstations, special lighting and IT infrastructure”
- $9.6 million for numerous items, including pantries, wood doors, bars, and quartz and glass countertops in a wellness room, town center café, and a “CC lounge;” free-standing decorative wood “lunch huts,” custom wood menus for the Sky Lobby café, and elevator lobby pergolas
If that wasn’t enough, taxpayers have already been billed for a $250,000 chandelier intended to “evoke” activity!
During a hearing on the cost overruns of the building, one Congressman expressed his sentiment on the matter saying, “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.”
The Fannie Mae Director, Melvin L. Watt, “fundamentally disagreed” with the IG report saying the building will “benefit the taxpayers.” In addition, Mr. Watt considered the extravagant features “reasonable, cost-effective and consistent with my responsibilities under the law and I, therefore, did not object to them.”
It should be noted that Fannie Mae did achieve $6.5 million worth of savings in some areas through the bidding process, but those savings don’t nearly add up to the cost overruns taxpayers will have to pay for. Taxpayers have already had to bail out Fannie Mae. Unfortunately, it looks like Fannie Mae will once again get their way with taxpayers, with little repercussion.