Mitt Romney’s campaign sought today to explain some of the complexities of his financial trusts, following his claim in a debate last night that investments related to Fannie Mae and Freddie Mac were made without his knowledge.
The trustee who manages Romney’s money said this morning that those investments were made through a charitable trust “operated on a totally blind basis” that Romney did not have control over. He also said that the investment related to Fannie Mae and Freddie Mac has been sold.
“This investment, which has been sold, was not known to Governor Romney,” Brad Malt said in a statement this morning. Although Romney’s financial disclosure forms don’t list it as such, Malt said that the fund was held within a charitable trust and has been managed by him “on a totally blind basis since 2002.”
The issue highlights the sensitivity of the campaign about perception of Romney’s wealth, the complexities of managing it, and his ability to attack Newt Gingrich over his consulting ties to Freddie Mac.
The financial disclosure forms that Romney filed last year show that he reported owning between $250,001 and $500,000 in a mutual fund that invested in debt notes of Fannie Mae and Freddie Mac, among other government entities.
Unlike most of his financial holdings, which are held in a blind trust and unknown to Romney, this particular investment was listed on a page separate from those held in a formal blind trust. It is listed on the same page as his Bank of America cash account, compensation for his “No Apology” book, speaking fees, and time on the Marriott board -- as well as at least $250,000 in gold holdings.
The Globe first reported about the issue in September, saying that Romney’s investment in funds related to Fannie Mae and Freddie Mac would have been known to him because it was outside of his blind trust investments. The Romney campaign at the time declined to comment publicly, and didn’t dispute anything in the report until today.
Romney placed his assets in a blind trust after he was elected governor in 2002. It’s an arrangement often used by politicians to shield themselves from conflicts of interest and protect themselves from political accusations.
But Romney himself once called the use of blind trusts “an age-old ruse.”
“You give a blind trust rules,” he said in 1994, when he was running against Senator Edward M. Kennedy. “You can say to a blind trust, ‘Don’t invest in properties which would be in conflict of interest or where the seller might think they’re going to get an advantage from me.”
Kenneth Brier, a tax attorney, said there is no formal legal standard for a blind trust, and added that there are different “degrees of blindedness” on how agreements are structured between clients and an accountant.
“It’s a shorthand for an arrangement,” he said. “One man’s blind trust might be arranged differently than another man’s blind trust.”
The Romney campaign declined to release the agreements for the Romney trusts, as a way to verify what information is shielded from Romney.
Romney’s profits from Fannie Mae and Freddie Mac have increasingly become an issue in the Republican nominating contest as Gingrich tries to beat back charges that he was a consultant to Freddie Mac.
“We began digging in after Monday night because frankly I’d had about enough of this,” Gingrich said in last night’s debate. “We discovered to our shock, Governor Romney owns shares of both Fannie Mae and Freddie Mac. Governor Romney made a million dollars off of selling some of that.”
“So maybe Governor Romney in the spirit of openness should tell us how much money he’s made off of how many households that have been foreclosed by his investments?” he added. “And let’s be clear about that.”
Romney countered that his investments were not known to him, since they were managed by a trustee and in a blind trust. Romney also clarified that his investments were not made in Fannie Mae or Freddie Mac directly, but through a mutual fund that in turn invested in the government-backed mortgage companies.
“I don’t own stock in either Fannie Mae or Freddie Mac,” Romney said. “There are bonds that the investor has held through mutual funds.”
“And Mr. Speaker, I know that sounds like an enormous revelation, but have you checked your own investments?” Romney added. “You also have investments through mutual funds that also invest in Fannie Mae and Freddie Mac.”
Gingrich has holdings in three mutual funds that include investments in Fannie Mae and Freddie Mac, according to CNN.