Whatever one might have thought of the Fannie Mae Foundation, itself the subject of some critical scrutiny in the press for its astronomical executive salary levels (the Foundation’s CEO took home almost $650,000 in salary and compensation according to the foundation’s 2005 990PF filing), its absorption of much of the advertising budget of the corporation (per a deal that was struck by former president Bill Clinton allowing Fannie to consider its for-profit-related advertising a charitable activity), and intimations that the foundation slanted its grantmaking to curry political favor for the corporation. However, for all the critical press coverage, the Fannie Mae Foundation plugged along putting out a ton of grants to community developers, funding substantial research on housing and economics, and mounting a very usable web-accessible research program called KnowledgePlex—until a myriad of accounting and accountability problems under the leadership of CEO Frank Raines undermined the foundations of the nation’s largest for-profit government-sponsored enterprise or GSE.

Now comes word that Fannie is shutting the foundation and moving all of its charitable giving back to the corporation. The highly paid CEO of the foundation promised that the corporation would maintain the foundation’s annual charitable grantmaking of over $60 million despite the elimination of the foundation itself, and though no longer required to disclose its grants (there is no requirement to disclose corporate charitable giving except if it occurs through a corporate foundation that files a 990PF), it would publish all of its grants on its website. Senator Grassley was quoted in the Chronicle of Philanthropy suggesting rather oddly that the foundation shutdown would potentially enhance the transparency and accountability of Fannie’s charitable grantmaking.

The corporation’s track record in the past few years makes the audiences for these philanthropic assurances feel a bit queasy, and the press coverage has focused on Fannie’s historic grant recipients uttering hopeful predictions that Fannie will maintain its past grantmaking to them. But there is another concern. For much of the foundation’s history, particularly as the Fannie Mae corporation established regional offices in locations that seemed to have as much political as market meaning in their site selection, grant recipients were always told to remember the “firewall” separating the foundation from the corporation. According to the philanthropic firewall theory, the grant recipients and their constituents working with or seeking help from the Fannie Mae Foundation would not find themselves suddenly the fodder for the corporation’s business or political activities. The new Fannie CEO, Daniel Mudd, has made it pretty clear that the elimination of the foundation is meant to allow greater coordination between Fannie Mae’s foundation and its business, so say goodbye to the firewall.

Time will tell what this means. Notwithstanding the excellent spin issued by the PR-savvy Fannie Mae, assurances about the nature, amount, and transparency of corporate philanthropy are not sure bets. The consequences of demolishing the firewall can go either way. On one hand, the foundation’s somewhat politicized philanthropic giving might become very tied to business and politics as Fannie-the-corporation fights off federal regulators at HUD and GSE legislation currently wending its way through Congress. Maybe that might get Congress to realize that there is a public need for mandatory disclosure of corporate philanthropic grantmaking through corporate foundations and through direct corporate giving, given the immense economic power of behemoth corporations like Fannie. On the other hand, perhaps this merger could induce Fannie to use some of its philanthropy to more directly address critical problems such as subprime and predatory lending, which might look like bailing out some part of Fannie’s subprime portfolio (supposedly around 2 percent) but might actually help save the homes of tens of thousands of low-income homeowners facing foreclosure due to heinous predatory practices. Whichever way it goes, we’ll be sure to keep a close eye on the new version of Fannie Mae philanthropy.