Fannie had gone from $1.2 billion in subprime-mortgage and securities purchases in 2000 to $9.2 billion in 2001 and $15 billion in 2002. Freddie's numbers were murkier, but clearly also on the rise. In 2003 alone, the two bought $81 billion in subprime securities—which also count against the goals.
In 2004, after a forensic audit by OFHEO, serious accounting manipulation was found at Fannie, and Franklin Raines, its chairman, was compelled to resign (as was and Timothy Howard, its chief financial officer).
RAINES was fraudulently cooking Fannie's books in order to collect millions in bonuses. Raines was eventually fired and ordered to give back $50 million in bouses (don't hold your breath). Raines was fired for fraudulent practices, but he walked away with millions, proving you can fool most of the people most of the time until you get caught....and NEVER ever serve a day in jail for being a crook.
Franklin Raines (seen here) looted and pillaged Fannie Mae as Clinton's appointee.
RAINING MONEY - Franklin Raines fired for cooking the books---walks away w/ $90 million tax dollars
Franklin Raines reigned for 5 years following Clinton's appointing him as CEO of Fannie Mae, the US' quasi-governmental mortgage house, has now been ousted.
There are several ongoing investigations of Fannie Mae's operations and accounting practices covering the last 5 years in order to determine when accounting irregularities started and the magnitude of the financial shortfalls. Current estimates indicate that there was a $9 billion misstatement of earnings and accounting irregularities between 2000-2004.
(POSTER'S NOTE: Can you say offshore wire transfer?)
Former chief executive Franklin Raines received more than $40 million in bonuses and other pay as a result of falsely inflated earnings at the US' largest mortgage finance company. This is according to a supplement of a lawsuit filed by Ohio Attorney General Jim Petro. Fannie Mae added "tens of millions of false revenue" to meet "Raines' 1999 publicly announced goal to double" earnings over the next five years, Petro's November 23, US District Court in Washington alleges. The filing alleges that, "Raines personally profited by over $40 million by this false earnings history.
Update -- 2/22/2006: Former Senator Warren Rudman's team of investigators and auditors selected from his law firm, Paul, Weiss, Rifkind, Wharton & Garrison, and from Huron Consulting Group presented their 600-page report calling Fannie Mae's accounting systems "grossly inadequate." It is based on a review of millions of documents.
The report found that accounting obfuscations were intended to increase stock valuations, thus increasing executive bonuses.
Raines was one of the most influential and politically savvy figures in Washington is identified by the Rudman investigation as not directly knowing that Fannie Mae's accounting practices violated rules. The report does state, "We did find, however, that Raines contributed to a culture that improperly stressed stable earnings growth and that... he was ultimately responsible for the failures that occurred on his watch".
Raines will continue to live well being supported by Fannie Mae's shareholders. Some relevant facts include:
-- Raines and his wife will be paid $114,393 a month as long as they live.
-- Stock options: Raines holds vested stock options worth roughly $5.7 million.
-- Stock bonuses: Raines was granted awards, payable in stock, for reaching performance goals. Under the program, he got 69,577 shares... half of what Fannie determined he should receive in January. At Monday's close, the shares are worth $4.9 million. It is unclear if he will receive the rest.
-- Deferred pay: For tax planning while employed by the company, Raines was allowed to put off the receipt of payment. These deferred past payments total $8.7 million
Future salary: Although Fannie Mae says Raines' retirement was effective December 21, 2004, he is seeking to have it effective as of June 22, 2005, and thereby receive $600,000 more in pay.
Mr. Raines followed a well-worn path in the United States during the later half of the 20th century. His humble beginnings were in Seattle. He won a scholarship to Harvard and was a Rhodes Scholar at Oxford. He worked on Wall Street for over a decade in the prestigious firm Lazard Freres. He was a member of President Clinton’s cabinet and director of his Office of Management and Budget. In 1999, Clinton selected him for the position of Fannie Mae CEO.
Following revelations of the financial scandal, Mr. Raines took early retirement from Fannie Mae so that he could collect a compensation package including $1 million per year for life and $11 million in vested stock. In 2003 Mr. Raines was paid $20 million in salary and bonus.
Fannie Mae is facing criminal investigations by the Justice Department, operational investigations by the SEC, and various Congressional investigations. There are questions regarding earnings statements being incorrectly inflated. In 2003, if derivative and other losses had been included, no bonuses would have been paid to top executives. However, deferral of the losses allowed declared earnings to reach a level which triggered maximum executive bonuses.
It is a far stretch to imagine that Franklin Raines actually was capable of satisfying the requirements of the positions he held from Harvard to Director of the White House Office of Management and Budget. If he had been competent enough to hold those positions, how could he have been Fannie Mae's CEO for 5 years and allowed, not known about, or not understood that $9,000,000,000 was being mishandled.
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Fannie Mae CEO Franklin Raines Letter to Shareholders----2003 Fannie Mae Annual Report
EXCERPT Ten years ago......the typical conforming mortgage required a down payment of 10 to 20 percent, and low-down payment mortgages were considered too risky. But then we helped to standardize the 3 to 5 percent down payment loan, brought it to global capital markets, and made it available to lenders and communities nationwide. Now low-down payment loans are commonplace. And we just adopted a new variance in our underwriting standards that will make the $500 down payment loan widely available as well...
In 1994, we pledged to provide $1 trillion in capital to ten million underserved families by the end of 2000. Thanks to our housing and industry partners, we met that goal early.
Then in 2000, we launched our American Dream Commitment, a pledge to provide $2 trillion in capital to 18 million underserved families by the year 2010, including $400 billion targeted specifically for minority families (later raised to $700 billion in response to President Bush’s Minority Homeownership Initiative). After four of the strongest years in housing and mortgage finance history, we’ve already surpassed the top-line goals of this commitment. But our work is far from complete.
So in January 2004, we announced our Expanded American Dream Commitment and pledged significant new resources to tackle America’s toughest housing challenges. Our new commitment has three main goals.
First, we will expand access to homeownership for six million first-time home buyers in the next ten years, including 1.8 million minority first-time home buyers. We also will help raise the national minority homeownership rate from 49 percent to 55 percent, with the ultimate goal of closing it entirely.
Second, we will help new and long-term homeowners stay in their homes through a series of initiatives, and commit $15 billion to preserve affordable rental housing and $1.5 billion to support the revitalization of public housing communities.
Third, we will increase the supply of affordable housing and support community development activities in at least 1,000 neighborhoods across the country through our American Communities Fund, and through targeted investments like Low-Income Housing Tax Credits that help finance affordable rental housing.
It is because of initiatives like our Trillion Dollar Commitment and our American Dream Commitment that we have exceeded our HUD affordable housing goals for ten consecutive years.
Fannie Mae CEO Franklin Raines Letter to Shareholders----2003 Fannie Mae Annual Report
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December 28, 2004
RAINES' FAREWELL
By PAUL THARP NYP
http://www.nypost.com/business/37312.htm
Although Fannie Mae chief Franklin Raines was fired for bungling its books, he got a $90 million parachute — not counting a monthly pension of $116,300 for life (plus COLAs). The 55-year-old Washington, D.C. insider and his CFO J. Timothy Howard left their jobs under a cloud of suspicion that the execs undermined the financial soundness of Fannie Mae, creating losses of up to $9 billion.
Regulators overseeing Fannie Mae urged it not to pay any benefits to either executive until reviews are made of their contracts, filings said yesterday. Fannie Mae's filings federal Raines owns options giving him $5.8 million in net profit after redeeming them, plus another $8.7 million in deferred compensation for his six years at the helm.
Raines has already collected $4.87 million in special performance shares this year and also keeps $5 million of paid-up life insurance. He and his spouse get free medical and dental benefits for life, worth over $1 million.
Last year, Raines earned $20 million in salary, bonuses and stock awards. The Securities and Exchange Commission said he broke accounting rules by playing with risky derivatives. After he was fired, Raines told the board that he's entitled to get paychecks until next June 22 giving him another $600,000, which triggers a $2,000 monthly raise in his lifetime pension.
He also says he's entitled to disputed options with a gross value of about $5.6 million. To keep Raines happy within philanthropic circles, Fannie Mae will match his charitable contributions by $10,000 a year.
Raines' CFO Howard gets a parachute valued at more than $13.1 million — not including a monthly pension of $36,071 for life (plus COLAs). Howard gets free medical and dental coverage for himself and family for life, and as well as the matching $10,000 annual perk in making charitable contributions.
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9/26/08 UPDATE: LA grand jury probing Countrywide VIP loans
LAtimesblogs via WSJ ^ | September 25, 2008 | Peter Viles
FR Posted on 09/26/2008 5:50:44 AM PDT by stockpirate
The Wall Street Journal reports that a federal grand jury in Los Angeles is investigating the so-called "Friends of Angelo" loan program at Countrywide Financial, under which influential borrowers received preferential terms on home loans. The reported borrowers under the program have included U.S. Sen. Chris Dodd (D-Conn.), former Fannie Mae Chief Executive Franklin Raines, and California state appeals court judge Richard Aldrich. (Excerpt) Read more at latimesblogs.latimes.com ...