Posted on 09/08/2008 2:14:12 PM PDT by Dubya-M-DeesWent2SyriaStupid!
Thinking of blaming Bush for Fannie & Freddie? Try again.
Here is a report in May, 2006 by OFHEO (Office of Federal Enterprise Oversight) regarding the state of Fannie Mae and Freddie Mac. The truth is, OFHEO under the Bush administration sought to reform the agencies but they fought it tooth and nail with their lobbyists and Congressional Democrats as allies. A scorched earth policy was pursued as they sought to destroy all opposition.
While the agencies stifled all criticism, they engaged in reckless lending policies. No down payment loans given to borrowers with 580 credit scores and 55% debt to income ratios. Mortgages approved for borrowers while requiring no verification of income or assets yet the borrower only had to provide a five percent down payment.
Mortgages given to borrowers with 540 credit scores. Similar programs were provided to lenders and borrowers that encouraged an anything goes culture. However, all good things, if it can be called that, must come to an end and the Fannie Mae party is no exception to this cliche. See earlier post: Fannie and Freddie's Ticking Time Bomb
The agency chickens have now come home to roost as the Democrats have put us on the hook for HUNDREDS of billions of dollars while former Fannie CEO and Clinton Administration official Frank Raines keeps nearly $100 million he received from Fannie Mae.
OFHEO's report stated:
Fannie Mae senior management promoted an image of the Enterprise as one of the lowest-risk financial institutions in the world and as best in class in terms of risk management, financial reporting, internal control, and corporate governance. The findings in this report show that risks at Fannie Mae were greatly understated and that the image was false.
During the period covered by this report1998 to mid-2004Fannie Mae reported extremely smooth profit growth and hit announced targets for earnings per share precisely each quarter. Those achievements were illusions deliberately and systematically created by the Enterprises senior management with the aid of inappropriate accounting and improper earnings management.
By deliberately and intentionally manipulating accounting to hit earnings targets, senior management maximized the bonuses and other executive compensation they received, at the expense of shareholders. Earnings management made a significant contribution to the compensation of Fannie Mae Chairman and CEO Franklin Raines, which totaled over $90 million from 1998 through 2003...
A combination of factors led Fannie Mae senior management, through their actions and inactions, to commit or tolerate a wide variety of unsafe and unsound practices and conditions.
Those factors included the Enterprises enormous financial resources and political influence, the expectation that senior management could write the rules that applied to Fannie Mae, financial rewards tied to a measure of profits that management could easily manipulate, and the relative disinterest of senior executives in adhering to standards of prudent business operations....
The image of Fannie Mae communicated by Mr. Raines and his inner circle and promoted by the Enterprises corporate culture was false. In the words of one current member of Fannie Maes Board of Directors, the picture of the Enterprise as a best-in-class financial institution was a façade. To maintain that façade, senior executives worked strenuously to hide Fannie Maes operational deficiencies and significant risk exposures from outside observersthe Board of Directors, its external auditor, OFHEO, the Congress, and the public. ...
The existence of a federal agency with the ability to regulate the Enterprise represented a direct challenge to senior management. To deal with that challenge, Fannie Mae took the extreme position that OFHEO simply had little authority over the Enterprise, while Fannie Maes lobbyists worked to insure that the agency was poorly funded and its budget remained subject to approval in the annual appropriations process. The goal of senior management was straightforward: to force OFHEO to rely on the Enterprise for information and expertise to such a degree that Fannie Mae would essentially be regulated only by itself....."
Finally, in a statement that reminds one of Bernie Ebbers and Worldcom, OFHEO reports: "The message from Mr. Raines was clear: EPS results mattered, not how they were achieved...."
Even Reagan believed that home ownership would magically turn the poor and minorities into conservatives. We can state unequivocally that that GOP-propelled experiment has been a dismal failure.
Fannie Mae was fined $400 billion for cooking the books in 2004. They over estimated their earnings by $6.3 billion. At the time this occurred, the CEO of Fannie Mae was Franklin Raines.
How corrupt was Raines? While being investigated by the SEC for cooking the books, he decided it was time to take an early retirement.
However, he wasnt completely off the hook - rather than going to jail for his actions, he bought his freedom for a $24.7 million settlement. However, heres the kicker - Of that $24.7 million, $15.6 million was in stocks, but was from stock at the time when the transgressions occurred.
What that means is that he was paying $15.6 million of stock valued at $77 per share, but the stock was now worth $9 per share. So - that money was $15.6 million in 2004 - which was now devalued to only $1.8 million.
In addition, Raines paid another $2 million, but surprise surprise, that was covered by the insurance policy to protect against things like that. He also donated an additional $1.8 million in stock, but another shocker - It wasnt even his.
He was involved in a lawsuit with Fannie Mae, in which both sides claimed the stock was rightfully theirs.
Finally, he agreed to part with $5 million in unspecified benefits which really shouldnt be unspecified since they are public funds!
By the way, Raines still gets a monthly pension of nearly $114,000 per month, for life, and then if necessary, for the life of his wife.
So where was the media in all of this?
Is Barney Frank, Dodd,Schumer,and the rest of the ilk going to drag in Franklin Raines to explain how he made HUNDREDS of MILLIONS from Freddie Mac while running it into the ground?
We all remember Franklin Raines. He was the lucky bastard who was the White House budget director under Clinton who happened to be sitting there when the GOP balanced the budget by cutting the capital gains tax and flooding the Treasury with hundreds of billions of unexpected money.
A Democratic president and republicans working so well together should have clued someone in.
Raines got to profit from the Clinton economy brilliance by getting handed a job which allowed him to basically print money for himself - a quasi-government mortgage lender (that doesnt lend money but does guarantee losers for other lenders).
Raines has been hiding for the last couple of years and for good reason. Rumor has it he bought a few pricey homes recently.
He should be the fing poster child for this housing crisis. He is a liberal tool. He should be more famous than the former head of Countrywide Home Loans who was giving insider rates to his buddies on Capitol Hill.
Video: Fannie Mae Scandal and Obama’s friends
Youtube ^ | 9/15/08 | cmddrums
Posted on Mon Sep 15 23:27:09 2008 by april15Bendovr
Articles that inform and raise question about Fannie Mae.
http://www.freerepublic.com/focus/f-news/2083221/posts
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.