Posted on 12/20/2006 12:42:48 PM PST by Tolerance Sucks Rocks
Fannie Mae's stock price has been on an upswing since late summer, reflecting investor confidence that a Democratic Congress would make strict scrutiny of the mortgage giant less likely (see the nearby chart). And there's no doubt that with Barney Frank wielding the gavel in the House Financial Services Committee, Fannie Mae and Freddie Mac will have a pal on Capitol Hill. Mr. Frank is already talking about expanding the companies' operations (and thus taxpayer exposure to any financial accident).
Fortunately, James Lockhart is still running the Office of Federal Housing Enterprise Oversight, or Ofheo, and he's shown no appetite for tolerating the shenanigans of the two lobbying powerhouses. This week he filed a 101-count notice of civil charges against Franklin Raines, Fannie's former CEO, and two other former executives. The suit seeks $115 million in restitution of ill-gotten pay and another $100 million in fines for six years' worth of proven financial misrepresentations at Fannie.
Mr. Raines's lawyers have responded by decrying Mr. Lockhart as biased for actually trying to regulate the companies he's supposed to oversee. Most of his predecessors didn't bother. And while it is true that, through a procedural quirk, Mr. Lockhart would sign off on any judgment (subject to legal appeal), Ofheo has had three directors since a similar suit was brought against Freddie Mac executives in 2003. So it's not clear Mr. Lockhart would be around to pass judgment on the case he brought this week.
In any case, it's revealing of Mr. Raines's view of Ofheo's proper role that he and his legal team believe that trying to investigate and penalize Fannie and Freddie's misdeeds is a conflict of interest for the Ofheo director. No wonder Fan and Fred got away with accounting fraud for so long.
(Excerpt) Read more at online.wsj.com ...
PING!
Sooner or later Fannie Mae and Freddie Mack will go the way out the Resolution Trust Corp. debacle. Remember that one?
Barney Frank? Hell, I'l bet Barney can't balance his checkbook.
Franklin Raines? Another terrific Clinton appointee.
Crook.
Jeanie Gorelick of 9/11 commission fame also got millions in bonus money while working for Raines. Nice to know that during Clinton, his buddies could get away with ripping us off, but the MSM gives him a pass.
Jamie Gorelick also benefited from the accounting jiggery pokery as well Mr Raines.
Fannie Mae is a company? I am not subscriber so I don't know if the newspaper employees included the following information.
Fannie Mae is a government-sponsored enterprises (GSE). Former Fed chairman Greenspan told the Senate (February 24, 2004) Committee on Banking, Housing, and Urban Affairs [my emphasis]:
"The GSEs' special advantage arises because, despite the explicit statement on the prospectus to GSE debentures that they are not backed by the full faith and credit of the U.S. government, most investors have apparently concluded that during a crisis the federal government will prevent the GSEs from defaulting on their debt. An implicit guarantee is thus created not by the Congress but by the willingness of investors to accept a lower rate of interest on GSE debt than they would otherwise require in the absence of federal sponsorship.
"Importantly, the scale itself has reinforced investors' perceptions that, in the event of a crisis involving Fannie and Freddie, policymakers would have little alternative than to have the taxpayers explicitly stand behind the GSE debt. This view is widespread in the marketplace despite the privatization of Fannie and Freddie and their control by private shareholders, because these institutions continue to have government missions, a line of credit with the Treasury, and other government benefits, which confer upon them a special status in the eyes of many investors."
[end]
Of course, with corruption to cover up (eh, Ms Gorelick, et al?) and / or a little money changing hands it's amazing what Congress can do. . . .
Thanks for posting. BTTT!
BUT... since they're politically connected Dems they get a pass.
Double-standard once again demonstrated...
I absolutely do not understand how a financial planner, for example, could reco FNM or FRE stock when they haven't filed a financial stmt in two+ years. Secondly, I do not understand why they do not have an "E" after their symbol, which ANY, repeat ANY other company would have had they not filed proper financial stmts. These cos should be de-listed or be on a conditional listing (as would be indicated by the "E" suffix after their stk symbol)
IT's not the stock that's the real problem. These GSE's (which include the Federal Home Loan Bank and the Federal Farm Credit Bank) issue billions of dollars of heavily optioned debt - also know as derivative bonds - also known as toxic waste. They do this to pump up the balance sheets, spur growth and the balance sheets become huge, leveraged hedge funds.
The question posed by this editorial is the implicit backing of the the Federal Govenment of the debt.
Anyone remember Orange County, California 1994 and Robert Citron?
He took the county down the drain by bying boatloads of bonds from FHLB, FNMA and other GSE enterprises. What happened?
Well these GSE's didn't default on the debt. No. The debt was such toxic waste that a swift change in interest rates made the stuff sink in value. The GSE's didn't default they just issued debt that a supposedly sophisticated investor like Citron could understand. He couldn't.
RAINES IS GREED PERSONIFIED (not to mention incompetence incarnate)
Fannie Mae's ex-CEO Franklin Raines (Clinton appointee) was fired for bungling (cooking?) Fannie Mae's books after billion dollar accounting irregularities were uncovered.
When he was fired, Raines was scheduled to get a $26 million tax paid parachute — not counting a monthly tax-paid pension of $116,300 for life.
He owns options giving him $5.8 million in net profit plus another $8.7 million in deferred compensation.
Raines had already collected $4.87 million in special performance shares....and keeps $5 million paid-up life insurance.
Mr/Mrs Raines get free med/dental benefits for life, worth over $1 million.
Raines earned $20 million in salary, bonuses and stock awards last year of his employment and said he was entitled to paychecks til June 22 adding another $600,000, which triggers a $2,000 monthly raise in his lifetime pension......
Raines also laid claim to disputed options with a gross value of about $5.6 million ......and demanded F/M match his charitable contributions by $10,000 a year.
There is no possibility in the entire round world that Raines has any idea what he presided over. He would have to be a Wall Street quant to come close and he would also have to be a mathematician or an engineer.
Rgds...
http://www.latimes.com/business/la-fi-fannie21feb21,1,1841837.story?coll=la-headlines-business
Fannie Mae to withhold bonuses from executives
February 21, 2007
Fannie Mae said Tuesday it would withhold $44.4 million in bonuses to former and current executives, including Chief Executive Daniel Mudd.
The mortgage finance company will deny the long-term incentive pay to 46 former and current executives, Fannie Mae spokeswoman Janis Smith said.
Fannie Mae in December said it overstated earnings from 2001 until mid-2004 by $6.3 billion.
Mudd, who has been with Fannie Mae since 2000, won't receive $4 million from that period because of the inflated performance. Others who will be denied bonuses are Chief Business Officer Robert Levin, $2 million; Chief Operating Officer Michael Williams, $1.85 million; former CEO Franklin Raines, who was ousted in 2004 because of the accounting mistakes, $11.2 million; Chief Financial Officer Timothy Howard, $3.37 million; and former Controller Leanne Spencer, $370,000.
Says it all about another of Clinton's government thieves. Thanks for the ping.
Oops, wrong administration... Never mind.
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