Fannie Mae no better than Enron

Posted September 9th, 2008 under , , , , , , , ,

On May 23, 2006, as a jury in Houston deliberated the case against top Enron executives Kenneth Lay and Jeffrey Skilling, a little-known regulatory agency in Washington, the Office of Federal Housing Enterprise Oversight (OFHEO), released a study with the dryly bureaucratic title “Report of the Special Examination of Fannie Mae.”

During the years 1998-2004, while headed Franklin Raines, Fannie Mae was found guilty of illegally inflating their earnings by $10.6 billion.  The main reason was to increase their bonuses (Raines received around $50million additional bonus due to this) and overall executive compensation.  Raines’ base pay was $1million per year.

…as a result of the investigation, Fannie Mae has agreed to pay $400 million in penalties. The company is now under criminal investigation by the Justice Department, and will likely be in trouble with the Securities and Exchange Commission, too.

Raines and team fought the investigation, they fought proposed government regulation and had the support of several democrats in congress.  For two years a bill to increase regulation was stymied until it was finally passed with a straight party vote.  The argument against the bill was that it would hurt granting loans to low-to-middle class applicants.

So, how come this hasn’t been more widely covered since the report came out over 2 years ago?

Franklin Raines is the former Clinton budget director and a member of his senior staff at Fannie Mae during this time was former Clinton Justice Department official Jamie Gorelick.  She received $15million in bunuses related to the inflated profits.  She was also responsible for creating the communications wall between the CIA and FBI during the Clinton years while working in the Justice Department.

Fannie Mae legally donates to political campaigns.  These are the top 5 candidates they donated to:

Top Recipients of Fannie Mae and Freddie Mac

 

Name Office Party/State Total
01. Dodd, Christopher J S D-CT $133,900
02. Kerry, John S D-MA $111,000
03. Obama, Barack S D-IL $105,849
04. Clinton, Hillary S D-NY $75,550
05. Kanjorski, Paul E H D-PA $65,500

Some analysis…

Total Contributions $1,386,426
Top 5 are Demotrats $491,799 35%  
16 of 25 are Democrats $966,778 70%  
9 of 25 are Republicans $419,648 30%  
   

So, why aren’t politicians all over this? Why isn’t the media tearing this apart?

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