Thursday, July 24, 2008

Fannie Mae Collapse or the Democrat Swindle of the U.S. Taxpayer

In 2006 an election year, the Democrats were still trying to lay the Enron scandal on Bush and the Republicans. With the help of the press a cover up of a larger financial scandal was taking place. A scandal that we are paying for today.

In 2006 a 3 year investigation into fraud at Fannie Mae was concluded. It revealed a level of financial misconduct by Franklin Raines, Jamie Gorelick, and others that grossly overstated earnings by 10.6 Billion dollars. To gain bonuses.

Byron York wrote back in 2006

ON May 23, 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." The document received far less attention than the news from Enron, but its conclusions were stunning. In meticulous detail, it outlined a culture of corruption at the Federal National Mortgage Association--better known as Fannie Mae--that rivals the most serious corporate scandals in recent years. In this case, however, the main players are Washington insiders--some of them prominent veterans of the Clinton administration--and the scandal's effects could ripple through Congress for years.

In doing so, the report says, Raines and his team steered Fannie Mae far afield from its original mission, transforming it from a stable business into a risky one. But Fannie Mae is not just any private institution. It is congressionally chartered, meaning its existence is established in law, it does not have to pay state and local income taxes, and it is not subject to bankruptcy laws.

In 1999, Raines announced a new goal to double Fannie Mae's EPS in five years, from $3.23 per share to $6.46. It was an audacious goal, and reaching it, according to OFHEO, became Fannie Mae's reason for existence: "$6.46, the EPS goal, became the corporate mantra--everything else was secondary to hitting that target."

Even though his salary never topped $1 million, Raines' total compensation shot from $6.48 million in 1998 to $8.52 million in 1999, to $13.89 million in 2000, to $18.86 million in 2001, to $18.20 million in 2002, to $24.15 million in 2003, all on the strength of EPS bonuses. Investigators found that of the $90.12 million Raines was paid in that six-year period, more than $52 million came from EPS bonuses.

Gorelick's situation was similar. OFHEO found that she took home $26.46 million in the period from 1998 to 2002 (she left in that year, so she wasn't there for the entire period under investigation). Of that figure, nearly $15 million came from EPS bonuses.

In other words, they cooked the books. And to make matters worse, according to OFHEO, when regulators began to catch on to what was happening, Raines and his team then "sought to interfere" with the OFHEO investigation by trying to get Congress to start up a separate probe of OFHEO. Fannie Mae also lobbied Congress to cut OFHEO's funds unless it got rid of the top official in charge of investigating Fannie Mae.


The Democrats aided Raines by refusing to hold hearings on Raines and Gorelicks fraud. Their actions have led to the collapse of this institution, putting the American taxpayer on the hook for 5.6 Trillion Dollars. We are the insurers of this institution.

Even today with the collapse of Fannie Mae when Republican Baynor called for hearings again Barney Frank refused.

When you look at our Government run institutions Social Security, Medicare, Medicaid, and Fannie Mae. Not one of these is solvent. We the American public hold the bills due on this group of catastrophes to the tune of $59 Trillion.

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