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 report—1998 to mid-2004—Fannie 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 Enterprise’s 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 Enterprise’s 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 Enterprise’s corporate culture was false. In the words of one current member of Fannie Mae’s 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 Mae’s operational deficiencies and significant risk exposures from outside observers—the 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 Mae’s 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...."
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Welcome to Free Republic!
Tens of millions to ‘community agitators’ like ACORN too..
Indeed.
“Those achievements were illusions deliberately and systematically created by the Enterprise’s senior management with the aid of inappropriate accounting and improper earnings management.”
If YOU use fruadulent accounting like this YOU are going to jail.
YOU, not your betters.
No one will swing for Fruad in this fiasco.
Now, let’s talk about somthing else.
Google the names of prior CEO’s of Fannie and Freddie and check their political contributions. A few worked both sides of the aisle but the bulk of their donations were for the Dems. Of course several are now wrking for Obama.
This is worse than Enron but nobody will report it.
Leland Brendsel, Franklin Rains, Rham Emanuel, Jim Johnson, I’m sure there are many others.
http://www.spectator.org/dsp_article.asp?art_id=13841
The GOP has a big share of blame for this too. The twelve years of “Republican” Congress we had from 1995 through 2006 were more than happy to subsidize housing and loosen lending standards. And then they wonder why the conservative base is disillusioned with them. Its the spending and expansion of entitlements like this monstrosity. Its the GOP being one of the cheerleaders for the expansion of Socialism in America.
Yes, they deserve scorn for doing nothing to counteract the fraud before the market went bust. But they deserve far more blame for letting FF&FM off the hook once their failures went public. Propping up failed businesses with money confiscated from productive enterprises is socialistic.
Bear repeating again and again...
“Propping up failed businesses with money confiscated from productive enterprises is socialistic.” and criminal!
Their comments, that we have no idea what the final cost for this will be, definitely caught my ear. Now here is where I'm not sure I'm on the right page. Why was it that the Democrats (and some RINOS) weren't willing to give President Bush a "blank check" when it came to waging the war on terror, but they obviously have no problem with giving the government a "blank check" when it comes to taking over these mortgage lenders? Am I appropriately comparing the two issues, or am I not making any sense?
bookmark
Bloomberg saying interest rates dropping since this news, to become a trend of lower interest rates, speculating interest rates will be 1/2 percent lower within 6 months or less.
Jamie Gorelick (911 fame) was a director.
And she walked away with over $20 million.
Because it will hurt the Democrats in general and Obama in particular.
The crooks that ran Freddie Mac and Fannie Mae into the ground are all now financial advisers to Obama's campaign.
ping for later
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