Skip to comments.WSJ: Systemic Political Risk - The Fannie Mae scandal - When it Raines, it pours.
Posted on 09/30/2005 6:06:48 AM PDT by OESY
...[I]nvestigators have uncovered even more accounting "irregularities" -- including overvaluation of assets, attempts to hide derivatives losses and the possible improper use of tax credits....
Which brings us to Mr. Oxley, the House Financial Services Chairman who is pressing a "reform" for Fannie and its sibling, Freddie Mac, that fails to address their core financial risks. His bill does nothing to reduce their huge portfolios of mortgage-backed securities (MBSs) and the derivatives they use to hedge those portfolios.
Reducing their MBSs would dent their profitability. But a meltdown in their black-box hedging operations could have far worse consequences, and the ramifications wouldn't be limited to Fan's and Fred's shareholders. Federal Reserve Chairman Alan Greenspan refers to this as "systemic risk," a polite way of saying that the damage could spread throughout the U.S. financial system and beyond. With Fan and Fred between them controlling about one-fourth of the multitrillion-dollar MBS market, that is no exaggeration.
In 2003, Freddie Mac revealed that it too had misstated earnings. But Fred was lucky and earnings were revised upward. Fannie has yet to complete a multiyear earnings restatement, which awaits the conclusion of the current investigation. But Fannie has estimated that close to $11 billion in profits could be wiped out for the period between 2001 and mid-2004....
Mr. Oxley knows all this but he punted on real reform to appease the homebuilders lobby that has several wholly owned subsidiaries on his Committee. His proposals are worse than doing nothing because they give the appearance of reform while further entrenching Fan and Fred politically. They would also make Republicans responsible for whatever economic and financial damage follows. The phrase for this is systemic political risk, and we trust that's something every Member of Congress understands.
(Excerpt) Read more at online.wsj.com ...
Fannie Mae executives - Salary + bonus received:
James. A. Johnson Chairman and CEO $966,000 + $1,932,000
Franklin Raines Chairman- and CEO-designate $526,154 + $1,109,589
Lawrence M. Small President and COO $783,839 + $1,108,259
Jamie Gorelick Vice chairman $567,000 + $779,625
J. Timothy Howard Executive vice president and CFO $395,000 + $493,750
Robert J. Levin Executive vice president $395,000 + $493,750
Sources: Office of Federal Housing Enterprise Oversight,
Fannie Mae Notice of Annual Meeting of Stockholders, May 20, 1999
NOTE: I was not able to locate more recent data immediately.
Ex-Fannie Mae CEO Franklin Raines, who was chairman and chief executive, is eligible for monthly pension payments of $114,393 for life, or close to $1.4 million a year, the company said. He is also owed $8.7 million in deferred compensation. And Raines, 55, holds vested options for 1.6 million shares of stock, plus options for 368,800 shares that he becomes eligible for upon retirement. He has a life insurance benefit of $5 million until age 60, with a benefit of $2.5 million afterward. -- NEW YORK TIMES NEWS SERVICE, December 28, 2004
QUOTE: If something were really wrong, wouldnt someone in the government do something? -- Fannie Mae CEO Franklin Raines told The Washingtonian, 2003
Let me guess...he was a Clinton guy, right?
JAMIE GORELICK & HER GREASY HANDS ALL OVER THIS
YOU REMEMBER GORELICK? FROM THE 9-11 OMISSION PANEL.
But wait a minute. I thought the Republicans were the ones mired in a "culture of corruption". I better go talk to Charlie Trie, John Huang, James Riady, Dan Rostenkowski, Jim Wright, Henry Cisneros, Johnny Chung, Red Bone, Webster Hubbell, Jim Guy Tucker, Pauline Kanchanalak, Al Gore, Bill Clinton, Hillary Clinton, The Brothers Rodham, Craig Livingstone...
Damn near anyone connected with the Clinton's are law breakers....
From the Downside Legacy, a list of Convictions within two degrees of Bill Clinton:
Gov. Jim Guy Tucker
Robert W. Palmer
Neal T. Ainley
William J. Marks, Sr.
Michael Brown (Ron Brown's son)
Sun Diamond Growers
Crop Growers Corporation
Brook Keith Mitchell Sr.
Five M Farming Enterprises
John J. Hemmingson
Alvarez T. Ferrouillet, Jr.
Municipal Healthcare Cooperative
Ferrouillet & Ferrouillet
Patsy Jo Wooten
Roger Tamraz (Lebanon by default)
William McCord (head of Lasater & Co.)
Jack Williams, Tyson lobbyist
Archie Schaefer, Tyson spokesman
Mark Cambiano (plea bargain: drop drug money to DNC for guilty plea on bank crime)
The Robert Mondavi Corporation
Richard Douglas - additional count of lying to FBI
IBM East Europe/Asia Ltd. (export of computers to a top-secret Russian nuclear weapons lab)
Robert S Lee
Berek Paul Don
Yah Lin "Charlie'' Trie
President Clinton, Secretary of State Madeleine Albright and 13 other top Western and NATO leaders (by a court in Belgrade)
Arthur A. Coia