Skip to comments.Top 7 Scumbags Who Stole Taxpayer Money
Posted on 02/15/2011 2:06:50 PM PST by TheHawksNest
One of the biggest frauds ever committed against the American people that has gone largely unnoticed by the victimized public was the failure of Fannie Mae and Freddie Mac. While most Americans are very upset that their housing values have plummeted and can personally feel how the housing crash has affected them, they cannot wrap their heads around a billion dollar scam. I will admit, I have trouble myself.
Lets face it, most Americans seem to be more interested in whatever trouble Lindsey Lohan is in this week than in the inner workings of the financial markets. Eyes tend to glaze over at the mere mention of the mortgage giants, and images of chocolate delights swim past the frontal lobe when the words Fannie Mae (or Fannie May, famous Chicago chocolates) are mentioned.
But its actually quite simple. A bunch of high powered government types found a casino at which they could not lose. Fannie Mae and Freddie Mac provide loans backed by the government, so if youre on the board or the president of the company, you can make any type of risky, hair-brained investment and fail (epic-style) and walk away with millions. Not only can you get rich but you could become the most influential staffer in the White House or the president.
The following individuals are the worst offenders who profited off of the mortgage crisis that led to the housing crash. Not only did they get away with it but they are some of the most powerful people in the world.
(Excerpt) Read more at newsrealblog.com ...
Why they haven’t put Jamie Gorelick behind bars: I don’t understand. Maybe they like her name.
I’m kind of of torn on this. Even though it appears that Andy is serious as our new governor, he was in on this too. BTW, I don’t see Chuck the Schmuck on this list either.
Sadly, this could easily be a top 50 and the author wouldn’t have run out of names. The corruption is breathtaking.
When Gorelick wasn’t destroying the economy via the housing collapse she was destroying national security by destroying the ability of the CIA to divulge terrorism threats prior to 9/11. She then had the nerve to try to cover it up while sitting on the 9/11 commission. Gorelick is a one-person wrecking crew. The more incompetent she is the more money and career options she is given.
More from older articles:
100 to Blame: Prosperity Theologists, Franklin Raines, and More
by Bruce Feirstein
September 25, 2009, 4:50 PM
Bruce Feirstein charts the 100 people, companies, institutions, and vices most responsible for the economic mess. Tune into VF.com for five new financial villains every day.
80. Prosperity Theologists.
Welcome to Television Evangelism, version 2.0, whose gospel can pretty much be summed up as God wants you to be rich; He wants you have that Xbox 360 and that all-weather Jacuzzi; He will provide for Thee, so long as you provide for Me. The leading proponent \is Joel Osteen, who broadcasts to millions each week from his 16,000-seat Lakewood church in Houston, Texas, formerly known as the Compaq Center Arena and one-time home to the Houston Rockets basketball team. All told, Osteen spent $95 million renovating the arena. Other Prosperity ministries include T. D. Jakess Potters House in South Dallas and Creflo Dollars World Changers near Atlanta, but Osteen is the only one who cites Nielsen ratings on his Web bio.
Because they made everyone believe that 1 1 = 5. These were the financial industrys backroom brainiacs, some with PhDs in physics, math, or computing, who believed that everything could be quantified. There was always some magic formula, some foolproof algorithm, some computer-engineered model that would eliminate risk, predict the market, and generally ensure that wed all be driving around in million-dollar V-12 convertible Maybachs. From collateralized debt obligations to credit-default swaps, most of the cant lose financial derivatives that inflated the mortgage bubble were based on their lead-into-gold alchemy. To update Mark Twain, attributing a quote to Benjamin Disraeli in 1907, there are three types of lies: lies, damn lies, and quantifiable analysis.
82. Franklin Raines.
Because as C.E.O. of Fannie Mae, he wasnt just a Friend of Angelo. He was one of Countrywide Financials great enablers. The usual executive summary of Franklin Rainess misdeeds is that he was forced out as C.E.O. of Fannie Mae in 2004 after an investigation determined that the government-sponsored enterprise had overstated Fannie Maes earnings by as much as $10.6 billion between 1998 and 2004 in order to trigger executive bonuses. In his six years at Fannie Mae, Rainess compensation was more than $90 million, of which $52 million came from bonuses tied to earnings.
But theres more to the story than that. Raines became C.E.O. of Fannie Mae in 1998 after a two-year stint as Bill Clintons budget director. Before joining the administration, hed been the vice chairman at Fannie Mae from 1991 to 1996, and before that, a partner at the investment-banking firm Lazard Freres. At the time he resigned from the Clinton administration, The Washington Post wrote that Raines had made no secret of his desire to return to the private sector, noting that his annual salary at the Office of Management and Budget had been just under $150,000, and the previous C.E.O., Jim Johnson, had pulled down $7.2 million in 1996 alone.
After he took over at Fannie Mae, one of Frank Rainess first orders of business was to double Fannies earnings, from $3.23 per share in 1998 to $6.46 by 2003. As a Fannie Mae executive told Vanity Fairs Bethany McLean: All the V.P.s in the company looked at each other and said, How is that going to happen? Not long after, the head of Fannies auditing department gave a speech to his employees, exhorting them: By now every one of you must have $6.46 branded in your brains. You must be able to say it in your sleep, you must be able to recite it forwards and backwards, you must have a raging fire in your belly that burns away all doubts, you must live, breath and dream $6.46, you must be obsessed on $6.46 . . . Remember, Frank has given us an opportunity to earn not just our salaries, benefits, raises, E.S.P.P. [employee stock purchase plan], but substantially over that if we make $6.46.
By 2001, in the most positive sense of the aphorism, Fannie was burning up its balance sheet like a house on fire. Its earnings had jumped from $3.23 per share in 1998 to $5.20 in 2001. As Raines wrote in Fannies 2001 annual report: Our combined book of business grew by 19 percent, taxable equivalent revenues grew by 30 percent, credit losses fell to their lowest level since 1983, and operating earnings per share grew by 21 percent over the previous year.
Under Rainess watch, Fannie. started a pilot program to buy subprime mortgages and began buying home loans with no-money-down financing. Fannie continued what appeared to be its longstanding policy of trying to buy influence on Capitol Hill, rewarding its friends and punishing those it perceived to be its enemies. According to the Center for Responsive Politics, between 1999 and 2002, Fannie Mae spent more than $27 million hiring nearly 20 different lobbying firms. According to a report by Fannie Maes regulatorThe Office of Federal Housing Enterprise Oversight (O.F.H.E.O.)Fannie Maes lobbyists tried to insert language into an appropriations bill that would have reduced O.F.H.E.O.s funding until its chief regulator, Armando Falcon, was fired. According to The Washingtonian magazine, when former congressman Richard Baker (Republican of Louisiana) called for a stronger regulator in 2000, Fannie Mae responded by calling his constituents, eliciting an avalanche of letters complaining he was trying to raise mortgage costs. And in response to personal attacks for his criticism of Fannie Mae and Freddie Mac on the editorial pages of the Wall Street Journal, the papers editorial page editor, Paul Gigot called Fannie and Freddie unique in their thuggery.
As a result of a 2003 accounting scandal at Freddie Mac (see separate listing, Leland Brendsel), O.F.H.E.O. decided to take a look at Fannie Maes finances.
The preliminary report, released in September 2004, found that Fannie Mae used cookie jar reserves to smooth out earnings, manipulated those earnings within a hundredth of a cent to trigger bonuses (in 1998, for example, the maximum bonuses kicked in at $3.23; miraculously, the earnings came in at $3.2309), and engaged in dysfunctional accounting. The 211-page report focused on practices that fell under the purview of Chief Financial Officer Tim Howard. But in the wider view, it warned that the matters detailed in this report are serious and raise concerns regarding the validity of previously reported financial results, the adequacy of regulatory capital, the quality of management supervision, and the overall safety and soundness of the Enterprise, and added that the problems relating to these accounting areas differ in their specifics, but they have emerged from a culture and environment that made these problems possible.
Challenging O.F.H.E.O.s allegations, Raines asked for an S.E.C. review. In December 2004, after the S.E.C. said that Fannies procedures werent even on the page of acceptable accounting standards, and that Fannie Mae would have to restate its earnings back to 2001, Raines retired. Two years later, when the final report was issued, the government found Fannie Mae had engaged in extensive financial fraud, and fined it $400 million. O.F.H.E.O. sued Raines and two other Fannie executives for $115 million, seeking to recover $84.64 million in stock options, bonuses, and other payments from Raines alone. The suit was settled in April 2008, with Frank giving up near-worthless stock options, making a $1.8 million donation to charity and a $2 million fine to the government that was covered by Fannie Maes insurance policies. This settlement is not an acknowledgement of wrongdoing on my part, Raines said in a statement, because I did not break any laws or rules while leading Fannie Mae. Oh, yes. There was one other thing. During his time as C.E.O., Raines received four Friends of Angelo sweetheart mortgages from Countrywide Financial.
All this is a very roundabout way of getting to whats missing from the usual executive summary. In 1999, after Raines became C.E.O., Countrywide Financial announced that it had entered into an exclusive strategic agreement with Fannie Mae, whereby Countrywide agreed to sell most of its loans to Fannie in return for reduced fees. This is not to say that Raines was in any way involved with the toxic subprime loans that Countrywide would later be peddling. He wasnt. Fannie Mae wouldnt wholeheartedly plunge into the subprime business until after Raines was gone. But you now had a partnership between two financial institutions that were almost entirely focused on growth. At any given moment, there were only a limited number of home buyers with perfect credit scores. Sooner or later, Fannie Mae and Countrywide had to reduce their credit standards, just to keep growing. By 2004, Countrywide had become Fannie Maes largest customer.
83. Lewis Ranieri.
In 2004, when BusinessWeek compiled a list of the greatest innovators in the magazines 75-year history, Lewis Ranieri was ranked right up alongside Bill Gates and Martin Luther King Jr. (Yes, that Martin Luther King Jr.) Why? Working at Salomon Brothers in the 1970s, Ranieri coined the term securitization, hired the PhDs who invented collateralized mortgage obligations, and created the market for mortgage-backed securities. He earned hundreds of millions for Salomon Brothers selling these pools of collateralized mortgages. He also earned the envy of every other investment bank, which took up his credo that mortgages are math and plunged into the business for themselves. Immortalized in the book Liars Poker (by Vanity Fair contributor Michael Lewis) for his slovenly dress and frat-boy antics, Ranieri once held a flaming Bic lighter under a bond salesmans crotch as the young trader tried to expalin the deals he was working on, completely oblivious to the flame. BusinessWeek was kinder to Ranieri, citing his victories in lobbying Washington to remove (read: deregulate) the legal and tax issues surrounding mortgage-backed securities. By 2006, in the frenzy of the subprime era, Ranieri himself was worried about the market he fathered. This stuff doesnt just get sold to money managers, he warned. It gets sold to the public and to foreign investors who dont have a clue what to look for. Unfortunately, Ranieri didnt heed his own advice: In November 2008, the F.D.I.C. seized the Franklin Bank Corp of Houston Texas, estimating that the cost of its failure to the Deposit Insurance Fund would be between $1.4 billion and $1.6 billion. Lewis Ranieri founded the bank in 2002.
84. The Repeal of the Glass-Steagall Act.
Here are the eight things you should know about the Glass-Steagall Act:
1) The bill was passed in 1933, after a congressional inquiry into the causes of the depression. One of the problems was that banks were both underwriting stocks, and selling them to their checking and savings account customers. To protect the public from this conflict of interest (i.e., pushing risky stocks off on their unwitting customers), the law mandated that commercial banks could no longer be in the investment banking business.
2) By the 1960s, commercial banks and brokerage firms both felt these restrictions were limiting their growth, and began working to get them overturned. Their efforts were not altogether unsuccessful: In 1987, JPMorgan, Citicorp, and Bankers Trust successfully lobbied the Federal Reserve Board to allow commercial banks to underwrite mortgage-backed securities. One of Morgans directors whod been advocating for these changes was Alan Greenspan, who would become head of the Federal Reserve Board in August 1987.
3) In April 1998, the merger of Citicorp and the Travelers Insurance Company (with its Smith Barney brokerage subsidiary) brought commercial banking, insurance, and investment banking together under one roof, and into direct conflict with Glass-Steagall. In response, Greenspans Fed gave the new conglomerate, Citigroup, two years to comply with the law which, in realpolitik, meant that Citi would either have to spin-off Travelers and Smith Barney (crushing co-C.E.O. Sandy Weills dream of creating an all-purpose megabank) or find a way to get Glass-Steagall killed. Weill launched furious lobbying campaign, targeting Greenspan, Treasury Secretary Robert Rubin, congress, and the White House to get the law changed. In the run-up to the 1998 elections, the FIRE industries Finance, Insurance and Real Estate would spend almost $200 million on lobbying, and contribute more than $150 million to politicians who oversaw banking legislation.
4) In October 1999, President Clinton threatened to veto the legislation repealing Glass-Steagall until he was certain the banks wouldnt cut back on mortgages to low- and middle-income neighborhoods. After weeks of contentious negotiations between Chris Dodd, Phil Gramm and the new Secretary of the Treasury, Larry Summers, a compromise was announced at 2:45 am on October 22 1999: Banks were prohibited from expanding into new businesses until they met the targets mandated by Clintons revised Community Reinvestment Act for the percentage of mortgages they were required to write in low-income neighborhoods. (See separate entry for Community Reinvestment Act.) The bill, known as the Gramm-Leach-Bliley Act passed the House by 362 to 57 and the Senate by 90 to 8. Clinton signed it into law on November 13. Citigroup was saved, Glass-Steagall was dead, and banks were free to start taking risks on things like Collateralized Debt Obligations.
5) Oh. We almost forgot to mention: After resigning as Clintons Secretary of the Treasury, Robert Rubin went to work for CitiGroup in late October 1999, where he would earn $126 million in cash and stock by 2009.. (And for those keeping track of these things at home, before joining the Clinton administration, Rubin had been co-chairman of Goldman Sachs.)
6) To this day, Bill Clinton defends both the Gramm-Leach-Bliley Act, and Phil Gramm, saying that hes yet to see any real evidence that the repeal of Glass-Steagall played a role in the financial crisis.
7) On the other hand, the Nobel-laureate Joseph E. Stiglitz believes the repeal of Glass-Steagall brought the risk-taking culture of investment brokerage to commercial banking. And Elizabeth Warren, the Harvard law professor who currently chairs the congressional oversight panel on the $700 billion stimulus package and funds, likens the repeal of Glass-Steagall to pulling the threads out of the regulatory fabric that kept us safe from financial panic since the great depression.
8) But perhaps the most interesting perspective of comes from Lloyd Blankfein, C.E.O. of Goldman Sachs. If you take an historical perspective, he told The New York Times in 2007, discussing Goldmans expanding range of financial services, and the benefits reaped by clients, Weve come full circle, because this is exactly what the Rothschilds or JPMorgan the banker were doing in their heyday. What caused an aberration was the Glass Steagall Act.
85. Retention Bonuses.
So riddle me this, Mr. Wall Street: After hauling down millions for years in salary, stock options, or guaranteed bonuses, when you ran the company into the ground and pretty much rendered yourself unemployable, were supposed to give you a retention bonus, to keep you in the job you screwed up and prevent you from going to a competitor, as if anyone else was chomping at the bit to hire you? (And please dont tell us it wasnt your departments fault. Thats sort of like asking, Why should the mail room suffer, just because the whole company went bankrupt?)
AND, Johnson and Gorelick
Americas greatest economic liability is also the greatest political liability for the Democratic congressional leadership. Fannie Mae and Freddie Mac have exposed taxpayers to $5.4 trillion in risk from loan guarantees, with taxpayers already having covered $126 billion in losses. So far, Democrats have been reluctant to include tough reforms on the profligate government-sponsored enterprises in the financial regulation package currently making its way through the legislative process.
A group of Republican senators led by John McCain, Arizona Republican, last week proposed to give the housing market giants five years either to become self-sufficient or to go out of business. They would also reduce the total amount of losses that taxpayers would cover to $400 billion. Rather than debate the particulars of this idea, Democratic leaders appear more interested in burying any and all such changes.
And no wonder. Renewed scrutiny of the two institutions would remind the public that senior Democrats were in bed, sometimes literally, with Fannie and Freddie. House Financial Services Chairman Barney Frank of Massachusetts spent a number of years blocking various attempts to regulate government-sponsored enterprises, famously saying that that he did not see any safety and soundness problems worthy of note. There was good reason for Mr. Frank to look the other way, given his history of close association with Herb Moses, Fannies assistant director for product initiatives from 1991 to 1998.
Many other top Democrats were friends with financial benefits from Fannie and Freddie. Franklin Raines, a former Carter- and Clinton-administration official, pocketed $90 million as Fannie Maes CEO - a figure bolstered by the agencys overstated earnings. Former Clinton appointee Jamie Gorelick was paid $26 million as Fannies vice chairman. Veteran Democratic honcho Jim Johnson, who led Sen. John Kerrys vice presidential search committee and temporarily led Mr. Obamas veep search, enjoyed $21 million. Mr. Johnson later resigned from the Obama team when he was identified as a friend of Angelo - one of those who were given below-market loans directly by Countrywide Financial CEO Angelo Mozilo. Among other friends of Angelo were Mr. Raines, Senate Budget Committee Chairman Kent Conrad of North Dakota and Senate Banking Chairman Christopher Dodd of Connecticut. Fannie Mae was the biggest buyer of the outrageously risky mortgages that proved to be Countrywides undoing.
Fannie and Freddies campaign donations almost always have gone heavily to Democrats. According to the nonpartisan Center for Responsive Politics, Barack Obama was the second-largest recipient of contributions from Fannie and Freddie sources during his brief Senate tenure. Former president Bill Clinton said it best in 2008. I think the responsibility the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was president to put some standards and tighten up a little on Fannie Mae and Freddie Mac.
Congressional Democrats should drop their resistance to reform proposals and make a break from their sordid history with these toxic firms.
Fannie Mae, Freddie Mac execs now offering advice to Obama
Senator’s links to mortgage giants also include campaign contributions
Posted: September 17, 2008
9:10 pm Eastern
By Jerome R. Corsi
© 2011 WorldNetDaily
Fannie Mae headquarters in Washington, D.C.
NEW YORK Campaign contributions from Fannie Mae and Freddie Mac made to Barack Obama may backfire if the Democratic presidential hopeful wages an aggressive campaign to cast blame on rival John McCain and the Republicans in Congress for the mortgage-related losses that forced the U.S. Treasury to take over the quasi-governmental mortgage giants.
A review of Federal Election Commission records back to 1989 reveals Obama in his three complete years in the Senate is the second largest recipient of Freddie Mac and Fannie Mae campaign contributions, behind only Sen. Christopher Dodd, D-Conn., the powerful chairman of the Senate banking committee. Dodd was first elected to the Senate in 1980.
According to OpenSecrets.com, from 1989 to 2008, Dodd received $165,400 in Fannie Mae and Freddie Mac campaign contributions, including contributions from PACs and individuals, followed by Obama, who received $126,349 in such contributions since being elected to the Senate in 2004.
In contrast, McCain warned of the coming mortgage crisis as he pressed in 2005 for regulatory reform of Fannie Mae and Freddie Mac.
(Story continues below)
“For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac known as government-sponsored entities or GSEs and the sheer magnitude of these companies and the role they play in the housing market,” McCain said on the floor of the Senate in 2005, speaking in favor of the Federal Housing Enterprise Regulatory Reform Act of 2005.
McCain pointed out Fannie Mae’s regulator had stated the company’s quarterly reports of profit growth over the past few years were “illusions deliberately and systematically created” by the company’s senior management, which resulted in a $10.6 billion accounting scandal.
The bill passed the House but was never brought up for a vote in the Senate, largely because of Democratic opposition to change in the Fannie Mae and Freddie Mac regulatory structure that remained in place until the Treasury takeover two weeks ago.
As evidenced by the failure to pass the Federal Housing Enterprise Regulatory Reform Act of 2005, the Democrats in Congress have repeatedly fought back Republican Party efforts to reform the two mortgage banking giants.
Instead, Democrats in Congress have sought to preserve the quasi-governmental status of the mortgage giants, seeing Fannie Mae and Freddie Mac as places to locate former top Democratic Party operatives, where they have earned millions in compensation, despite a continuing series of financial scandals. Enron-like accounting manipulation, for example, boosted earnings to a level at which massive executive bonuses could be paid.
In the aftermath of the U.S. government takeover, attention has focused on three Democrats with close ties to Obama who served as Fannie Mae executives: Franklin Raines, former Clinton administration budget director; James Johnson, former aide to Democratic Vice President Walter Mondale; and Jamie Gorelick, former Clinton administration deputy attorney general.
All three Obama-related executives earned millions in compensation from Fannie Mae.
Johnson earned $21 million in just his last year serving as Fannie Mae CEO from 1991 to 1998; Raines earned $90 million in his five years as Fannie Mae CEO, from 1999 to 2004; and Gorelick earned an estimated $26 million serving as vice chair of Fannie Mae from 1998 to 2003, according to author David Frum, a fellow at the American Enterprise Institute.
All three have been involved in mortgage-related financial scandals.
In 1998, according to the Washington Post, Gorelick, as Fannie Mae vice chairman, received a bonus of $779,625, despite a scandal in which employees falsified signatures on accounting transactions to manipulate books to meet 1998 earning targets. The moves, in turn, triggered multi-million-dollar bonuses for top executives.
Gorelick was embroiled in another controversy over an alleged conflict of interest when a 1995 memo she authored as deputy attorney general surfaced while she was a member of the 9/11 commission.
The memo, which became known as the “Gorelick Wall,” appeared to establish barriers that barred federal anti-terrorist criminal investigators from accessing various federal records and databases that may have assisted them in their criminal investigations.
According to the Associated Press, Raines and several other Fannie Mae top executives were ordered in a civil lawsuit to pay nearly $31.4 million for manipulating Fannie Mae earnings over a period of six years to trigger their massive bonuses.
Raines was also forced in the settlement to give up Fannie Mae stock options valued at $15.6 million.
Last year, the Securities and Exchange Commission alleged Freddie Mac had engaged in accounting fraud from 2000 to 2002, imposing a $50 million fine on the company and on four executives fines for amounts ranging from $65,000 to $250,000.
Raines currently advises Obama on housing policy.
Johnson was appointed to head Obama’s vice presidential selection committee, until a controversy concerning an alleged $7 millions in questionable real estate loans he received on favorable terms from failed sub-prime mortgage lender Countrywide Financial surfaced and forced him to step down.
WND previously reported a panel chaired by Elena Kagan, dean and professor of law at Harvard Law School, speculated at the June two-day meeting of the American Constitution Society that Gorelick was a possible attorney general cabinet appointment if Obama should be elected president.
The decision by the U.S. Treasury to take over Freddie Mac and Fannie Mae could end up costing the U.S. taxpayer as much as $100 billion, although the extent of losses at the two giant mortgage companies remains to be determined.
According to the Wall Street Journal, Freddie and Fannie own or guarantee about $5.2 trillion worth of mortgages.
The riskiest loans held by Freddie and Fannie are known as “Alt-A” and sub-prime mortgages, worth about $780 billion, or about 15 percent of the total portfolio.
The federal government takeover of Freddie and Fannie passes to U.S. taxpayers the contingent liability for failures in the entire $5.2 trillion loan portfolio held by the two mortgage giants.
Over the past four quarters, Freddie and Fannie have suffered losses of about $14 billion, as the mortgage market has been hit by a wave of defaults and foreclosures not seen in the U.S. since the 1930s.
Read more: Fannie Mae, Freddie Mac execs now offering advice to Obama http://www.wnd.com/?pageId=75586#ixzz1E4Q8ipSZ
They really should put her behind bars.
Outstanding article of the organized crime gang who all belong in jail.