Replies

Rep. Maxine Waters (D-Calif.): “Through nearly a dozen hearings, where frankly we are trying to fix something that wasn’t broke, Mr. Chairman, we do not have a crisis at Freddie Mac and in particular at Fannie Mae under the outstanding leadership of Mr. Frank Raines.”

Rep. Maxine Waters (D., Calif.): “Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals.”

Rep. Gregory Meeks (D-NY): In a hearing several years ago about a report on the safety and soundness of Fannie Mae and Freddie Mac from their regulator, Armando Falcon, Federal Housing Enterprise Oversight Director, Falcon came under fire. Meeks said; “The GSEs have done a tremendous job. There has been nothing that was indicated that’s wrong with Fannie Mae, Freddie Mac has come up on its own,” adding the regulator was trying to give the two a “heart surgeon [sic] when they really don’t need it.”

Rep. Barney Frank (D., Mass.): “The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities [Fannie Mae and Freddie Mac] that are fundamentally sound financially and withstand some of the disaster scenarios.”

Rep. Barney Frank (D-Mass.): In the same hearing several years ago about a report on the safety and soundness of Fannie Mae and Freddie Mac from their regulator, Falcon, Frank attacked Falcon: “I don’t see anything in your report that raises safety and soundness problems.”

Sen. Christopher Dodd (D., Conn.): “I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time.”

Sen. Charles Schumer (D., N.Y.): “And my worry is that we’re using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie’s mission.”

Franklin Raines, former head of Fannie Mae: “These assets are so riskless that their capital for holding them should be under 2%.

Richard Syron, former head of Freddie Mac: “If I had better foresight, maybe I could have improved things a little bit. But frankly, if I had perfect foresight, I would never have taken this job in the first place.”

Note: Raines was forced out of Fannie Mae in December 2004 after the Securities and Exchange Commission launched an investigation into alleged accounting problems at Fannie Mae involving an estimated $6 bn in accounting problems. The Office of Federal Housing Oversight sued Raines in 2006, accusing him of aiding accounting shenanigans at Fannie, which allegedly involved the delay of reporting losses so top executives could earn large bonuses.

The suit attempted to recover the $50 mn Raines in pay got based on billions of dollars in overstated earnings. In total, OFHEO demanded $110 mn in fines and a clawback of $115 mn in bonuses for three executives accused, including Raines.

Raines, Fannie’s former chief financial officer and its former controller settled the case in April 2008, agreeing to pay fines totaling about $3 mn, paid for by Fannie’s insurance policies.

Raines also agreed to donate the proceeds from the sale of $1.8 mn of his Fannie stock and to give up stock options, though the options were worthless. Raines also gave up an estimated $5.3 mn of “other benefits” said to be related to his pension and forgone bonuses. In the end, Raines kept most of his largesse–in 2003 alone, his compensation was estimated at over $20 mn.