Skip to comments.Burning down the house; How Democrats sparked the Great Recession (book recounts Fannie Mae debacle)
Posted on 07/03/2011 6:09:37 AM PDT by Liz
Reckless Endangerment a scalding new book ....... is another cautionary tale about governments terrifying self-confidence.........."a story of what happens when Washington decides, in its infinite wisdom, that every living, breathing citizen should own a home. The 1977 Community Reinvestment Act pressured banks to relax lending standards......... In 1994, Bill Clinton proposed increasing homeownership through a partnership between government and the private sector, principally orchestrated by Fannie Mae. Fannie Maes political machine dispensed campaign contributions, gave jobs to friends and relatives of legislators, hired armies of lobbyists (even paying lobbyists not to lobby against it), paid academics who wrote papers validating the homeownership mania, and spread charitable contributions to housing advocates across the congressional map. By 2003, the government was involved in financing almost half $3.4 trillion of the home-loan market..........by summer 2005, almost 40% of new subprime loans were for amounts larger than the value of the properties. Reckless Endangerment is a study of contemporary Washington, where showing compassion with other peoples money pays off in the currency of political power, and currency.
(Excerpt) Read more at nypost.com ...
Congressman Barney Frank says he wants some of those responsible for our current financial meltdown to be prosecuted. And we couldn't agree more. First up in the court dock: Rep. Barney Frank, D-Mass. Even by the extraordinarily loose standards of Congress, it takes some chutzpah for someone such as Frank to suggest that he'll seek prosecutions for those behind the housing and financial crunch and for what he called "a strongly empowered systemic risk regulator." Frank: Fannie Mae and Freddie Mac's point man in Washington. For Frank, perhaps more than any single individual in private or public life, is responsible for both the housing market mess and subsequent bank disaster. And no, this isn't partisan hyperbole or historical exaggeration. But first, a little trip down memory lane. (Excerpt) Read more at ibdeditorial.com ...
CUOMO AND BILL CLINTON CREATED CONDITIONS FOR MELTDOWN
Andrew Cuomo, the youngest Housing and Urban Development secretary in history, made a series of decisions between 1997 and 2001 that gave birth to the countrys current crisis. He took actions thatin combination with many other factorshelped plunge Fannie and Freddie into the sub-prime markets without putting in place the means to monitor their increasingly risky investments. He turned the Federal Housing Administration mortgage program into a sweetheart lender with sky-high loan ceilings and no money down, and he legalized what a federal judge has branded kickbacks to brokers that have fueled the sale of overpriced and unsupportable loans. Three to four million families are now facing foreclosure, and Cuomo is one of the reasons why. . . SOURCE http://www.villagevoice.com/2008-08-05/news/how-andrew-cuomo-gave-birth-to-the-crisis-at-fannie-mae-and-freddie-mac/
Feb 8, 2010
Editorial, The Wall St Journal
FR Posted February 08, 2010 by The Raven ...
HUD's Web visitors learn that in 1999 "Secretary Cuomo established new Affordable Housing Goals requiring Fannie Mae and Freddie Mactwo government sponsored enterprises involved in housing financeto buy $2.4 trillion in mortgages in the next 10 years. This will mean new affordable housing for about 28.1 million low- and moderate-income families. The historic action raised the required percentage of mortgage loans for low- and moderate-income families that the companies must buy from the current 42 percent of their total purchases to a new high of 50 percenta 19 percent increasein the year 2001." ... (Excerpt) Read more at online.wsj.com ...
REFERENCE Entitled, "Highlights of HUD Accomplishments 1997-1999," the document chronicles the "accomplishments under the leadership of Secretary Andrew Cuomo, who took office in January 1997." HUD's Web visitors learn that in 1999: "Secretary Cuomo established new Affordable Housing Goals requiring Fannie Mae and Freddie Mactwo government sponsored enterprises involved in housing financeto buy $2.4 trillion in mortgages in the next 10 years. This will mean new affordable housing for about 28.1 million low- and moderate-income families. Cuomo's historic action raised the required percentage of mortgage loans for low-and moderate-income families that the companies must buy from the current 42% of their total purchases to a new high of 50%-----a 19% increasein the year 2001."
REFERENCE---BY MICHELLE MALKIN Fannie Mae serves as an industrial-sized patronage factory -- sharing profits with political allies, spreading taxpayer funds to voting blocs----like ethnic groups-----and doling out jobs to left-wing academics, Washington has-beens and back-scratching buddies. Obama insider Fannie Mae exec Jim Johnson got sweetheart loans from shady subprime Countrywide. Pols raked in six-figure salaries as F/F engaged in Enron-style accounting, plunged into debt and helped usher in the subprime housing meltdown through cockamamie lending practices.
Bill Clinton appointed Franklin Raines, Daley and Rahm Emanuel just as the quasi-governmental F/M engaged in rampant book-cooking so that F/M insider could help themselves to massive bonuses. The Chi/Tribune exposed how Emanuel's "profitable stint" was low-show w/ no work involved. Emanuel was not even assigned to committees, according to company proxy statements (more on Raines and Emanuel below).
Immediately upon joining the board, Emanuel and other insiders qualified for $380,000 in stock and options plus a $20,000 annual fee, public records indicate. W/ Wall Street Emanuel there, accounting tricks were used to mislead shareholders about outsize profits F/M reaped from risky investments. The goal was to cook the books to keep fraudulent earnings on the books, to make Freddie Mac look profitable on paper-----AND to fraudulently obtain humongous annual bonuses for political insiders.
Freddie and Fannie, the two big quasi-govt mortgage banks that HAVE ALREADY RECEIVED HUGE federal bailouts, had huge lobbying budgets that they used for political contributions to keep regulators off their backs.
So which politicians get Fannie and Freddie political contributions.
The top three U.S. Senators getting big Fannie and Freddie political bucks were Democrats and number two was then-Senator Barack Obama who had only been in the Senate four years but still managed to grab the number two spot ahead of John Kerry, decades in the senate, and Chris Dodd then-chairman of the powerful Senate Banking Committee.
Fannie and Freddie were creations of the Congressional Democrats and the Clinton White House, designed to make mortgages available to more people, and as it turned out, some many many who couldnt afford them.
Fannie and Freddie have also been places for big Washington democrats to go to work in the semi-private sector and pocket millions.
The Clinton Administrations White House budget director Franklin Raines was appointed by Clinton to run Fannie........ and collected $50 million dollars. Jamie Gurilli Gorelick (now BP's attorney), a Clinton Justice Apartment Official, worked for Fannie and took home $26 million dollars in mfg bonuses.
Big Democrat Jim Johnson, recently on Obamas VP search committee hauled in millions from his Fannie Mae CEO job. Now remember, Obamas ads and stump speeches attacked McCain and Republican policies for the financial turmoil. It is demonstrably not Republican policy and worse, it appears the man attacking McCain, Senator Obama, was at the head of the line when the piggys lined up at the Fannie and Freddie trough for campaign bucks...." - FoxNews, Sept. 2008
I read this in yesterday’s FR postings and sent to just about everyone I know. The criminality that was/is Fanny and Freddy is beyond belief.
ping. On my reading list for summer...but it won’t be a relaxing read. And I don’t know if I can afford to get any more steamed than I already am...
Its Bush’s fault...
The failure of Fannie/Freddie, and the resulting 'burning down' of the economic house of the U.S., lies completely at the feet of the marxist/socialist liberal Democrats.
The GOP and President George Bush attempted to fix this in 2004 and were emphatically turned back. This historical record is without question. It's on youtube with 3.8 million views already. Continue to forward this video around the net.
The Office of Federal Housing Enterprise Oversights report reported that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives.
Franklin Raines, Fannie Maes former chief executive officer, OFHEOs report shows that over half of Mr. Raines compensation for the 6 years through 2003 was directly tied to meeting earnings targets (by cooking the books).
Ex-Fannie CEO Franklin Raines (Clinton appointee) is a parasitic crook of the first order. This thief cooked the FM books precipitating losses of $9BILLION (that we know of) for the single purpose of creating $50 million fraudulent bonuses for himself (and millions for other F/M insiders). The SEC said Raines broke accounting rules by playing with risky derivatives.
The US Government filed suit against Franklin Raines when the depth of the F/M accounting scandal became clear. READ IT HERE http://housingdoom.com/2006/12/18/fannie-charges/
The Government noted, "The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public.....explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner."
These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the misstated Fannie Mae profits. (Soon going to trial.)
Franklin Raines, left, Clinton's appointee to F/M, looted and pillaged Fannie Mae. Raines famously bought into the climate control scam w/ F/M funds. Then hooked up with Ohaha's Chicago mob who organized the Chicago Climate Exchange (now defunct).
REFERENCE Ex-Fannie CEO Franklin Raines should be behind bars for life. He is a crook of the first order. This thief Raines cooked the FM books precipitating losses of $9B (that we know of) for the single purpose of creating bonuses for himself and other F/M insiders. The SEC said Raines broke accounting rules by playing with risky derivatives.
RAINES COOKS THE F/M BOOKS---WALKS AWAY A MULTI-MILLIONAIRE After Raines was fired and exposed as a fraudster for cooking the govt books, Raines walked away w/ $90 million dollars, a $26 million parachute,
PLUS..... Raines gets a MONTHLY pension of $116,300 for life. Raines had already collected $4.87 million in special performance shares. Raines owns options giving him $5.8 million in net profit after redemptions, plus another $8.7 million in deferred compensation for six years at the F/M helm.
Raines keeps $5 million of paid-up life insurance. He and his spouse get free medical and dental benefits for life, worth over $1 million. Raines earned $20 million in salary, bonuses and stock awards (that we know of) in one year.
After he was fired, Raines told the F/M board that he's entitled to get paychecks until June 22 giving him another $600,000, which triggers a $2,000 monthly raise in his lifetime pension. He also said he's entitled to disputed options with a gross value of about $5.6 million. To keep Raines happy within philanthropic circles, Fannie Mae will match Raines' charitable contributions by $10,000 a year.
December 23, 2009
Attorney General of the United States of America
U.S. Department of Justice
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
Dear Attorney General Holder:
We write to demand an immediate investigation into the activities of (then-) White House Chief of Staff Rahm Emanuel. We believe there is an abundant public record which establishes that the actions of the Obama White House have blocked any investigation into his activities while on the board of Freddie Mac from 2000-2001, and facilitated the cover up of potential malfeasance until the 10-year statute of limitations has run out.
The purpose of this letter is to connect the dots to establish both the conduct of Mr. Emanuel and those working with him to thwart inquiry, and to support your acting speedily so that the statute of limitations does not run out before the Justice Department is able to empanel a grand jury.
The New York Times reports that the Obama administration is negotiating to double the commitments to Fannie and Freddie for a total of $800 billion by December 31, in order to avoid the congressional approval that would be needed after that date. But there currently is no Inspector General exercising independent oversight of these entities. Acting Inspector General Ed Kelly was stripped of his authority earlier this year by the Justice Department, relying on a loophole in a bill Mr. Emanuel cosponsored and pushed through Congress shortly before he left for the Obama White House. This effectively ended Mr. Kellys investigation into what happened at Fannie and Freddie.
Since that time, despite multiple warnings by Congress that having no independent Inspector General for a federal agency that oversees $6 trillion in mortgages is a serious oversight, the Obama White House has not appointed one.
We recognize that these are extremely serious accusations, but the stonewalling by Mr. Emanuel and the Obama White House has left us with no other redress. A 2003 report by Freddie Macs regulator indicated that Freddie Mac executives had informed the board of their intention to misstate the earnings to insure their own bonuses during the time Mr. Emanuel was a director (as an appointee of the Clinton administration). But the Obama White House refused to comply with a Freedom of Information Act request from the Chicago Tribune for those board minutes on the grounds that Freddie Mac was a commercial entity, even though it was wholly owned by the government at the time the request was made.
If the Treasury approves the $800 billion commitment to Fannie and Freddie by the end of the year, it will mean that under the influence of Rahm Emanuel, the Obama White House is moving a trillion-dollar slush fund into corruption-riddled companies with no oversight in place. This will allow Fannie and Freddie to continue to purchase more toxic assets from banks, acting as a back-door increase of the TARP without congressional approval.
Before the Obama White House commits any more money to Fannie and Freddie, we call on the Public Integrity Section in the Justice Department to begin an investigation into the cause of Fannie and Freddies conservatorship, into Rahm Emanuels activities on the board of Freddie Mac (as a Clinton appointee) including any violations of his fiduciary duties to shareholders, into the decision-making behind the continued vacancy of Fannie and Freddies Inspector General post, and into potential public corruption by Rahm Emanuel in connection with his time in Congress, in the Obama White House, and on the board of Freddie Mac.
We also call for the immediate appointment of an Inspector General with a complete remit to go after this information.
Signers of this letter come from differing political ideologies. One, the conservative head of a transparency foundation, the other, publisher of a liberal political blog. But we make common cause today out of grave concern for the future of our country in the wake of corruption-riddled bailouts.
These bailouts continue to rob Main Street to benefit Wall Street, and, because of that, we together demand the resignation of Mr. Emanuel, a man who has steadfastly worked to obstruct both oversight and inquiry into the matter. Rahm Emanuels conflicts of interest render him far too compromised to serve as gatekeeper to the President of the United States. We will lay out the details further below, and are available at your earliest convenience to meet with you directly.
“In 1994, Bill Clinton proposed increasing homeownership through a ‘partnership’ between government and the private sector”
When you hear a politician propose a “public-private partnership”, grab your wallet and run like hell.
In return for campaign contributions and political support, large corporations will be granted license to raid the public coffers and create exclusive markets for their products.
Gorelick made a bundle to keep quiet about Clinton’s RedCom campaign donations.
Excerpt ...Ten years ago the typical conforming mortgage required a down payment of 10-20%, and low-down payment mortgages were considered too risky. But then we helped to standardize the 3-5% down payment loan, brought it to global capital markets, and made it available to lenders and communities nationwide. Now low-down payment loans are commonplace. And we just adopted a new variance in our underwriting standards that will make the $500 down payment loan widely available as well...
In 1994, we pledged to provide $1 trillion in capital to ten million underserved families by the end of 2000. Thanks to our housing and industry partners, we met that goal early.
Then in 2000, we launched our American Dream Commitment, a pledge to provide $2 trillion in capital to 18 million underserved families by the year 2010, including $400 billion targeted specifically for minority families (later raised to $700 billion in response to President Bushs Minority Homeownership Initiative). After four of the strongest years in housing and mortgage finance history, weve already surpassed the top-line goals of this commitment. But our work is far from complete.
So in January 2004, we announced our Expanded American Dream Commitment and pledged significant new resources to tackle Americas toughest housing challenges. Our new commitment has three main goals.
First, we will expand access to homeownership for six million first-time home buyers in the next ten years, including 1.8 million minority first-time home buyers.We also will help raise the national minority homeownership rate from 49 percent to 55 percent, with the ultimate goal of closing it entirely.
Second, we will help new and long-term homeowners stay in their homes through a series of initiatives, and commit $15 billion to preserve affordable rental housing and $1.5 billion to support the revitalization of public housing communities.
Third, we will increase the supply of affordable housing and support community development activities in at least 1,000 neighborhoods across the country through our American Communities Fund, and through targeted investments like Low-Income Housing Tax Credits that help finance affordable rental housing.
It is because of initiatives like our Trillion Dollar Commitment and our American Dream Commitment that we have exceeded our HUD affordable housing goals for ten consecutive years.
Jamie Gorelick was another recipient of millions from this government fiasco. I think she got out with something like $20 million...
“Its Bushs fault...”
In a way, yes. He certainly didn’t mind the bubble building and building, as it masked what should have been a severe recession.
Just per the article, some $800B out of an economy of around $12T was fake (i.e., unsupported) borrowed money.
Now we pay the price...and may pay for DECADES.
As president, there was certainly a lot that Bush could have done (starting with using the bully pulpit), so I am far from giving him a free pass.
It only took 50 years for the Civil Rights Act to destroy America.
Its Bushs fault...
W’s admin, along with regulators, warned about the growing danger of the loose lending.
I’m reading Reckless” It’s hair raising. Democrats ripped us off.
The Government noted, "The 101 charges reveal how individuals (F/M insiders) improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner."
These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the misstated Fannie Mae profits. (Soon going to trial.)
Freddie and Fannie had huge lobbying budgets that they used for political contributions to keep regulators off their backs............AND RECEIVED HUGE GOVT BAILOUTS.
So which politicians get Fannie and Freddie political contributions? The top three U.S. Senators getting big Fannie and Freddie political bucks were Democrats and number two was (A) then-Senator Barack Obama who had only been in the Senate four years but still managed to grab the number two spot ahead of (B) John Kerry, decades in the senate, and (C) Chris Dodd then-chairman of the powerful Senate Banking Committee.
Fannie and Freddie were creations of the Congressional Democrats and the Clinton White House, designed to make mortgages available to more people, and as it turned out, many many people who couldnt afford them.
Fannie and Freddie have also been places for big Washington Democrats to get jobs and pocket millions---(legaklly and illegally).
Clinton appointed his White House budget director Franklin Raines to run Fannie........ Raines was fired for cooking the books so he could get massive $50 Million in bonuses PLUS a staggering exit package worth millions.
Jamie Gurilli Gorelick (now BP's attorney), a Clinton Justice Apartment Official, worked for Fannie and took home $26 million dollars.
Big Democrat Jim Johnson, recently on Obamas VP search committee hauled in millions from his Fannie Mae CEO job. Keep in mind, Obamas ads and stump speeches attacked Republican policies for the financial turmoil. But Fannie is demonstrably not Republican policy and worse, it appears then-Senator Obama, was at the head of the line when the piggys lined up at the Fannie and Freddie trough for campaign bucks...." - FoxNews, Sept. 2008
McCain spokeout on May 25, 2006, on behalf of the Federal Housing Enterprise Regulatory Reform Act of 2005: "Mr. President, this week Fannie Maes regulator reported that the companys quarterly reports of profit growth over the past few years were illusions deliberately and systematically created by the companys senior management, which resulted in a $10.6 billion accounting scandal.
The Office of Federal Housing Enterprise Oversights report says that Raines and other Fannie Mae bigwigs deliberately and intentionally manipulated financial reports to artificially hit earnings targets in order to trigger bonuses for senior executives like Gorelick.
Obamas Deficit Avalanche isnt Bushs Fault / scottuystarnes.com / 2/9/2010
Washington Times reports: Even more staggering than the mountains of snow in the capital are the deficits the Obama administration plans for the next decade. Huge spending increases will add about $12 trillion to the national debt for budget years 2009 to 2020.
The scariest part is that these deficits are based on unrealistic budgeting assumptions; the real fiscal outlook is much bleaker. In the proposed 2011 budget, the White House defensively attacks the irresponsibility of past deficits.
For example, the 2009 budget deficit of $1.4 trillion is blamed on the George W. Bush administration as if President Obamas $862 billion stimulus package and more than $400 billion supplemental spending bill had nothing to do with it. Mr. Obamas planned 2010 budget deficit rises to an even higher record level of $1.6 trillion.
By comparison, all of Mr. Bushs deficits from 2002 to 2008 the seven years during which his team had the most control over the budget produced a combined deficit of $2.1 trillion.
Obama has spent more in 2 years than Bush did in 7 years. Obamas BIOB (Blame it on Bush) defense just wont work anymore.
“Ws admin, along with regulators, warned about the growing danger of the loose lending.”
...I did hear a little. But I heard a lot more about the “Ownership Society” coming from Bush. I do not give him a pass...at all.
But I do agree, the rut of the problem clearly traces back to liberalism and it may well be what ultimately takes down this country.