"Mr. President, this week Fannie Mae’s regulator reported that 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 Office of Federal Housing Enterprise Oversight’s report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae’s former chief executive officer, OFHEO’s report shows that over half of Mr. Raines’ compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie
Mac.The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator’s examination of the company’s accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.
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. OFHEO’s report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO’s report solidifies my view that the GSEs need to be reformed without delay.
I urge my colleagues to support swift action on this GSE reform legislation.".............Wow, yet another doltish Republican talking sense. Incredible!!
6 comments:
Fannie and Freddie are hybrid private-public entities. They have highly paid CEOs that were eager to jump on the subprime bandwagon to pump up their profits. The reason Fannie and Freddie got caught up in the subprime fiasco is the same reason other financial institutions did -- Greed.
If Fannie and Freddie had remained completely public this would not have happened.
In any case, the Republicans controlled all branches of government when the housing bubble began to form (2002), and when it reached it's zenith (2006).
According to Barney Frank...
I joined with other Democrats in helping Mike Oxley bring out of our Committee a bill that would regulate Fannie Mae and Freddie Mac. I voted against it on the House floor after the Republican leadership dictated a change – over Mike Oxley's objections – to the affordable rental housing piece, but it did pass the House anyway and I did not urge other Democrats to join me in voting no. So the argument that I blocked Fannie Mae and Freddie Mac legislation makes zero factual sense since the House, when I was in the minority, did pass the bill. It died because of Senate opposition, spurred by President Bush.
Note: I was incorrect when I stated that BF "introduced" the bill. It came out of BF's committee and he "helped" craft it. Also, even though he eventually voted against it, the bill still passed the House, so I fail to see how any blame can be assigned to Mr. Frank.
"The OFHEO report also states that Fannie Mae used its political power to lobby Congress "
Am I the only person here who sees something wrong with a government agency using taxpayer dollars for political efforts like this?
A few weeks ago I heard an NPR (government radio) station urging listeners to call Congress and beg for.. .you guessed it, more wasted money for government radio.
You're not the only one, dmarks. Especially troubling to me was the fact that Fannie and Freddie (at the tax-payer's risk) themselves bought a lot of these crappy loans - to the tune of $388,000,000,000!!!
Regarding the points of dmarks and Will -- The reason this happened is because F-and-F are hybrid private-public entities. In other words, we can blame privatization -- you know, the thing Conservatives love so much.
Using YOUR logic, F-and-F should have done better than when they were fully public... due to the competition, free market magic and what not.
In my opinion this is another example of the utter failure of Conservative fiscal policies. Conservatism is a failed ideology and should be abandoned posthaste.
Also, I've got to wonder why Will is totally ignoring the deregulation issue. Perhaps because he realizes just how true what I pointed out in the prior paragraph is... and he doesn't want to admit it?
At the very beginning of this , I said that the crisis was caused by loosened lending and that both of the parties were to blame. What, because I didn't use the word, deregulation?
F and F was an example of private gain and public risk. Franklin Raines knew that he could make a killing and, if in fact it ever did go south, he also knew that the tax-payer would bail him out. I don't see how this can be called a failure of the private sector.
Post a Comment