Senator John McCain is hitting Barack Obama hard on his ties to Fannie Mae and Freddie Mac, the failed GSEs (government sponsored enterprises) that incurred huge losses on the purchase of hundreds of billions in low-documentation loans.
Obama is the US senator with the second-highest level of contributions from employees at the two bankrupt agencies after Senator Chris Dodd, Democrat of Connecticut, chairman of the Senate Banking Committee who happens to have made a sweetheart loan deal with Fannie customer Countrywide Mortgage.
Obama also has had on his economic team two advisers who profited handsomely from Fannie – Franklin Raines, a Clinton administration official who earned $90 million in his tenure as CEO of Fannie, and James Johnson. Obama denies that Raines ever was associated with his campaign although news report say otherwise.
McCain must make this cozy Fannie/Democrat relationship an integral part of his campaign. Americans want to know what is going on in Washington, and this is the perfect setup for McCain’s anti-corruption crusade with Palin at his side.
In 2005, McCain warned about the precarious position of Fannie Mae (the Federal National Mortgage Association). He wrote:
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 join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.I urge my colleagues to support swift action on this GSE reform legislation.
Meanwhile both Obama and Biden even have refused to take a yes-or-no position on the government bailout of insurer AIG which shows an unwillingness to take stands on tough issues… which is sort of like voting ‘present’ in the Illinois legislature.
The Fannie and Freddie failures point out the corruption on which the Democrat party is based. Conservatives have long known that liberals do only one thing: Commandeer as much wealth as possible through taxation, spread some around to needy people for PR purposes, and then keep the lion’s share for themselves and for their acolytes in the bureaucracy. Ronald Reagan’s old adage that it costs two dollars in bureaucracy to get one dollar to the poor is quite accurate.
That Raines could profit to the tune of $90 million for running a government agency into the ground in a $10 billion accounting scandal is just the tip of the iceberg. Sweetheart loan deals for Democrat bigwigs from companies like Countrywide are rampant. Countrywide CEO Angelo Mozilo said in 1995 that he was working “very closely with Jim Johnson of Fannie Mae to come up with a rational method of making the process more efficient by the use of credit scoring.”
A little too closely perhaps.
Here are the incomes of the Democrat ‘public servants’ running Fannie Mae between 1998 and 2003, including salary, bonus, performance share plan payouts, stock options and earnings per share challenge grant awards: Raines, $90 million; Timothy Howard, $30 million; Jamie Gorelick (deputy attorney general under Clinton who built the ‘wall’ between the CIA and FBI that prevented information-sharing on terrorism), $26.4 million; James Johnson, who earlier served on the Obama campaign; $21 million.
The Office of Federal Housing Enterprise Oversight said of the phony accounting practices of these officers: “Those achievements were illusions deliberately and systematically created by the Enterprise’s (Fannie’s) senior management with the aid of inappropriate accounting and improper earnings management… By deliberately and intentionally manipulating accounting to hit earnings targets, senior management maximized the bonuses and other executive compensation they received, at the expense of shareholders.”
So Raines, Howard, Gorelick and Johnson were cooking the books for their own benefit. Yet when an oil company executive makes a big payout for working more than 10 years to legally and legitimately save and transform Exxon and Mobil, as Lee Raymond did, the Democrats make it a talking point for years to come. The media will be silent on these Democrats, rest assured.
Obama has criticized Mozilo, but only in passing. He defended the presence of Johnson in his campaign saying “Everybody, you know, who is tangentially related to our campaign, I think, is going to have a whole host of relationships – I would have to hire the vetter to vet the vetters.”
In other words, when Obama hires a tainted character, it is passed off with a shrug. Meanwhile Obama operatives are all over Alaska trying to find out if Sarah Palin fired a state police bureaucrat for the wrong reasons.
Turns out, she did not.
And Obama’s people are on another wild moose chase.
Please visit my website at www.nikitas3.com for more common sense.