GOP Line on Financial Crisis: Blame the GSE’s

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Monday, October 06, 2008 at 12:16 pm

The House oversight committee is holding a hearing now on the collapse of Lehman Bros. and the financial crisis generally. This hearing– and four others– will likely provide hints of how Congress, post-bailout bill, will try to revamp how the government polices Wall Street.

The committee has produced internal Lehman Bros. documents that show Lehman CEO Richard Fuld resisted claims to limit his compensation and rejected any responsibility for the investment bank’s bankruptcy. Fuld will testify in an hour, and it could get ugly. Rep. Elijah Cumming (D-Md.) wondered how “he sleeps at night”.

But for now, House Republicans are taking turns blasting Rep. Henry Waxman, (D-Calif.) the committee chairman, for not scheduling a hearing on Fannie Mae and Freddie Mac. The committee Republicans contend that Democrats had blind faith in Fannie’s and Freddie’s plan to help low- and middle-income homeowners and ignored the government sponsored enterprises’ risky purchases of subprime mortgages.

Rep. Tom Davis (R-Va.) and Rep. John Mica (R-Fl.) keep circling back to how the Clinton administration built up Fannie and Freddie. The shady accounting practices of former Fannie CEO Franklin Raines, a Clinton appointee, are also fair game.

The Republican seem off the mark. They keep hammering Raines, who resigned in 2004. But the riskiest purchases by Fannie and Freddie happened in 2005-2007.

Democratic and Republican committee members might soon unite in bashing Wall Street’s current symbol of greed, Fuld. But they look far apart in agreeing on how the government helped cause the crisis.

Comments

4 Comments

jhimmi
Comment posted October 6, 2008 @ 12:09 pm

Raines is a criminal. He should be questioned before Congress, made an example of, and convicted of fraud and embezzlement.

On December 21, 2004 Raines accepted what he called “early retirement” as Fannie CEO while the SEC continued to investigate alleged accounting irregularities. He is accused by OFHEO (the 'weak' regulating body of Fannie Mae), of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses.

Raines overstated earnings, initially estimated to be $9 billion but have been announced as 6.3 billion.

Civil charges were filed against Raines and two other former executives seeking $110 million in penalties and $115 million in returned bonuses from the three accused.

The three executives agreed to pay fines totaling about $3 million, which will be paid by Fannie's insurance policies. Raines also agreed to donate the proceeds from the sale of $1.8 million of his Fannie stock and to give up stock options. The stock options however have no value. An editorial in The Wall Street Journal called it a “paltry settlement” which allowed Raines and the other two executives to “keep the bulk of their riches.” In 2003 alone, Raines's compensation was over $20 million.

In June 2008 the WSJ reported that Franklin Raines was one of several public officials who received below market rates loans at Countrywide Financial because the corporation considered the officeholders “FOA's”–”Friends of Angelo” (Countrywide Chief Executive Angelo Mozilo). He received loans for over $3 million while CEO of Fannie Mae.


PacificGatePost
Comment posted October 6, 2008 @ 11:37 pm

A NEEDED FIX IN THE BOARD ROOMS

In't it time the system went in for some much needed repair?

Due diligence and oversight long ago slid out the window. No one was watching.

Time to do something about it.

Here's a huge one they all missed…. The dramatic change that swept through all of North America's boardrooms over the past 30 years. It is one of the underlying causes of the headache the economy is now feeling, but more importantly, it has resulted in the general feeling of “disconnect” by most Americans.

“WE THE SHAREHOLDERS OF YOUR COMPANIES……

http://pacificgatepost.blogspot.com/2008/03/let…


PacificGatePost
Comment posted October 7, 2008 @ 6:37 am

A NEEDED FIX IN THE BOARD ROOMS

In't it time the system went in for some much needed repair?

Due diligence and oversight long ago slid out the window. No one was watching.

Time to do something about it.

Here's a huge one they all missed…. The dramatic change that swept through all of North America's boardrooms over the past 30 years. It is one of the underlying causes of the headache the economy is now feeling, but more importantly, it has resulted in the general feeling of “disconnect” by most Americans.

“WE THE SHAREHOLDERS OF YOUR COMPANIES……

http://pacificgatepost.blogspot.com/2008/03/let…


Wonk Room » Will The House Republican’s Regulation Plan Stay Silent On Derivatives?
Pingback posted June 4, 2009 @ 8:35 pm

[...] right along with the Republican’s misguided attempts to place blame for the financial crisis on Fannie and Freddie, but I was struck that derivatives aren’t mentioned anywhere in the write-up. Could the plan [...]


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