Thursday, October 30, 2008

The Fannie Mae Executives that brought down Wall Street

Fannie Mae, the second-largest financial institution in the nation, buys home mortgages and sells bonds backed by them, which investors consider to be implicitly backed by the Treasury, though there is no formal guarantee. Its activities and those of similar smaller agencies dominate the mortgage-backed securities market. Once known as the Federal National Mortgage Association, the company changed its name in 1997 to match its Wall Street nickname, based on its abbreviation. For more information about Fannie Mae, see Understanding Fannie Mae's Role.

The recent collapse of Fannie Mae has been widely atributed to mismanagementy and downright fraud perpetrated by its executives.

Here’s a quick look into the 3 former Fannie Mae executives who brought down Wall Street and where they are now.

Fannie Mae's Franklin RainesFranklin Raines was a Chairman and Chief Executive Officer at Fannie Mae . Raines was forced to retire from his position with Fannie Mae when auditing discovered severe irregulaties in Fannie Mae’s accounting activities. At the time of his departure The Wall Street Journal noted, ” Raines, who long defended the company’s accounting despite mounting evidence that it wasn’t proper, issued a statement late Tuesday conceding that “mistakes were made” and saying he would assume responsibility as he had earlier promised.

News reports indicate the company was under growing pressure from regulators to shake up its management in the wake of findings that the company’s books ran afoul of generally accepted accounting principles for four years.” Fannie Mae had to reduce its surplus by $9 billion.

Raines left with a “golden parachute valued at $240 Million in benefits. The Government filed suit against Raines when the depth of the accounting scandal became clear. 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.

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 miss-stated Fannie Mae profits.

Fannie Mae's Tim HowardTim Howard - Was the Chief Financial Officer of Fannie Mae. Howard “was a strong internal proponent of using accounting strategies that would ensure a “stable pattern of earnings” at Fannie. In everyday English - he was cooking the books. The Government Investigation determined that, “Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae.”

On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant’s income statement to achieve management pay bonuses. Investigations by federal regulators and the company’s board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004.

Tim Howard’s Golden Parachute to soften his landing from leaving Fannie Mae was estimated at $20 Million!

Fannie Mae's Jim JohnsonJim Johnson - A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. A look at the Office of Federal Housing Enterprise Oversight’s May 2006 report on mismanagement and corruption inside Fannie Mae, and you’ll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson’s 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million.” Johnson is currently under investigation for taking illegal loans from Countrywide while serving as CEO of Fannie Mae.

Johnson’s Golden Parachute was estimated at $28 Million.

More importantly–WHERE ARE THEY NOW?

FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor.

TIM HOWARD? Howard is also a Chief Economic Advisor to Obama.

JIM JOHNSON? Johnson was hired as a Senior Obama Finance Advisor and was selected to run Obama’s Vice Presidential Search Committee.

While their party affiliation is unclear, what's clear is their positioning for the future. Chances are these individuals will end up holding office in the new administration no matter who wins.

No comments:

Post a Comment


The posts herein are provided “AS IS” with no warranties, and confer no rights. The opinions expressed are solely my own personal opinions. The information on this site reflects opinions and is not intended nor is to be construed as legal advice to anyone.

© 2008, Carlos E. Bravo - All Rights Reserved

© 2008 KarlHaus LLC - All Rights Reserved | A SolutionHaus Site