Monday, December 18, 2006

Franklin Raines made Fannie Mae short over $6 billion

I have followed the career of Seattle native star Franklin Raines as in each higher job he performs lower. It was frustrating to hear him as President Clinton's budget chief spout nonsense. Then he got the star job of head of Fannie Mae, the federal "private" mortgage second market maker. It wasn't enough to have high status and high pay; he needed to "earn" millions in bonuses. And "earn" them he did. Not. The board of Fannie Mae fired him in 2004. After he was gone Fannie Mae's profits were recalculated and lowered by $6.3 billion. That's real money, even in D.C. The $6.3 billion in false profits provided Raines with his big bonuses - over $100 million. He was cooking the books to put money in his pockets. It's a crime to rob someone of $10. Isn't it a crime to steal millions? Someone lacks the guts to put him in prison, but at least they are going after the cash. The Office of Federal Housing Enterprise Oversight is seeking fines and the cash in a civil lawsuit, not with criminal charges. The Associated Press reports:
OFHEO said it is seeking civil fines of $100 million or more against the three former executives and restitution totaling more than $115 million in bonus money tied to an improper accounting scheme. ... Lockhart said the charges "reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over 20 accounting principles, and misleading the regulator and the public." "The misconduct cost (Fannie Mae) and shareholders many billions of dollars and damaged the public trust," Lockhart said in a statement. OFHEO, the regulator for Fannie Mae and Freddie Mac, last May issued a blistering report alleging a six-year accounting fraud at Washington-based Fannie Mae, the second-largest U.S. financial institution after Citigroup Inc. The regulators said the scheme included manipulations to reach quarterly earnings targets so that company executives could pocket hundreds of millions in bonuses from 1998 to 2004.

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