[Rhodes22-list] Bob Skinner said, "

Thu Oct 2 11:06:54 EDT 2008

Ed,

>From the WSJ today - Freddie and Fannie Mayhem

Brad

-------------------

House Financial Services Committee hearing, Sept. 10, 2003:

Rep. Barney Frank (D., Mass.): I worry, frankly, that there's a
tension here. The more people, in my judgment, exaggerate a threat of
safety and soundness, the more people conjure up the possibility of
serious financial losses to the Treasury, which I do not see. I think
we see entities that are fundamentally sound financially and withstand
some of the disaster scenarios. . . .

Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban
Development Secretary Mel Martinez:

Secretary Martinez, if it ain't broke, why do you want to fix it? Have
the GSEs [government-sponsored enterprises] ever missed their housing
goals?
* * *

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Frank: I do think I do not want the same kind of focus on safety
and soundness that we have in OCC [Office of the Comptroller of the
Currency] and OTS [Office of Thrift Supervision]. I want to roll the
dice a little bit more in this situation towards subsidized housing. .
. .
* * *

House Financial Services Committee hearing, Sept. 25, 2003:

Rep. Gregory Meeks, (D., N.Y.): . . . I am just pissed off at Ofheo
[Office of Federal Housing Enterprise Oversight] because if it wasn't
for you I don't think that we would be here in the first place.
[nowides]
Fannie Mayhem: A History

A compendium of The Wall Street Journal's recent editorial coverage of
Fannie and Freddie.

And Freddie Mac, who on its own, you know, came out front and
indicated it is wrong, and now the problem that we have and that we
are faced with is maybe some individuals who wanted to do away with
GSEs in the first place, you have given them an excuse to try to have
this forum so that we can talk about it and maybe change the direction
and the mission of what the GSEs had, which they have done a
tremendous job. . .

Ofheo Director Armando Falcon Jr.: Congressman, Ofheo did not
improperly apply accounting rules; Freddie Mac did. Ofheo did not try
to manage earnings improperly; Freddie Mac did. So this isn't about
the agency's engagement in improper conduct, it is about Freddie Mac.
Let me just correct the record on that. . . . I have been asking for
these additional authorities for four years now. I have been asking
for additional resources, the independent appropriations assessment
powers.

This is not a matter of the agency engaging in any misconduct. . . .

Rep. Waters: However, I have sat through nearly a dozen hearings
where, frankly, we were trying to fix something that wasn't broke.
Housing is the economic engine of our economy, and in no community
does this engine need to work more than in mine. With last week's
hurricane and the drain on the economy from the war in Iraq, we should
do no harm to these GSEs. We should be enhancing regulation, not
making fundamental change.

Mr. Chairman, we do not have a crisis at Freddie Mac, and in
particular at Fannie Mae, under the outstanding leadership of Mr.
Frank Raines. Everything in the 1992 act has worked just fine. In
fact, the GSEs have exceeded their housing goals. . . .

Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf
of Freddie Mac and Fannie Mae, do you feel that over the past years
you have been substantially under-regulated?

Mr. Raines?

Mr. Raines: No, sir.

Mr. Frank: Mr. Gould?

Mr. Gould: No, sir. . . .

Mr. Frank: OK. Then I am not entirely sure why we are here. . . .

Rep. Frank: I believe there has been more alarm raised about potential
unsafety and unsoundness than, in fact, exists.
* * *

Senate Banking Committee, Oct. 16, 2003:

Sen. Charles Schumer (D., N.Y.): And my worry is that we're using the
recent safety and soundness concerns, particularly with Freddie, and
with a poor regulator, as a straw man to curtail Fannie and Freddie's
mission. And I don't think there is any doubt that there are some in
the administration who don't believe in Fannie and Freddie altogether,
say let the private sector do it. That would be sort of an ideological
position.

Mr. Raines: But more importantly, banks are in a far more risky
business than we are.
* * *

Senate Banking Committee, Feb. 24-25, 2004:

Sen. Thomas Carper (D., Del.): What is the wrong that we're trying to
right here? What is the potential harm that we're trying to avert?

Federal Reserve Chairman Alan Greenspan: Well, I think that that is a
very good question, senator.

What we're trying to avert is we have in our financial system right
now two very large and growing financial institutions which are very
effective and are essentially capable of gaining market shares in a
very major market to a large extent as a consequence of what is
perceived to be a subsidy that prevents the markets from adjusting
appropriately, prevents competition and the normal adjustment
processes that we see on a day-by-day basis from functioning in a way
that creates stability. . . . And so what we have is a structure here
in which a very rapidly growing organization, holding assets and
financing them by subsidized debt, is growing in a manner which really
does not in and of itself contribute to either home ownership or
necessarily liquidity or other aspects of the financial markets. . . .

Sen. Richard Shelby (R., Ala.): [T]he federal government has [an]
ambiguous relationship with the GSEs. And how do we actually get rid
of that ambiguity is a complicated, tricky thing. I don't know how we
do it.

I mean, you've alluded to it a little bit, but how do we define the
relationship? It's important, is it not?

Mr. Greenspan: Yes. Of all the issues that have been discussed today,
I think that is the most difficult one. Because you cannot have, in a
rational government or a rational society, two fundamentally different
views as to what will happen under a certain event. Because it invites
crisis, and it invites instability. . .

Sen. Christopher Dodd (D., Conn.): I, just briefly will say, Mr.
Chairman, obviously, like most of us here, this is one of the great
success stories of all time. And we don't want to lose sight of that
and [what] has been pointed out by all of our witnesses here,
obviously, the 70% of Americans who own their own homes today, in no
small measure, due because of the work that's been done here. And that
shouldn't be lost in this debate and discussion. . . .
* * *

Senate Banking Committee, April 6, 2005:

Sen. Schumer: I'll lay my marker down right now, Mr. Chairman. I think
Fannie and Freddie need some changes, but I don't think they need
dramatic restructuring in terms of their mission, in terms of their
role in the secondary mortgage market, et cetera. Change some of the
accounting and regulatory issues, yes, but don't undo Fannie and
Freddie.
* * *

Senate Banking Committee, June 15, 2006:

Sen. Robert Bennett (R., Utah): I think we do need a strong regulator.
I think we do need a piece of legislation. But I think we do need also
to be careful that we don't overreact.

I know the press, particularly, keeps saying this is another Enron,
which it clearly is not. Fannie Mae has taken its lumps. Fannie Mae is
paying a very large fine. Fannie Mae is under a very, very strong
microscope, which it needs to be. . . . So let's not do nothing, and
at the same time, let's not overreact. . .

Sen. Jack Reed (D., R.I.): I think a lot of people are being
opportunistic, . . . throwing out the baby with the bathwater, saying,
"Let's dramatically restructure Fannie and Freddie," when that is not
what's called for as a result of what's happened here. . . .

Sen. Chuck Hagel (R., Neb.): Mr. Chairman, what we're dealing with is
an astounding failure of management and board responsibility, driven
clearly by self interest and greed. And when we reference this issue
in the context of -- the best we can say is, "It's no Enron." Now,
that's a hell of a high standard.

On Thu, Oct 2, 2008 at 8:41 AM, Tootle <ekroposki at charter.net> wrote:
>
> Bob Skinner said, "I must admit that I will not be satisfied with any
> solution that does not severely penalize those who
> sat on top of this pile of paper with their golden
> parachutes.  The very existence of the parachutes
> is evidence that they had no confidence that the
> market would survive their mismanagement.
>
> And I know that I have a lot of company in that
> sentiment.
>
> Those of us who believe in good pay for good work
> are bent beyond tolerance by the obvious disregard
> for merit in determining executive pay at the top.
> A double standard if I ever saw one, the antithesis
> of the classless society we flaunt to the rest of
> the world.
>
> I smell revolution - bloodless, I hope, but
> nevertheless with sharp teeth and a great hunger
> for revenge.
>
> As the French once said, heads will roll.  And
> the first will be those of the legislators who do
> not enact appropriate penalties and limitations
> during the process of rebuilding our financial
> structure.
>
> There should be no free ride for either the
> lenders who made ill-advised loans, or the fools
> who took the money and mis-spent it.
>
> /Robert
>
> What Bob Skinner DID NOT SAY:
>
> Here is a quick look into 3 former Fannie Mae executives who have brought
> down Wall Street.
>
> Franklin 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. http://housingdoom.com/2006/12/18/fannie-charges/ .
> 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.
>
> Tim 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.
> Howard's Golden Parachute was estimated at $20 Million!
>
> Jim 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.
>
> 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 hired as a Senior Obama Finance Advisor and was
> selected to run Obama's Vice Presidential Search Committee[until public
> clamor]
>
> IF OBAMA PLANS ON CLEANING UP THE MESS - HIS ADVISORS HAVE THE EXPERTISE -
> THEY MADE THE MESS IN THE FIRST PLACE.   Would you trust the men who tore
> Wall Street down to build the New Wall Street ?
>
> Pay close attention because should Obama be elected you will see more of
> these three, if they are not indicted,. tried and incarcerated.
>
> Ed K
> Greenville, SC, USA
> attachment:
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