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Fannie Mae Fleecing

January 25, 2011

Taxpayers Pay Out Hundreds Of Millions For Fannie Mae’s Legal Bills, While Obama Fills White House With Fannie Mae Execs


Barack Obama



From the RNC

Taxpayers Have Paid More Than $160 Million To Defend Fannie Mae And Freddie Mac Executives From Fraud Charges Since The Federal Government Took Over The Companies. “Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud.” (Gretchen Morgenson, “Mortgage Giants Leave Legal Bills To The Taxpayers,” The New York Times, 1/24/11)


The Vast Majority Of The Money Has Been Spent To Defend Fannie Mae Officials From Suits Originating Before The Subprime Crisis. “The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted.” (Gretchen Morgenson, “Mortgage Giants Leave Legal Bills To The Taxpayers,” The New York Times, 1/24/11)

  •  Including Defending Franklin D. Raines, The Former CEO Of Fannie Mae. “Documents reviewed by The New York Times indicate that taxpayers have paid $24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.” (Gretchen Morgenson, “Mortgage Giants Leave Legal Bills To The Taxpayers,” The New York Times, 1/24/11)
  •  “[Franklin Raines] Has Shaved Eight Points Off His Golf Handicap, Taken A Corner Office In Steve Case’s D.C. Conglomeration Of Finance, Entertainment And Health-Care Companies And More Recently, Taken Calls From Barack Obama’s Presidential Campaign Seeking His Advice On Mortgage And Housing Policy Matters.” (Anita Huslin, “On The Outside Now, Watching Fannie Falter,” The Washington Post, 7/16/08)
  •  “Legal Costs Incurred By Mr. Raines, Mr. Howard And Ms. Spencer In The Roughly Four And A Half Years Prior To The Government Takeover Totaled Almost $63 Million.” (Gretchen Morgenson, “Mortgage Giants Leave Legal Bills To The Taxpayers,” The New York Times, 1/24/11)



The Office Of Federal Housing Enterprise Oversight Published A Report In 2006 Accusing Fannie Mae Executives Of Manipulating Profits And Generating Millions Of Dollars In “Improper Bonuses.” “The following year, the Office of Federal Housing Enterprise Oversight, then the company’s regulator, published an in-depth report on the company’s accounting practices, accusing Fannie’s top executives of taking actions to manipulate profits and generate $115 million in improper bonuses.” (Gretchen Morgenson, “Mortgage Giants Leave Legal Bills To The Taxpayers,” The New York Times, 1/24/11)


Former Treasury Official Richard S. Carnell Questions Why Raines Is “Being Held Harmless By The Government And Receiving Payment Of Legal Bills” After His Conduct Came To Light In A Housing Enterprise Oversight Report. “Richard S. Carnell, an associate professor at Fordham University Law School who was an assistant secretary of the Treasury for financial institutions during the 1990s, questions why Mr. Raines, Mr. Howard and others, given their conduct detailed in the Housing Enterprise Oversight report, are being held harmless by the government and receiving payment of legal bills as a result.” (Gretchen Morgenson, “Mortgage Giants Leave Legal Bills To The Taxpayers,” The New York Times, 1/24/11)

  •  “They Defied Their Duty Of Loyalty And Served Themselves.”  “‘Their duty of loyalty required them to put shareholders’ interests ahead of their own personal interests,’ Mr. Carnell said. ‘Had they cared about the shareholders, they would not have staked Fannie’s reputation on dubious accounting. They defied their duty of loyalty and served themselves. At a moral level, they don’t deserve indemnification, much less payment of such princely sums.'” (Gretchen Morgenson, “Mortgage Giants Leave Legal Bills To The Taxpayers,” The New York Times, 1/24/11) 



Obama’s National Security Adviser Tom Donilon “Was In Charge Of The Lobbyists, And “An Enabler” That Helped “Fannie Mae Escape Regulation And Avoid Increasing Their Capital.” “‘He was in charge of the lobbyists. ….That process involved using the Hill to rein in the regulators,’ said Stephen Blumenthal, former acting director of the Office of Federal Housing Enterprise Oversight. ‘That was always Fannie Mae’s approach. And there’s no question that Congress played a major role in enabling Fannie Mae to escape regulation and avoid increasing their capital, which is what eventually killed the company.’ ‘I don’t think he was part of the problem, but he wa sn’t part of the solution,’ Blumenthal said. ‘Mr. Donilon was not a target of the investigation. … Was he an enabler? Absolutely.’ (Josh Gerstein, “Donilon’s Resume : Policy, Law And Fannie Mae,” Politico, 10/08/10)

“Donilon Oversaw A Major Lobbying Campaign Against The Accounting Probe By Fannie Mae.” “An early report claimed Fannie was using reserves to improve its earnings. A May 2006 ‘Report of the Special Examination of Fannie Mae’ by OFHEO says Donilon oversaw a major lobbying campaign against the accounting probe by Fannie Mae. Donilon was not accused of participating in the accounting issues, which ultimately led to a $400 million settlement with the Securities and Exchange Commission in 2006 (Fannie Mae did not admit any improprieties).” (Diana Olick, “Former Fannie Mae Exec As White House Chief Of Staff?” CNBC, 9/24/10)

  •  “Lobbyists Under Donilon’s Charge Fought The OFHEO Investigation And Even Tried To Counter, Pushing An Investigation Into OFHEO.” “The report is very long and full of instances that show lobbyists under Donilon’s charge fought the OFHEO investigation and even tried to counter, pushing an investigation into OFHEO. The report also cites a 2003 email from then COO (and later CEO) Daniel Mudd to Donilon, exposing what OFHEO calls ‘efforts to generate interagency conflict.'” (Diana Olick, “Former Fannie Mae Exec As White House Chief Of Staff?” CNBC, 9/24/10)
  •  “Others Have A Different View Of Donilon’s Agenda, Suggesting That Donilon Wanted To Preserve The Mortgage Giant’s Empire And Head Off Any Attempt By Congress To Lessen Fannie Mae’s Huge Footprint On The Mortgage Market.” (Pete Yost, “On Housing, Donilon At Center Of Regulatory Fight,” The Associated Press, 10/9/10)

An Examination Of Fannie Was “Replete With References To Donilon.” “A 2006 report on the federal ‘special examination of Fannie Mae’ is replete with references to Donilon, who worked at the firm from 1999 to April 2005, first as senior vice president and general counsel, and later as executive vice president for law and policy. The report quotes from a 2004 Donilon e-mail plotting efforts to resist federal regulators’ attempts to force changes in Fannie Mae’s executive structure.” (Josh Gerstein and Abby Phillip, “Donilon’s Resume: Policy, Law And Fannie Mae, Politico, 10/8/10)



“Obama’s Tolerance For Fannie Mae Veterans Has Always Been Murky.” “The Obama team’s tolerance for Fannie Mae veterans has always been murky. During the 2008 campaign, Obama picked former Fannie Mae CEO Jim Johnson to lead his vice presidential search but dumped Johnson after his ties to the worsening mortgage crisis made him radioactive.” (Josh Gerstein and Abby Phillip, “Donilon’s Resume: Policy, Law And Fannie Mae, Politico, 10/8/10)

Obama’s Chief Of Staff William Daley Served On The Fannie Mae Board And Received Hundreds Of Thousands Of Dollars In Deferred Compensation And Stock Options. “After Clinton passed over Daley for a Cabinet post in his first term, he appointed him to the Fannie Mae board. Daley reported collecting $24,814 in director’s fees in 1996 from the firm. He also listed deferred compensation and stock options from Fannie Mae worth between $215,000 and $500,000.” (Charles R. Babcock and Barbara J. Saffir, “In Wealth, Clinton Team Doesn’t Look Like America,” The Washington Post, 6/24/97)

  •  Former Fannie Mae CEO Jim Johnson Recruited Daley For Fannie Mae. “Fannie’s government relations operations dramatically expanded in the mid-1990s, when then-CEO Johnson recruited Washington A-listers Robert Zoellick, who served in the Reagan and Bush administrations; Lawrence M. Small, former secretary of the Smithsonian Institution; and William M. Daley, commerce secretary in the Clinton administration.” (Lisa Lerer, “Fannie, Freddie Spent $200M To Buy Influence,” The Politico, 7/16/08)
  •  Daley’s Son Is A Former Lobbyist For Fannie Mae. “Daley is a former Fannie Mae board member. Daley’s son, William Daley Jr., is a former lobbyist for Fannie Mae. Daley Jr. is now with Morgan Stanley, and he is registered with Cook County and the State of Illinois as a lobbyist for the firm.” (Lynn Sweet, “Ad Ties Obama To Machine,” Chicago Sun-Times, 9/23/08)

Former Obama Transition And Treasury Official Damon Munchus Worked As “A Senior Financial Analyst For Credit Portfolio Strategies At Fannie Mae.”  “Prior to the Treasury Department, his financial services and capital markets experience ranged from being a member of President Obama’s FDIC Agency Review Transition Team, a Vice President within the Investment Banking Division of Jefferies and Co., and a senior financial analyst for credit portfolio strategies at Fannie Mae.” (Cyprus Advisory Team, Cyprus Advisory, Accessed 1/4/11)

  •  Munchus Worked At Fannie Mae As A Senior Financial Analyst Prior To Working On Obama’s Transition Team And At Treasury. (Center For Responsive Politics,, Accessed 1/4/11; Damon Munchus Revolving Door Profile,, Accessed 1/4/11)  
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