Posted by
Always To The Right on Wednesday, October 01, 2008 12:50:32 AM
A federal grand jury in New York is probing the accounting
shenanigans at Fannie Mae and Freddie Mac. It's about time, and we hope
it doesn't end there.
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We mention all this because we now have an opportunity, thanks to
the New York grand jury, to probe perhaps the greatest financial crime
ever — one that dwarfs Enron in size and scope.
Yes, we're talking Fannie and Freddie.
Here's how James B. Lockhart III, head of the Office of Federal
Housing Enterprise Oversight, described the two companies back in 2006,
before the meltdown occurred:
"The result of (Fannie's and Freddie's) rapid growth unconstrained
by market forces and a weak regulator was years of mismanagement,
flagrant earnings manipulation, and systems-and-controls problems.
Managements of both companies were forced out, earnings were misstated
by an estimated $16 billion, fines exceeding one-half billion dollars
were imposed, and remedial costs will exceed $2 billion."
Yet Congress did nothing. Fannie and Freddie continued to enjoy a
virtual monopoly of the housing finance market, holding nearly half the
nation's $12 trillion in mortgage assets in 2007.
Other Fannie-Freddie alumni did equally well. Rep. Rahm Emanuel has
been front and center in crafting a new rescue bill. Ex-Clinton Justice
official Jamie Gorelick careens from career catastrophe to catastrophe,
and still gets top jobs. It pays to have ties.
Meanwhile, as previously documented, Rep. Barney Frank and Sen.
Chris Dodd repeatedly thwarted reforms. Yet today they stand
front-and-center as Democrats try to "fix" a problem they created.