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June 19, 2006

FANNIE SCANDAL

by Tina Grazier

You've heard about the Enron scandal, the Tyco scandal, the
failings of Global Crossing and Worldcom, but have you heard
about the other big accounting scandal? No? Hmmm...

An investigation and report by the OFHEO (Office of Federal
Housing Enterprise Oversight ) reveals that between 1998 and
2004 the management of a prominent American firm grossly
overstated earnings to ensure big bonuses for their upper
management. The "Report of the Special Examination of Fannie
Mae" by the OFHEO states that Fannie Mae's reporting regarding
profit growth and earnings were "illusions deliberately and
systematically created by senior management with the aid of
inappropriate accounting and improper earnings management".

Fannie Mae will pay $400 Million in penalties and the company is
now under criminal investigation.

THEY COOKED THE BOOKS FOR BUCKS, GUYS!!!

So, who are "they"? Are they rich corporate creeps concerned
more about PROFITS than employees? Are they greedy
extravagant jerks enjoying wild parties and flaunting their
WEALTH as their company flounders? Well, no, not exactly.
They are Washington insiders and could touch both sides of
the political aisle...but one name in particular is of interest to me
since the person was a very prominent and controversial figure
on the 911 commission. You remember Jamie Gorelick, the
former Justice Department Deputy Attorney General who was
responsible for creating the policy that prevented communications
between intelligence agencies. (Terrorism had been tucked into a
neat legal envelope at the time and the investigation into illegal
campaign contributions to the Clinton-Gore campaign by Charlie
Trie was front and center.) Meanwhile, having done enough at the
Justice Department Ms. Gorelick moved on to greener pastures
as Vice Chairman of Fannie Mae in 1997.

What will be reported by the MSM as the crimminal proceedings in the
Fannie Mae case begin? Will we hear about Jamie Gorelick's
involvement in this scandal wherein she took home $26.46 Million in
salary and bonuses between 1998 and 2002?. How about Fannie Mae's
#1, former Clinton budget advisor Mr. Franklin Raines, will his name be
featured in the headlines for weeks on end? Mr. Raines' salary was never
more than $1 million a year, but in the six year period of the investigation
he was paid more than $52 million in bonuses. ($90.12 Million total). If this
story is reported, will the association to democrats and the Clinton
administration be reported or played down? Will the MSM report this story
at all? For now at least, I'm going to go ahead and breathe freely.

My thanks to Byron York of National Review for his article
"Funny Business at Fannie Mae". Byron says, "...the scandal's effects could
ripple through congress for years."
And so it should.

Posted by Post Scripts at June 19, 2006 12:11 PM

Comments

The ink hasn't even dried on the headlines for CEO's back-dating their stock options so they would be [guaranteed] maximum profits and now this?

It's really disturbing to see how many people, trusted with so much, and given so much, have such low moral standards!

Where have we gone wrong? It's not like Fannie Mae folks cooked the books to save the company from ruin or protect investors...I could at least rationalize that transgression, even if I didn't agree with it. But, that had nothing to do with what happened here. This was pure, unadulterated, greed, completely absent any other alturistic motives!

There are crimes of theft and there are crimes of theft that breech the public trust and undermine the confidence of American government, and the two theft crimes must be viewed completely different. People who "breech the public trust" ought to pay a price 10 times that of an ordinary crook because of how it hurts our country.

I wonder if we shouldn't teach "character" in school?

Character could be worked in there somewhere, i.e., given the choice between teaching, oh..., say, intermediate algerbra or character, I would say we stand a better chance of using "character" than intermediate algerbraic formulas as adults, but I'm not picking on algerbra, I'm just saying, when it comes to preparing kids to have good life skills, character is really important. Obviously, character should be taught at home, but just as obvious, too many parents are falling down on the job or corruption wouldn't be so rampant!

When it comes to corruption in government, I wonder if it could be our [electoral system] that lends itself to filtering out the honest candidates/politicians and breeding corruption by too much temptation? It takes a lot of money to get elected to a federal office and that high cost prevents a lot of good people from participating because they are not rich or they are not connected and willing to make deals.

Once elected, politicians always have their hand out to raise even more campaign money to insure their continued employment. Has this whole money raising process devolved into way too much temptation and not enough focus on job performance and high moral standards? It seems that way to me!

If we have too many corrupt people in high office. The people I know in the state legislature tell me [fund raising] is job one. You never stop raising money your whole political career. This money raising is going full bore even while creating and passing laws and making political appointments..that can't be good.

If my dot connecting is right, then it stands to reason that political appointments will be made based on self serving, hidden reasons and the corruption goes deeper than we could ever imagine.

I really think it's time we look for some solutions to the corruption, from tougher penalties to the way these guys raise money in elections. We can do better...we have too!

Posted by: Jack Lee at June 19, 2006 08:21 AM

Jack, I think you hit the nail on the head when you mentioned character. The problems of corruption will always be with us as long as temptation is with us. Character enables human beings to resist temptation. Greed doesn't even play a roll until we say yes and open that first door. I think character must be taught in every classroom at every level (human beings are slow learners!) but also in every neighborhood and workplace and organization. We must, as a society, raise our standards. We also need to teach our kids to think. This is one reason I embrace the conservative movement. Check out my post tomorrow it's shaping up as another "twilight zone moment" for the two of us.

Posted by: Tina at June 19, 2006 07:36 PM

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