Congress Ignored Fannie/Freddie Corruption
By: Tom Fitton
FrontPageMagazine.com | Friday, April 03, 2009
The group of which I am president has discovered new documents that prove government negligence in the Fannie Mae and Freddie Mac collapse was longer and more prevalent than we had imagined. Judicial Watch, the public interest group that investigates and prosecutes government corruption, has uncovered new documents that show that members of Congress for years were aware that Fannie Mae and Freddie Mac were playing fast and loose with accounting issues, risk assessment issues, and executive compensation issues, even while leftists in Congress continued to block attempts to regulate the two Government Sponsored Enterprises (GSEs).
Judicial Watch obtained the documents from the Federal Housing Finance Agency (FHFA) in response to a Freedom of Information Act (FOIA) request dated December 4, 2008. Judicial Watch requested records related to members of Congress activity regarding the policy of Fannie Mae and Freddie Mac to increase lending to individuals with poor credit risk, as well as correspondence and records about contacts between FHFA and Fannie and Freddie. Among the important documents:
Overall, these documents show that Congress was made aware of the massive problems at Fannie Mae and Freddie Mac over the last six years. Yet leftists, led by Congressman Barney Frank, repeatedly blocked attempts to rein in Fannie Mae and Freddie Mac.
- FHFA letter, dated March 26, 2007, from the director of the Office of Housing Enterprise Oversight (OHFEO), James B. Lockhart, to U.S. Senators Elizabeth Dole, Chuck Hagel, Mel Martinez and John Sununu: “This is a very serious issue. Freddie Mac’s inadequate systems and controls make it a significant supervisory concern. Furthermore, its lack of timely public disclosures deny market participants the essential financial information made available by all other publicly traded companies so that investors may make informed judgments.” The letter also mentions, “Fannie Mae still has not filed financial statements for 2005 and 2006 and thus, they are not timely filers either.”
- FHFA letter, dated December 3, 2004, to Congressman Barney Frank: “On November 15, 2004 Fannie Mae filed a Form 12b-25 with the Securities and Exchange Commission (SEC). Fannie Mae indicated that its external auditors could not complete their reviews of its financial statements and noted the possibility of up to a $9 billion loss dating back to 2001. As a result, OHFEO has determined it will not provide a monthly capital classification at this time.”
- Letter dated June 16, 2006, from OHFEO Director Lockhart to Senator Chuck Hagel: “In January 1999, Chairman and CEO Franklin Raines approved a recommendation made by the Chief Financial Officer (CFO) (Tom Howard) and the Controller (Leanne Spencer) to defer recognition of $200 million in amortization expense. This deferral, along with other accounting decisions made at that time relating to provisions for loan losses and the recognition of low-income housing tax credits, allowed management to meet the EPS threshold for maximum bonuses.
For example, during a hearing on September 10, 2003, before the House Committee on Financial Services considering a Bush administration proposal to further regulate Fannie and Freddie, Rep. Frank stated: “I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury.”
These new documents show that leftists in Congress were reckless when it came to the massive taxpayer liabilities related to Fannie Mae and Fannie Mac. Government officials at FHFA repeatedly sounded the alarm regarding fraud, abuse and corruption at these two GSE’s while Democratic leaders in Congress, led by Barney Frank, blocked attempts to address the situation in a meaningful way.
We have implemented a new commenting system. To use it you must login/register with disqus. Registering is simple and can be done while posting this comment itself. Please contact gzenone [at] horowitzfreedomcenter.org if you have any difficulties.
blog comments powered by