Replies to post #117578 on Fannie Mae-No Politics (FNMA)

[patoja76]

In fact history is cyclical. Except for the ecomical conditions on 2007-2008, this is a remake of a classic movie:

In All the Devils Are Here, Bethany McLean and Joe Nocera paint a detailed portrait of the GSEs, including Fannie. Fannie had been aggressive in its political fights with Wall Street and Congress in the 1980s. In the 1990s Fannie ramped up the 'cut them off at the knees' strategy against political enemies. Tactics included a massive lobbying effort, neutering the OFHEO (its 1992-created regulator), creating a "partnership office" network to court the politically powerful with pork, giving high level employment to the well connected, giving out campaign contributions, creating a charity foundation, and threatening critics like FM Watch with retaliation. One of McLean & Nocera's sources even compared Fannie's activities to Tammany Hall.[62]
McLean and Nocera also claim that Fannie 'gamed' its affordable housing numbers, with a process that was referred to internally as "stupid pet tricks". The National Community Reinvestment Coalition, National Association of Affordable Housing Lenders, and studies by the Department of Housing and Urban Development all found the GSEs lacking in their actual, real support of affordable housing.[63]
Accounting controversy[edit source]
In late 2004, Fannie Mae was under investigation for its accounting practices. The Office of Federal Housing Enterprise Oversight released a report[64] on September 20, 2004, alleging widespread accounting errors.
Fannie Mae was expected to spend more than $1 billion in 2006 alone to complete its internal audit and bring it closer to compliance. The necessary restatement was expected to cost $10.8 billion, but was completed at a total cost of $6.3 billion in restated earnings as listed in Fannie Mae's Annual Report on Form 10-K.
Concerns with business and accounting practices at Fannie Mae predate the scandal itself. On June 15, 2000, the House Banking Subcommittee On Capital Markets, Securities And Government-Sponsored Enterprises held hearings on Fannie Mae.[65]
On December 18, 2006, U.S. regulators filed 101 civil charges against chief executive Franklin Raines; chief financial officer J. Timothy Howard; and the former controller Leanne G. Spencer. The three are accused of manipulating Fannie Mae earnings to maximize their bonuses. The lawsuit sought to recoup more than $115 million in bonus payments, collectively accrued by the trio from 1998 to 2004, and about $100 million in penalties for their involvement in the accounting scandal.