| Feds seize Fannie and Freddie; Where's Jamie Gorelick? | |
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| Tweet Topic Started: Sep 7 2008, 01:14 PM (294 Views) | |
| Quasimodo | Sep 7 2008, 01:14 PM Post #1 |
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http://money.cnn.com/2008/09/07/news/companies/fannie_freddie/index.htm?postversion=2008090711 U.S. seizes Fannie and Freddie Treasury chief Paulson unveils historic government takeover of twin mortgage buyers. Top executives are out. By David Ellis, CNNMoney.com staff writer Last Updated: September 7, 2008: 2:01 PM EDT NEW YORK (CNNMoney.com) -- Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back. The move marks Washington's most dramatic attempt yet to shore up the nation's housing market, which is suffering from record foreclosures and falling prices. The sweeping plan, announced by Treasury Secretary Henry Paulson and James Lockhart, director of the Federal Housing Finance Agency, places the two companies into a "conservatorship" to be overseen by the Federal Housing Finance Agency. Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing. (snip) Freddie CEO Richard Syron and Fannie CEO Daniel Mudd will no longer run the agencies, while the FHFA will assume control of the boards of both companies, regulators said. Syron and Mudd will be replaced by two finance veterans charged with restoring the mortgage titans to health. Herb Allison, the former president of money manager TIAA-CREF, will head Fannie Mae. Allison formerly served as vice chairman of Merrill Lynch. David Moffett, who served as vice chairman and chief financial officer of U.S. Bancorp until early 2007 and then joined the Carlyle Group private-equity firm as a senior advisor, will take over Freddie Mac. At the same time, dividends on both common and preferred shares will be eliminated in an effort to conserve about $2 billion annually. All of the firms' lobbying and political activities will be halted immediately and charitable activities reviewed. (snip) How we got here Sunday's decision culminates weeks of meetings and analysis by top federal regulators and management teams assessing the health of the companies. "We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection," Paulson said. The two firms buy loans, attach a guarantee, then sell securities backed by the loans' income stream. All told, they own or back $5.4 trillion worth of home debt - half the mortgage debt in the country. (snip) |
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| Quasimodo | Sep 7 2008, 01:17 PM Post #2 |
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Ralph Nader Robert Weissman P.O. Box 19312 Washington, D.C. 20036 September 25, 2006 Chairman Christopher Cox Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Dear Chairman Cox, As you continue to investigate the Fannie Mae accounting debacle, we are writing to urge you to seek civil sanctions, including disgorgement, from senior executives who profited directly from the misconduct at Fannie Mae, and that you urge the Department of Justice to give careful consideration to criminal prosecution of these individuals. In May, the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight (OFHEO) entered into a settlement with Fannie Mae for its accounting misconduct, requiring payment from Fannie Mae of $400 million in penalties and what you have described as perhaps the largest restatement of earnings in corporate history. (snip) Top officers at Fannie Mae benefited personally from the ensuing wrongdoing. According to OFHEO vi, each of Fannie Mae's most heavily compensated executives derived more than half of their massive payouts from compensation components tied to attaining EPS goals: * Fannie Mae CEO and Chair Franklin Raines obtained $90,128,761 in compensation from 1998 to 2003. Of this amount, $52,815,708 was derived from components tied to attaining EPS goals. * Fannie Mae CFO Timothy Howard received $30,155,029 in compensation from 1998 to 2003. Of this amount, $16,764,405 was derived from components tied to attaining EPS goals. * Fannie Mae Vice Chair Jamie Gorelick received $26,466,834 in compensation from 1998 to 2003. Of this amount, $14,898,778 was derived from components tied to attaining EPS goals. * Then-Chief Operating Officer and current Fannie Mae CEO Daniel Mudd received $26,306,057 in compensation from 1998 to 2003. Of this amount, $14,562,380 was derived from components tied to attaining EPS goals. * Executive Vice President Robert Levin received $26,418,623 in compensation from 1998 to 2003. Of this amount, $15,272,645 was derived from components tied to attaining EPS goals. In general, when seeking to remedy corporate wrongdoing, it is important to include penalties for both the corporate entity and for executives responsible for the wrongdoing. Failure to sanction both the entity and the individuals enables too many escapes from accountability for key implicated parties, and fails to send a clear deterrent message. In the case of Fannie Mae, the SEC and OFHEO have, via their settlement with Fannie Mae, imposed a fine and instituted significant structural remedies and restraints. The U.S. Attorney for the District of Columbia, Kenneth Wainstein, has indicated that there will be no criminal prosecution of Fannie Mae. Still under consideration, however, is the matter of appropriate sanctions for individual misconduct. We urge that you give careful attention to applying the entire range of civil sanctions available, including fines, disgorgement and prohibitions on future service on publicly traded companies' boards of directors. Unless evidence emerges that contradicts the findings of the OFHEO report, the Fannie Mae case presents a classic set of precise facts and abuses for disgorgement and other sanctions. Here, according to OFHEO, it was the very collaboratively planned executive compensation system itself that drove the wrongdoing. Failure to obtain disgorgement from the senior executives who committed this wrongdoing, motivated in significant part by awareness of how the accounting manipulations would benefit their personal wealth, would be a gross injustice, and seriously undermine the deterrent message that the SEC and OFHEO properly desire to communicate in this case. Certainly the performance-based compensation of the wrongdoing executives and directors should be disgorged; and, given the harm to the corporation, it would be very appropriate to seek disgorgement as well of their non-performance-based compensation. The executives and directors' munificent pay came while they oversaw or implemented practices that, as you have said, has forced Fannie Mae to undertake "one of the largest restatements in American corporate history" and cost the company more than $1 billion. Failure to disgorge non-performance-based compensation would leave the culpable officers and directors in the same position they would have been absent the earnings manipulation. In such a case, not only would there be no punitive component, but there would be little deterrent effect. The message to corporate America would be that, if you are caught, crime does not pay, but it doesn't cost you anything either; and, if you can get away with wrongdoing, the rewards may be immense. (snip) If manipulating earnings requiring a restatement of $10 billion and costing the firm and shareholders more than $1 billion, "coopting internal auditors and other managers,"vii and stonewalling their regulators -- largely for the purpose of maximizing bonuses and other personal compensation -- does not result in criminal prosecution, what scale of wrongdoing is required? We look forward to your reply, and based on your public comments that civil penalties including disgorgement are under consideration, we hope that the SEC is planning to take aggressive action to sanction the individuals who carried out and facilitated the lengthy wrongdoing at Fannie Mae. Sincerely, Ralph Nader Robert Weissman |
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| Baldo | Sep 7 2008, 01:51 PM Post #3 |
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Humm, counting her money? |
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| Tidbits | Sep 7 2008, 01:58 PM Post #4 |
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If she goes to the Big House and is transferred a few times, will the ask her: "How many houses do you have?" |
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| Bill Anderson | Sep 7 2008, 02:14 PM Post #5 |
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Jamie Gorelick made $26 million while looting Fannie. Great work, if you can get it.
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| Baldo | Sep 7 2008, 02:54 PM Post #6 |
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God forbid we should ever be twenty years without such a rebellion. The people cannot be all, and always, well informed. The part which is wrong will be discontented, in proportion to the importance of the facts they misconceive. If they remain quiet under such misconceptions, it is lethargy, the forerunner of death to the public liberty. ... And what country can preserve its liberties, if it's rulers are not warned from time to time, that this people preserve the spirit of resistance? Let them take arms. The remedy is to set them right as to the facts, pardon and pacify them. What signify a few lives lost in a century or two? The tree of liberty must be refreshed from time to time, with the blood of patriots and tyrants. It is its natural manure., November 13, 1787, letter to William Stephens Smith, quoted in Padover's Jefferson On Democracy http://www.famous-quote.net/thomas-jefferson-quotes.shtml Meanwhile we just borrow more money from the imaginary reserve fund of the printing press. |
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