If Fannie Mae were simply XYZ Mortgage Company it would have been investigated by the FBI, criminal wrongdoing charges filed with stiff prison sentences possible.
Fannie Mae is a publically traded company under Government Supervision. It is called a Government Sponsored Enterprise (GSE) as is Freddie Mac.
Huge improprieties were found and top executives were responsible. Recently, The Office of Federal Housing Enterprise Oversight (OFHEO), the division of the Department of Housing and Urban Development that oversees and regulates Freddie Mac and Fannie Mae, reached a settlement agreement with three of Fannie Mae’s top executives.
The three involved are:
Former Board Chairman and Chief Executive Officer Franklin D. Raines
Former Chief Financial Officer J. Timothy Howard
Former Controller Leanne Spencer
Chairman and CEO, CFO and Controller, you don’t get much higher then that.
As quoted in Mortgage News Daily OFHEO filed a Notice of Administrative Charges for the following on December 18, 2006:
1. inappropriately managed earnings
Larry: I think this refers to “cooking the books
2. failure to ensure that adequate internal controls were
put in place
Larry: Negligence perhaps or just plain irresponsible lending practices.
3. permitting the accounting function to operate without adequate resources
Larry: This opens several questions. What are adequate resources? Lack of people or lack of money to lend?
4. releasing misleading financial reports
Larry: This one sounds like fraud to me.
OFHEO stated that the above “represented misconduct and unsafe and unsound practices that led to losses suffered by Fannie Mae”. They also indicated there were other charges but did not list them.
OFHEO determined monetary fines be given to the offenders and paid to Fannie Mae. They are:
For Mr. Raines: He is to pay $24.7 million. He will surrender his stock options valued at $15.6 million at issuance and will give up other unnamed benefits worth $5.3 million.
For Mr. Howard: He is to pay $950,000 derived from the sale of his Fannie Mae stock. He will relinquish $5.2 million of stock options and $240,000 in other unnamed benefits.
For Ms. Spencer: She will pay $275,000 to the U. S. Government and waive any claims for compensation.
Had this been any other mortgage company or lender, criminal prosecution would certainly have been sought. This, after all, is a public company and should fall under regulation of the SEC for securities violations and the FBI for any criminal violations.
It is also interesting to note that MDN also disclosed this information, “OFHEO previously entered into a Consent Order with Fannie Mae that included a $400 million civil money penalty and revision of major internal controls, restructuring the company's organization, and changes in accounting practices and corporate governance”, indicating other large improprieties had occurred.
Few people were ever aware and are still not aware of the problems that exist within both GSE organizations, Fannie Mae and Freddie Mac. More mortgage meltdown will come as a result of these publicly traded corporations.
I am sure the fines for Mr. Raines will not strip him of his wealth nor will it prevent him from working for non GSE companies. Maybe he will even be given a diplomatic position as the former Chairman of Ameriquest was.
We need to know more of what is happening here. Few report on it and if they do they are typically small sound bites.
Justice should be universal not selective in a democratic society.
No comments:
Post a Comment