Facts on Fannie's fraud ...
Posted 5/30/2006 8:41 PM
<snip>
... the facts don't look very good for Raines and Fannie Mae.
In releasing a 348-page report last week, government officials said
the company engaged in "extensive financial fraud" by doctoring earnings so Raines and other executives could earn "unjustified levels of compensation." Officials also said the company suffered from "an arrogant and unethical corporate culture."
These are extraordinarily damning assertions. They show a company whose top executives were contemptuous of criticism and imbued with a sense of entitlement to enrich. According to the report, Raines pulled in more than $90 million in his six years as CEO, $52 million of which was performance pay triggered by bogus accounting.
Fannie Mae is no average company. A federally chartered institution created during the Depression to provide more money for mortgages, it was spun off in the 1960s by Congress into a lucrative private company that still enjoys taxpayer-financed perks. It does not have to pay state and local taxes. It has a standing letter of credit from the U.S. Treasury. It is exempt from many of the reporting requirements of other public corporations. It can borrow money at lower interest rates than other companies can.
It also creates special risks.
The company, which pours money into the housing market by buying millions of mortgages from banks, is crucial to the functioning of the economy. For that reason, taxpayers would almost certainly be called on to bail it out if it ever got into serious financial trouble. That makes an honest accounting of its profits, assets and liabilities a vital public trust.
<snip>
The company overstated its earnings by $10.6 billion over six years, according to last week's report. <snip>
http://www.usatoday.com/news/opinion/2006-05-30-fannie-mae-fraud_x.htm