Fannie Mae and Freddie Mac will eventually wither away. But the cash-grabbing exploits of Franklin Raines may live on forever.
Rep. Randy Neugebauer, the chairman of the House oversight and investigations subcommittee, said Thursday he will hold a hearing next week to remind everyone of the obscene sums Raines, the former Fannie Mae CEO and ex-Clinton administration budget director, and his colleagues raked in while overseeing a major accounting fraud at the government-backed mortgage buyer.
Neugebauer didn’t name any witnesses for the hearing, which is set for Tuesday. In what is surely a total coincidence, the hearing will occur just a few days after the administration’s scheduled release of its long-awaited plan to phase out the companies, whose taxpayer rescue has cost around $150 billion or so since 2008.
The immediate object of Neugebauer’s ire is the $160 million the government has spent defending the companies and their former executives in civil lawsuits. That number “raises serious questions about the conservators’ responsibilities to prevent any further losses to the American taxpayer,” the Texas Republican said.
Neugebauer said Fannie has spent $8 million defending Raines against civil suits related to his so-called leadership of the company between 1999 and 2004, when he was forced to step down after the Securities and Exchange Commission’s chief accountant ruled the company’s books were cooked. It has spent an added $16 million on his top aides and $30 million on other officers and directors, he said.
Regulators in 2006 sued Raines and his chief lieutenants, Tim Howard and Leanne Spencer, for their role in the accounting fraud, which former Fannie-Freddie overseer James Lockhart estimated at $10.6 billion in overstated profits. Raines alone reaped $52 million in unearned compensation over six years thanks to the cooked books, Lockhart said.
Without, of course, admitting or denying anything, the three former execs settled the suit in 2008 by paying penalties and relinquishing shares in a deal valued at $31 million. The government’s current Fannie-Freddie overseer, Edward DeMarco, told the New York Times he can’t see the upside of trying to relitigate the liability coverage issue. He presumably has spent enough time with lawyers as it is.
That’s an exasperating but not an uncommon stance, seen recently as well at Bank of America (BAC), which is cheerfully picking up a ballooning legal tab for former Countrywide chief Angelo Mozilo.
So let’s face it, the hearing isn’t likely to result in any action. But with Fannie and Freddie, it’s always a joy to take a stroll down memory lane.
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