So You Want To Defend Rahm on Fannie/Freddie
It’s a pretty sad day when political elites like Rahm Emanuel have their misdeeds shielded by obfuscation like this, but I’m happy to have a discussion about what Rahm did at Fannie and Freddie – and what he has done since that time.
Jed Lewison says that the allegation “that Emmanuel and the White House are not only covering up past corrupt practices but are also creating an $800 billion slush fund with which they can carry out even more corruption — is reminiscent of the fanciful allegations that Bill Clinton killed Vince Foster and Ron Brown.”
He dismisses any inquiry into Fannie/Freddie malfeasance because — well, Republicans are racists:
Fannie Mae and Freddie Mac are key elements in the right-wing narrative about the recession. Their script goes something like this: ACORN, Fannie, and Freddie worked with the Democratic Congress to pressure banks to lend to “risky” borrowers, using the Community Reinvestment Act as their leverage. This storyline is totally false, but wingers love it because it not only absolves the financial and real estate industries of responsibility for the financial crisis, but it puts the blame squarely on the backs of blacks and Latinos. Absent evidence, lending credibility to the this right-wing shibboleth is a great disservice.
Rather than parrot right-wing myths that have nothing to do with the question at hand, let’s look at the evidence. The fact that the White House is contemplating doubling the limit of their commitment to Fannie/Freddie to $800 billion (even though they’ve only used $112 billion) was reported by that famous right-wing rag the New York Times on December 16:
Now, according to people close to the talks, officials are discussing the possibility of increasing that commitment, possibly to $400 billion for each company, by year-end, after which the Treasury would need Congressional approval to extend it. Company and government officials declined to comment.”
This is somehow meaningless because Michelle Malkin hates ACORN.
The fact that Rahm Emanuel was on the board of Fannie and Freddie from 2000-2001 when executives laid out their plans to deceive shareholers so they could pad their bonuses was reported by Hot Air the Chicago Tribune:
On Emanuel’s watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.
Maybe Vince Foster wrote the report by the Office of Federal Housing Enterprise Oversight (OFHEO), the oversight board for Fannie/Freddie, which “provided evidence that non-executive members of the Board were aware, and supportive of, management in this regard, including the use of derivatives to improperly manage the earnings of Freddie Mac.”
Rahm claims he just “doesn’t remember” what happened during that time, but the White House turned down the Tribune’s FOIA request for the board minutes and correspondence from the time Rahm was there. They claimed it was “commercial information,” even though at the time of the request Freddie was wholly owned by the federal government.
Probably Ron Brown’s doing.
Wild-eyed McCarthyite Ryan Grim of the Huffington Post is the one who reported that the Inspector General for Fannie and Freddie, Ed Kelley, had been removed earlier this year. Kelley’s independent authority to conduct investigations was challenged in May, and he was demoted to internal auditor shortly thereafter using a loophole in a law passed in 2008 which folded two oversight agencies (OFHEO & FHFB) into one (FHFA):
The mortgage industry is one of the most susceptible to fraud, yet one of the areas Kelley said he doesn’t get into is criminal investigation.
“We don’t have the authority to do criminal investigations,” he said. “It’s the very reason why they set up IG offices themselves, [as opposed to] internal audit offices.”
The administration has not appointed an Inspector General to replace him, despite repeated warnings.
The law with the “loophole” that kept Kelley from operating as Inspector General at the FHFA, even though he had done so at the FHFB, was the Housing and Economic Recovery Act of 2008. Cosponsored by Rahm Emanuel. (Here’s Rahm speaking on the floor of the House in support of the bill, which bailed out Fannie & Freddie).
As Yves Smith notes, “The Administration has taken a decidedly hostile stance towards the agency.” It’s been 16 months since the law took effect. No Inspector General has been appointed, though one has been removed. This despite the fact that the Administration has been warned multiple times by Congress, the FHFA and TARP Inspector General Neil Barofsky, who calls it “a serious gap in oversight.”
And now they want to throw $400 billion more at Fannie and Freddie. But we’re not supposed to ask for an investigation, because Jed says it “would be a massive burden on a White House that is already struggling with enormous problems with no end in sight.”
I think I heard that a couple of times during the Bush years.
I think what we’re seeing is a breakdown of the progressive online community into those who are willing to overlook extreme financial malfeasance if “our guys” are the ones doing it, and those who don’t want to be part of “our guys” if that’s the price. Count me in with the latter group, because the hypocrisy of the former is what led to the Bush dead-enders and their irrational embrace of George Bush beyond limit. A small cabal who can only interpret things through personalities is going to lose the rest of the country pretty quickly, because most people actually believe that these continuous bailouts are part of the “enormous problems” we are struggling with.
If you’d like to be part of the “principles before personalities” community, sign up to blog at The Seminal.