Yesterday, Terry Keenan wrote an article for the New York Post pointing out that if the major media were truly objective and fair in their characterizations, they would be treating the ongoing Fannie Mae scandal as the Democrats’ Enron.
That’s because, Keenan contends, of the ties of prominent Democrats to Fannie Mae (including a potential Kerry cabinet member), not to mention a shift in political giving by Fannie Mae execs:
IS the growing scandal at Fannie Mae about to become the Democrats’ Enron?
That’s the hot question in Washington this week as regulators painted a scary picture of the huge home lender, detailing accounting shenanigans, including “cookie jar” reserves that smoothed out volatile results and paved the way for tens of millions of dollars in executive bonuses.
For those, including Alan Greenspan, who have warned that this government-sponsored lender is a ticking time bomb, the revelations seem to indicate that Fannie’s own management believed its operations are a lot riskier than they let on.
That’s just one reason this story has Washington and Wall Street buzzing. There are many others — starting with Fannie’s chairman and CEO Franklin Raines.
Raines is not your average CEO, mind you. The Harvard educated exec, who pocketed $20 million from Fannie Mae last year, is just one of a handful of Democrats who easily bridges the Washington-New York power axis.
Raines was widely believed to be Senator John Kerry’s first choice for Treasury Secretary in a Kerry administration, and was even mentioned as a potential Kerry running mate. In the corporate world, Raines is a force to be reckoned with as well — heading up the Business Roundtable’s corporate governance committee. No joking.
With one foot in politics and the other in business, Raines was tailor-made for Fannie, a place where job one is keeping the government off its back. That’s why Fannie and its cousin Freddie Mac boast Washington lobbying machines second to none.
Time was, not long ago, when Fannie and Freddie were equal-opportunity political donors. Both companies liberally doled out money to lawmakers of both parties with little regard to party affiliation.
But that equation began to change in recent years. Once untouchable, the White House and the Republican-controlled Congress began to take on Fannie and Freddie in the post-Enron era.
And no surprise, execs at Fannie and Freddie began to target their donations at Democrats. Little wonder Fannie Mae repeatedly tops the list of stocks that would benefit from a Kerry victory.
Keenan concludes ominously:
The next few weeks will likely tell whether the scandal at Fannie Mae will blow over, or whether it threatens to blow up into a bigger mess that could potentially leave U.S. taxpayers exposed to a mammoth bailout. It will be interesting to see if Fannie’s ties to the Democrats get as much ink as Enron’s ties to the Republicans.
If the Chronicle‘s business section is any indicator, it appears that the newspaper is going to ignore the political angle. Here’s an excerpt from Marcy Gordon’s AP article in today’s Chronicle:
The government-chartered mortgage financer and its regulator said Monday they had reached an agreement after negotiations that stretched over the weekend. Last Monday, the Office of Federal Housing Enterprise Oversight told the Fannie Mae board that its eight-month-old investigation had found pervasive earnings manipulation to meet Wall Street expectations — and in one case to meet target levels for the award of executive bonuses — and other serious accounting misdeeds.
A Treasury official, meanwhile, renewed the Bush administration’s call for tighter government reins over Fannie Mae and Freddie Mac, the other huge government-sponsored mortgage company, which faced an accounting crisis 15 months ago.
The Bush administration, which has put together a pretty good record in acting against corporate malfeasance, is right to urge greater scrutiny and control of Fannie Mae and Freddie Mac, which seem to have become more political than such organizations ought necessarily to be. Given their treatment of Vice President Cheney’s former connection to Halliburton, one can only imagine the scandal that media outlets like the Chronicle might be obsessing over if, say, current Treasury Secretary John Snow (instead of Democrat and potential Kerry Treasury Secretary Franklin Raines) had overseen Fannie Mae during such turbulence (while pocketing $20 million last year).