Senator Obama, in discussing the recent problems with the financial markets, diverts attention from his own culpability
Sen. Barack Obama said Tuesday that the country is facing the "most serious financial crisis in generations" and argued that rival Sen. John McCain would only make it worse....
Obama said what's happened in the past few days is "nothing less than the final verdict on an economic philosophy that has completely failed."
But what philosophy is he talking about? The philosophy that allowed Fannie Mae and Freddie Mac to engage in unsound financial transactions while members of Congress were paid to look the other way, and in some cases, even block reform? That practice?
Well how is Senator Obama going to be able to reform a pratice that he himself was engaged in?
David Hogberg of Investors Business Daily reports
Fannie Mae (FNM) and Freddie Mac (FRE) may not have managed their mortgage investments wisely, but the loan-funding giants used a savvy strategy of campaign contributions, based on an Investor's Business Daily analysis.
The Federal Election Commission data, compiled by the watchdog Center for Responsive Politics, include contributions from Fannie and Freddie political action committees, now shut down under the Treasury Department's takeover.
Records show that since both PACs were set up in 2003, they have contributed just over $3 million to federal candidates. The money went to candidates' campaigns and their leadership PACs, which politicians use to enhance their influence by giving donations to their peers.
And the two top recipients of this money, according to OpenSecrets.org are Senators Christopher Dodd, John Kerry and Barack Obama.
One of the architects of the companies efforts to buy influence is former head of the Obama Vice-Presidential selection committee and fund raiser Jim Johnson.
A spokesman for the Obama campaign declined to comment, noting only that former Fannie Mae CEO Jim Johnson stepped down from his campaign post in June. His resignation came in the wake of charges that he collected more then $7 million in home loans at special, below-average rates....
Johnson spearheaded an aggressive campaign to create a local grass-roots network of company advocates. Under his leadership, Fannie opened more than 50 partnership offices in cities and rural communities. At the same time, the Fannie Mae Foundation, a private nonprofit financed by the mortgage giant, contributed generously to local charities, arts institutions and housing organizations, giving Fannie influence in lawmakers’ home districts....
Johnson headed Fannie Mae from 1991 to 1998, leaving with a $21 million payout. Even after he left, Fannie continued to pay him an annual fee of at least $300,000 a year for consulting services and a $71,000 monthly pension, according to filings with the Securities and Exchange Commission.
And while Obama would like to claim that both Bush and McCain are responsible for the current problem, the Congressional Record tells a different story. On May 25th of 2005, Senator McCain took to the Senate floor and argued for reform of Fannie Mae and Freddie Mac
Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.
The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.
The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.
For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay.
I join as a cosponsor of the Federal Housing Enterprise Regulatory Reform Act of 2005, S. 190, to underscore my support for quick passage of GSE regulatory reform legislation. If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.
I urge my colleagues to support swift action on this GSE reform legislation.
Not bad for a guy who Senator Obama likes to characterize as not knowing anything about the economy. This bill never became law. It "passed the House but was never brought up for a vote in the Senate, largely because of Democratic opposition to change in the Fannie Mae and Freddie Mac regulatory structure that remained in place until the Treasury takeover...." What is clear is that of the 3 sponsors of this bill, Barack Obama was not one of them.
What is also clear is that
In the aftermath of the U.S. government takeover, attention has focused on three Democrats with close ties to Obama who served as Fannie Mae executives: Franklin Raines, former Clinton administration budget director; James Johnson, former aide to Democratic Vice President Walter Mondale; and Jamie Gorelick, former Clinton administration deputy attorney general.
All three Obama-related executives earned millions in compensation from Fannie Mae.
Johnson earned $21 million in just his last year serving as Fannie Mae CEO from 1991 to 1998; Raines earned $90 million in his five years as Fannie Mae CEO, from 1999 to 2004; and Gorelick earned an estimated $26 million serving as vice chair of Fannie Mae from 1998 to 2003, according to author David Frum, a fellow at the American Enterprise Institute.
All three have been involved in mortgage-related financial scandals.
In 1998, according to the Washington Post, Gorelick, as Fannie Mae vice chairman, received a bonus of $779,625, despite a scandal in which employees falsified signatures on accounting transactions to manipulate books to meet 1998 earning targets. The moves, in turn, triggered multi-million-dollar bonuses for top executives.
The actions of these people and others within both parties of Congress and outside it amount to a gross subversion of the the US economy.
Yet Senator Obama would have us believe that someone who tried to put a stop to it at least three years ago is less qualified to fix the problem then the man who is in bed with the perpetrators of economic sedition.
Not that's arrogance.
