Sunday, June 19

Democrat bundler pulled down millions per year at Fannie

Fannie Mae and Freddie Mac were established by congress (lower-case intentional, as always; the institution doesn't deserve the honor of capitalization) with the goal of increasing home ownership, by making it possible for more people to get mortgages.

For some strange reason government agencies whose mission, in essence, is to hand out taxpayer funds to lucky recipients end up being run almost entirely by Democrats, and these two agencies certainly followed that trend: the executives and directors read like a who's who of Democratic movers and shakers.

In 1991 a guy named James Johnson was appointed to head Fannie. Johnson seemed to be extremely good at working the political system, and saw to it that his agency gave big chunks of cash to outfits like Acorn, the Congressional Black Caucus, the Congressional Hispanic Caucus and other groups that could then be counted on for support. And the agency was also generous in making campaign contributions to members of congress.

Thus when experts testified--years before the mortgage meltdown--that Fannie was guaranteeing loans to people who were all but certain to default, all that support would enable the agency to pressure congress to defeat bills seeking to scale back its operations or funding.

You might well be asking, How could it possibly be legal for an agency created by congress and funded at least partly by tax revenue to give money to congresswhores?

Good question. The answer is that congress created Fannie and Freddie as "government-sponsored enterprises"--semi-corporations, but with taxpayers required to make good on any losses.

If you think that sounds like a guarantee of risky practices followed by huge losses, you're right.

And if you object that you can't recall congress asking you if you'd be willing to cover any losses the two GSE's incurred, you're right again. Congress doesn't need to ask your permission to do jack--even if it violates the Constitution. Because they're... the closest thing we have to royalty.

Oh, and to finish the story: In September 2004 the Office of Federal Housing Enterprise Oversight reported that during Johnson's tenure as CEO, Fannie Mae had improperly deferred $200 million in expenses. This enabled top executives, including Johnson and his successor, Franklin Raines, to receive substantial bonuses in 1998.

In 2006 a second report by the same office stated that Fannie Mae had substantially under-reported Johnson's compensation. Originally reported as $6–7 million, Johnson actually received approximately $21 million.

According to a major media source
--though one that I'll admit is heavily biased politically--in all James Johnson pocketed total salary and bonuses of roughly $100 million during his seven years as chairman and chief executive officer of Fannie.

And remember, this is from an entity created by congress, and which had the federal gummint (i.e. taxpayers) backstopping any losses.

Oh, if you have a chance, ask some of your Democrat friends how they'd feel if the CEO of a private company pulled down that kind of deal.


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