Corruption compliments of Barney Frank

Judicial Watch Shows Congress Ignored Corruption at Fannie Mae and Freddie Mac
for Years

According to new documents uncovered by Judicial Watch, members of Congress for years were aware that Fannie Mae and Freddie Mac were playing fast and loose with accounting, risk assessment and executive compensation issues even while liberals in Congress, led by Democratic Rep. Barney Frank, continued to block attempts to regulate the two Government Sponsored Enterprises (GSEs).

Judicial Watch obtained these documents from the Federal Housing Finance Agency (FHFA) in response to a Freedom of Information Act (FOIA) request submitted back on December 4,2008. These document requests are part of Judicial Watch's comprehensive investigation of the government's role in the financial crisis, but of particular concern in this case, was the policy of Fannie Mae and Freddie Mac to increase lending to individuals who were poor credit risks, as well as correspondence and records about contacts between FHFA and Fannie and Freddie.

The following are a few of the most important documents obtained by Judicial Watch:

FHFA letter, dated March 26, 2007, from the Director of the Office of Federal Housing Enterprise Oversight (OFHEO), James B. Lockhart, to U.S. Senators Elizabeth Dole, Chuck Hagel, Mel Martinez and John Sununu: This is a very serious issue. Freddie Mac's inadequate systems and controls make it a significant supervisory concern. Furthermore, its lack of timely public disclosures deny market participants the essential financial information made available by all other publicly traded companies so that investors may make informed judgments." The letter also mentions, " ... Fannie Mae still has not filed financial statements for 2005 and 2006 and thus, they are not timely filers either. "
FHFA letter, dated December 3, 2004, to Congressman Barney Frank: "On November 15, 2004 Fannie Mae filed a Form 12b-25 with the Securities and Exchange Commission (SEC). Fannie Mae indicated that its external auditors could not complete their reviews of its financial statements and noted the possibility of up to a $9 billion loss dating back to 2001. As a result, OHFEO has determined it will not provide a monthly capital classification at this time."
Letter dated June 16, 2006, from OHFEO Director James B. Lockhart to Senator Chuck Hagel: ". . .In January 1999, Chairman and CEO Franklin Raines approved a recommendation made by the Chief Financial Officer (CFO) (Tom Howard) and the Controller (Leanne Spencer) to defer recognition of $200 million in amortization expense. His deferral along with other accounting decisions made at that time relating to provisions for loan losses and the recognition of low income housing tax credits, allowed management to meet the EPS threshold for maximum bonuses."

What is important about these documents? They show that Congress was made aware of the massive problems at Fannie Mae and Freddie Mac going back at least six years. The documents clearly demonstrate that officials at FHFA were desperately sounding the alarm regarding fraud, abuse and corruption at Fannie and Freddie.

Yet even when faced with the litany of complaints by FHFA against Fannie and Freddie, liberals in Congress, led by Congressman Barney Frank, repeatedly blocked attempts to rein them in.

For instance, during a hearing on September 10, 2003 before the House Committee on Financial Services on a Bush administration proposal to further regulate Fannie and Freddie, Rep. Frank stated: "I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government sponsored enterprises we are talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We have recently had an accounting problem with Freddie Mac that has led to people being dismissed, as appears to be appropriate. I do not think at this point there is a problem with a threat to the Treasury."

"Barney Frank and his liberal allies in Congress have a lot of explaining to do," said Judicial Watch President Tom Fitton. ''Any way you slice it, liberals in Congress were reckless when it came to the massive taxpayer liabilities related to Fannie Mae and Freddie Mac and they should be held accountable for it." JW