The Blame Game

20090807-181851-pic-80916081_t756It’s amazing to me that so many people can get so worked up about one mid level bureaucrat in the White House who is a repentant communist and says he accidentally signed a 9-11 truther petition thinking it was just a request for more information on what the White House knew prior to those terrorist attacks. Meanwhile, we have a Secretary Treasury whose taken gifts from banks, underpaid his taxes by more money than I personally see in years, and seems completely captured by Wall Street and unable to draft decent regulation containing their gambling addiction. Then, there is the fact that I continually write about the same people in Wall Street and the Investment Banking community cooking up death derivatives and going about their merry way, subsidized, unpunished, and totally unrepentant over causing the worst financial crisis since 1929.

I just have to scream: WTF is wrong with you people? Why are we punishing some one for his venture into social activism while completely ignoring people that are making off with our national treasure and the lifeblood of our mixed market economy? These are folks that drove your house prices down, ruined your pension plans and your 401k, and are taking bailouts by the billions. Where’s the sense of balance? How does this resemble justice?

Here’s a REALLY good example from today’s NY Times. Written by Gretchen Morgensen, it’s called “Fair Game-They Left Fannie Mae, but we got the Legal Bills.” It’s all about the government having to bail out Fannie Mae because of the extremely bad management practices, and yes, illegal accounting practices that stuck us with a huge mess and an even bigger bill. Morgensen interviews Representative Alan Grayson, a Florida Democrat, who is one congress critter doing his oversight responsibility while others wallow in the political contributions from their regulatees.

With all the turmoil of the financial crisis, you may have forgotten about the book-cooking that went on at Fannie Mae. Government inquiries found that between 1998 and 2004, senior executives at Fannie manipulated its results to hit earnings targets and generate $115 million in bonus compensation. Fannie had to restate its financial results by $6.3 billion.

Almost two years later, in 2006, Fannie’s regulator concluded an investigation of the accounting with a scathing report. “The conduct of Mr. Raines, chief financial officer J. Timothy Howard, and other members of the inner circle of senior executives at Fannie Mae was inconsistent with the values of responsibility, accountability, and integrity,” it said.

That year, the government sued Mr. Raines, Mr. Howard and Leanne Spencer, Fannie’s former controller, seeking $100 million in fines and $115 million in restitution from bonuses the government contended were not earned. Without admitting wrongdoing, Mr. Raines, Mr. Howard and Ms. Spencer paid $31.4 million in 2008 to settle the litigation.

When these top executives left Fannie, the company was obligated to cover the legal costs associated with shareholder suits brought against them in the wake of the accounting scandal.

Now those costs are ours. Between Sept. 6, 2008, and July 21, we taxpayers spent $2.43 million to defend Mr. Raines, $1.35 million for Mr. Howard, and $2.52 million to defend Ms. Spencer.

“I cannot see the justification of people who led these organizations into insolvency getting a free ride,” Mr. Grayson said. “It goes right to the heart of what people find most disturbing in this situation — the absolute lack of justice.”

What’s the difference between getting justice and getting retribution? Well, in terms of missing it by light years, compare the treatment between social activist Van Jones and practitioners of accounting malpractice like Raines, Howard and Spencer (or tax dodgers who get gifts from Wall Street Bankers like our SOT). It’s the difference between a slap on the wrist and a slap across the face.

Here’s the estimates on the bailout out costs on Fannie Mae to date.

PRECISELY one year ago, we lucky taxpayers took over Fannie Mae and Freddie Mac, the mortgage finance giants that contributed mightily to the wild and crazy home-loan-boom-turned-bust. In that rescue operation, the Treasury agreed to pony up as much as $200 billion to keep Fannie in the black, coughing up cash whenever its liabilities exceed its assets. According to the company’s most recent quarterly financial statement, the Treasury will, by Sept. 30, have handed over $45 billion to shore up the company’s net worth.

This is an ongoing problem with the Wall Street and Financial Market crisis. Those that created these huge issues that require public treasure are not being held to account. Where is the outrage from all the other people like Congressman Barney Frank who were basically led down the garden path by Raines who provided reports to various Congressional and Senate committees? These guys now want to look at the internal books at FED but couldn’t even figure out there was something strange going on with the books at Fannie Mae when they had complete access? Gimme a break!

Grayson should be commended and I’ll give him the last word, because I agree completely. There are folks that are homeless and out on the street because of the way Raines and his crew ran Fannie. There are bills we are paying now because of the way Raines and his crew ran Fannie. Where’s the justice in this? Meanwhile, LOOK!!! There’s one less Bolshevik in the White House!!!

While the $6.3 million paid to defend Mr. Raines, Mr. Howard and Ms. Spencer is a pittance compared with other bills coming due in the bailout binge, it is still disturbing for these costs to be covered by those who had nothing to do with the problems and certainly did not benefit from them. The money may be small, but the episode’s message looms large: those who presided over this debacle aren’t being held accountable.

“It is wrong in a very deep sense,” Mr. Grayson said. “The essence of our society is that people who do good things are rewarded and people who do bad things are punished. Where is the punishment for Raines, Howard and Spencer? There is none.”

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