Wednesday, May 24, 2006

The dog that isn't barking...

Why haven't there been indictments of executives at Fannie Mae in light of the ""extensive" fraud committed by Fannie Mae executives so they could collect hundreds of millions of dollars in bonuses?

From its peak in 2001, investors holding Fannie Mae stock have lost over $30 BILLION as the stock has dropped from the mid-80s a share down to its current $50 a share. How many 401(k)s and IRAs have taken a hit because of the fraud at Fannie Mae? How many state pension funds have lost money because Franklin Raines was leading the fraud that stuffed millions of dollars into his own pocket?

Given how hard federal prosecutors have gone after the management at Enron, WorldCom and HealthSouth, where managers also engaged in accounting fraud in order to boost the stock price, it is shocking that there have been no indictments of the Fannie Mae executives who planned and carried out the fraud. Granted, the money investors lost with Fannie Mae is a tad less than the $120 billion or so investors lost on Worldcom and the $60 billion or so investors lost on Enron stock, but it's more than the money investors lost on HealthSouth... and, at HealthSouth, federal prosecutors are so determined to nail former CEO Richard Scrushy that they're going after him a second time (having failed to garner a conviction the first time around).

And while charges were filed against Skilling for his involvement in Enron's collapse in just about 27 months, over 3 years have gone by since news of the fraud surfaced at Fannie Mae... plenty of time to have brought charges.

And while Enron's collapse led to the ill-advised passage of Sarbanes-Oxley, the fraud at Fannie Mae has, to my knowledge, led to absolutely nothing of substance being done on the regulatory side. And while recent reports that the Smithsonian Institution was paying its executives "exceptionally high" salaries led to a congressional committee rushing to cap the salaries paid to executives at the Smithsonian, no similar action has been taken to limit the compensation of the top executives at Fannie Mae... even though there have been no allegations of fraud at the Smithsonian and the compensation paid to executives at the Smithsonian paled in comparison to the compensation pocketed by Fannie Mae executives (Smithsonian Secretary Lawrence Small received $573,832 in salary for 2005, compared to the $20 million collected by Fannie Mae's CEO in 2002.

Now, a cynical person might - just might - think the lack of indictments might have something to do with the political clout of the Fannie Mae leadership. From Franklin Raines, Fannie Mae's former CEO and longtime heavyweight in the Democratic party to Jamie Gorelick, a Hillary Clinton favorite, to Duane Duncan, former Chief of Staff to powerful GOP Congressman Richard Baker, Fannie Mae has political ties to Washington that Kenneth (Kenny Boy) Lay could only have dreamed of having. Heck, if Gorelick could escape taking a hit over her involvement in setting up the wall that helped keep the FBI from learning of the 9/11 plot, she - and her backers - ought to have no problem having her walk away from her involvement from an episode in which people merely lost money rather than their lives.

And, as was proven again as recently as just yesterday, when Congressional leaders took umbrage over the FBI search of Louisiana Democrat William Jefferson's office, we know that Congress cares more about protecting its own than it does in making sure that Washington is as corruption free as is possible.

And they wonder why we dislike them so...