Free Market Institute of the Pacific

Exploring Business, Economics, and Freedom

The FNMA Gang:

The Federal National Mortgage Administration, a quasi-public company commonly called Fanniemae for convenience, was founded in 1938 to help stabilize and monetize the mortgage market by serving as a facilitator for the secondary mortgage market.

Not long ago, the FNMA was a financially healthy concern, with more than $300 Billion (not million) in assets. They were firmly “in the black” and set to be so for a century or more into the future.

However, a few key individuals on the House and Senate Banking and Finance Committees wanted to create some level of personal control over mortgage markets. They abused their positions to put staffers, sexual partners, and friends into management positions in the FNMA. Most of these individuals not only had no experience or knowledge of the industry, they were also firmly under the control of congressional members whom also had no such skills. They did, however, have a mission...to make home mortgages available to anyone in the nation who desired one.

They managed to bankrupt the FNMA...somehow losing the $300 Billion edge they started with, which is an accomplishment which could probably not be repeated due to the sheer enormity of the numbers. In addition, the congress has spent over $111 Billion in bailouts just to keep the organization afloat. So they have actually managed to lose well over $400 Billion. In the end run...all of this money came out of citizen’s pockets.

This financial debacle laid the foundation for the housing bubble and eventual collapse which created the current US recession, along with the economic impact felt world-wide. Literally hundreds of millions of people are victims of this gang.

One’s first response is to assume gross incompetence or negligence, but under scrutiny another story begins to emerge. These political appointees not only knew they were losing money in massive doses, they created an accounting scam to cover it up, and then granted themselves hundreds of millions of dollars in performance bonus payments. If they had simply been inept managers it’s unlikely they could have, or would have had the gall, to steal such prodigious amounts in order to retire as multi-millionaires. Therefore, investigators are being led to the conclusion that the destruction of the FNMA, the housing market, and the US economy was actually done purely out of greed, as part of a criminal conspiracy, or as part of some sort of twisted philosophical mission.

Thereby landing the FNMA Gang in our Rogue’s Gallery of Economic Criminals. Included in their number are such luminaries as...

Franklin Raines: Among the best known are Franklin Raines; he left the Clinton administration to become CEO of the FNMA in 1999. In 2004 he was urged to retire pending  investigations of his mismanagement. In those five years he gave himself a salary and bonuses totalling over $90 Million dollars. As of this time, he has been forced to surrender his FNMA stock options (which are worthless) along with some retirement benefits. He has retained the $90 Million however.

Jamie Gorelick: Another Clinton refugee, Jamie Gorelick was the deputy attorney general who was made famous by her ineptness in handling intelligence exchanges between various law enforcement agencies...the end result being information lost regarding the upcoming 9/11 attacks.

Having failed at this task, she was promoted to a vice-chairmanship at the FNMA. She had no training or experience in finance or financial matters, but apparently took part in the accounting scandals, working with Raines and receiving numerous bonus payouts for her efforts. She still insists that the FNMA was “professionally managed in all respects.”

Herb Moses: Congressman Barney Frank’s “lover” and/or “spouse” (both words used by Frank in introducing his partner) was FNMA executive Herb Moses. Frank was pushing the FNMA hard at the time to “dumb down” requirements for obtaining a home mortgage, and Moses was instrumental in making it happen and keeping Congressman Frank informed as the institution lost money by the billions.

Obviously, Moses was entitled to numerous multi-million dollars bonuses for this “valuable” work, as well as being a cooperative sexual playmate for a member of congress. He was allowed to keep all of his bonus money when he was pressured to leave the FNMA.

Barney Frank: Congressman Frank himself constantly fought back at the Bush administration’s attempts to rein in FNMA excesses. Even though he was perfectly aware of the dishonesty of his statements, he continued to support the management of the FNMA and assured members of Congress and the press that the organization was sound and in no danger. He has recently stated that new FNMA mortgage standards are too strict and should be relaxed (and no...he’s not joking).

The list goes on...there were numerous individuals, both within management of the FNMA and in the US Congress, who were not only aware that the company was going under, but were financially benefitting from its demise while the American public paid the price. Needless to say, as a result of the impact of their actions...and the hundreds of millions of human beings who have suffered, the FNMA Gang may be the greatest Economic Criminals in US history.