Sunday, October 5, 2008

Fannie Mae Exposé

Today's New York Times features a long cover article by Charles Duhigg on the fiasco at Fannie Mae, "Pressured to Take More Risk, Fannie Reached Tipping Point". The broad strokes of this have been covered before, but the Times article fills in some of the sordid details.

The article notes how former Fannie Mae CEO Franklin Raines and his CFO J. Timothy Howard expanded Fannie's share of the mortgage market by having the company increase its purchases of risky mortgages. Those two were of course forced to resign in 2004, after the accounting scandal at Fannie came to light, and Daniel Mudd took over as CEO then. Mudd was shown the door last month, after the federal government took over Fannie Mae. The Times article concludes by describing what Raines, Howard, and Mudd are up to today:

Mr. Raines and Mr. Howard, who kept most of their millions, are living well. Mr. Raines has improved his golf game. Mr. Howard divides his time between large homes outside Washington and Cancun, Mexico, where his staff is learning how to cook American meals.

But Mr. Mudd, who lost millions of dollars as the company’s stock declined and had his severance revoked after the company was seized, often travels to New York for job interviews.

Incidentally, at first I wondered why McCain didn't push back in the first debate when Obama blamed the credit crisis solely on "failed Republican policies", by noting Obama's receipt of campaign contributions from the GSEs, and his association with Franklin Raines. Then I read that McCain's campaign manager, Rick Davis, had been a lobbyist for Freddie Mac.

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