Eric OKeefe's blog

Fannie Mae and Freddie Mac have been put under direct federal government control.  This is a major step in the most expensive financial scandal in U.S history. These two mortgage giants guarantee $5.5 trillion of debt. They fueled the recent housing boom riding an implied federal guarantee of their debt. They used creative leverage which ballooned their phantom profits, their management bonuses, and the ultimate losses to U.S. taxpayers -- which I predict will exceed $100 billion.

These organizations were classic rent-seeking companies; Fannie has a large headquarters on Wisconsin Ave. in Washington, D.C., because the source of their power and profits was Congress, not customers. They hired people for their political pull, not their financial acumen. And what we got was government-style extravagance, self-dealing, and ultimately a doubling of the publicly held debt of the United States.

This is a stunning financial development, and it should become a stunning political development. Of course Fannie paid the politically powerful from both parties, but they put their biggest dollars and biggest hires on the side of the biggest spenders.

Here is how much some of the winners profited from this scandalous operation, according to an insightful Wall Street Journal editorial:

Franklin Raines, CEO: $90,128,761 (1998-2003)

Jamie Gorelick, vice-chair: $26,466,834 (1998-2003)

Jim Johnson, CEO: $21,000,000 (1998 alone)

Who are these people? Let's ask wikipedia:

Franklin Delano Raines (born January 14, 1949 in Seattle, Washington) is the former chairman and chief executive officer of Fannie Mae who served as White House budget director under President Bill Clinton.

Jamie S. Gorelick (born May 6, 1950) is an American attorney and judicial officer who was Deputy Attorney General of the United States during the Clinton administration. She was appointed by former Senate Democratic Leader Tom Daschle to serve as a commissioner on the bipartisan National Commission on Terrorist Attacks Upon the United States, which sought to investigate the circumstances leading up to the terrorist attacks of September 11, 2001.

James A. Johnson is a United States Democratic Party political figure. He was the campaign manager for Walter Mondale's failed 1984 presidential bid and chaired the vice presidential selection process for the presidential campaign of John Kerry. In the 2008 election, he is a member of the vice-presidential selection process for the presumptive Democratic nominee, Senator Barack Obama.

Raines was also a donor to Obama's 2006 U.S. Senate campaign.

Notice a pattern?

Cross-posted at Blogivists.