"lend them money and you get a rabble instead of a thrifty working class"Texas Sen. John Cornyn, citing a 2006 finding that Fannie Mae intentionally overstated earnings, called for a criminal probe of the mortgage giant and Freddie Mac in the wake of a government bailout to prevent their collapse.
Cornyn requested the investigation in a letter to Attorney General Michael Mukasey. The two government-sponsored companies were placed in a government conservatorship by the U.S. Treasury this week.
There are "serious concerns whether a well-documented culture of corporate executive corruption at these organizations contributed to the mortgage giants' collapse," Cornyn said in the letter. He urged the Justice Department to "determine to what extent any illegal activities led to the institutions' failure."
A 2006 report by the Office of Federal Housing Enterprise Oversight, which regulates the mortgage giants, said by "deliberately and intentionally manipulating accounting to hit earnings targets," top Fannie Mae executives "maximized the bonuses and other executive compensation."
Cornyn said "disturbing allegations of active interference on the part of Fannie Mae lobbyists" to thwart the 2006 investigation raises questions about whether the probe should have resulted in criminal charges.
The 2006 investigation led to a $400 million fine against Fannie Mae.
Fannie Mae spokeswoman Amy Bonitatibus declined to comment on Cornyn's demand for an investigation.
http://www.bloomberg.com/
Also, 17 lawyer team advising Treasury Dept. On Freddie Mac and Fannie Mae bailout.
The 17-lawyer team from Wachtell, Lipton, Rosen & Katz advising the Treasury Department on the bailout of Fannie Mae and Freddie Mac was the driving force behind the department’s senior preferred stock purchase agreement, according to a partner who worked on it. The agreement lays out the government’s responsibility to support Fannie and Freddie’s debt and mortgage backed securities holders. It is intended to stabilize the market by ensuring that both companies maintain a positive net worth.
One of the lead partners on the assignment, Harold Novikoff, says Wachtell lawyers put together the entire document during the past two and a half weeks.
“There were endless term sheets, and almost endless drafts,” he says. Though Wachtell was responsible for actually drafting the agreement, the lawyers were also working with the Treasury Department and Morgan Stanley, the company acting as Treasury’s financial adviser.
The agreement lays out the key components of the rescue plan, including the provision that the federal government will make a quarterly assessment on whether to push money into Fannie or Freddie, based on whether either company has liabilities exceeding its assets. Novikoff says the team’s goals in structuring the arrangement were to stabilize the market, buoy the mortgage market, and keep taxpayer costs low.
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