1	SHOT IN THE FANNIE MAE The History of a Financial Disaster
2	Background In 1977, Community Reinvestment Act CRA is signed into law by President Carter Designed to prevent discrimination and promote affordable housing in low-income communities Encouraged mortgage lending through two government sponsored enterprises (GSEs), Fannie Mae, and Freddie Mac Fannie Mae and Freddie Mac are regulated by Congress. Fannie Mae buys mortgages from other companies. It is backed by the taxpayers for all losses, but keeps all profits.
3	1993 President Clinton ordered new regulations for the CRA to increase access to mortgage credit for inner city and distressed rural communities. The new rules featured: strictly numerical assessments to get a satisfactory CRA rating using federal home-loan data broken down by neighborhood, income group, and race encouraging community groups (e.g., Acorn) to complain when banks were not loaning enough to specified neighborhood, income group, and race and allowing these groups to collect a fee from the banks for marketing these mortgages (as of 2000 $9.5 billion had been paid to such groups).
4	1993-1998 The number of CRA mortgage loans increased by 39 percent between 1993 and 1998, while other loans increased by only 17 percent. The chief executive of Countrywide Financial, the nation's largest mortgage lender, said that in order to approve minority applications, "lenders have had to stretch the rules a bit"
5	1997 Clinton administration ordered more rule changes for Fannie and Freddie to loosen credit for low income borrowers. Allowed them to hold just 2.5% of capital to back their investments, vs. 10% for banks. By 2007, Fannie and Freddie owned or guaranteed nearly half of the $12 trillion U.S. mortgage market.
6	1998 Banks begin making thousands of bad loans,0 down, no documentation, for 120%! (1998 – 2008). Executives at Fannie receive huge bonuses if loan targets are met. Franklin Raines and Jamie Garelick from the Clinton Administration are appointed to run Fannie Mae.
7	2003 President Bush proposes a new oversight committee to clean up Fannie Mae, but Democrats derail the effort. Rep. Melvyn Watt, (D-NC) Committee on Financial Institutions & Consumer Credit. stated, “I don’t see much other than weakening the bargaining power poorer families to get affordable housing.”
8	2003 Representative Barney Frank (D-MA) claimed "These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing."
9	1999 - 2004 Raines earns $90 million+ in bonuses. Garelick earns $25 million+ in bonuses. In 2004, Enron collapses, congress investigates, Executives Skilling & Lay are convicted for fraudulent bookkeeping. Congress responds with the Sarbanes-Oxley Act – more heavy-handed regulation of corporations.
10	2004 An OMB investigation finds massive fraudulent bookkeeping at Fannie Mae. False numbers triggered executive bonuses every year. Congress holds no hearings, no one goes to jail, or is punished. WHY NOT?
11	1999 -2005 Fannie Mae gives millions to Democratic causes, examples: Jesse Jackson & ACORN. Fannie Mae pays millions to 354 congressmen and senators, from both parties. Who got the most money?
12	Top 4 Recipients
13	Top 4 Recipients
14	2005 The Federal Housing Enterprise Regulatory Reform Act is sponsored by:
15	2005 None of the top 4 recipients support the legislation. The reform act is blocked by Democrats, never even making it out of committee. None of the politicians return any of the money, tainted by fraud. In fact, some continued to receive money from Fannie Mae
16	2005 Franklin Raines & top execs are forced to resign from Fannie Mae. They do not go to jail. There is no media “perp. walk.” They keep their bonuses, though they finally pay $31.4 million in civil fines.
17	2008 Fannie Mae & Freddie Mac go bankrupt and the government takes them over completely. Lehman Brothers, goes bankrupt from investing in bad mortgages. AIG gets $85 million in loan guarantees, after insuring bad loans & projects.
18	2008 Franklin Raines is now a top economic advisor to the Obama Campaign which wants the government to take over more of the economy. Did government involvement in the mortgage market work out? How will even MORE government involvement make it better?
19	SOURCES Congressional Record, 5/25/06 Herald Tribune, 4/18/08 New York Times, 9/13/03 www. govtrack.com, 9/17/08 Wall Street Journal, 9-22-08