Friday, October 03, 2008

New York Times September 30, 1999

Fannie Mae Eases Credit To Aid Mortgage Lending
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is
easing the credit requirements on loans that it will purchase from banks and other lenders......Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin
D. Raines, Fannie Mae's chairman and chief executive officer
. ''Yet there remain too many borrowers whose credit is just a notch below
what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime.....In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any
difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn,
prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident
fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and
bailed out the thrift industry.''

On December 21, 2004 Raines accepted what he called "early retirement" from his position as CEO while U.S. Securities and Exchange Commission investigators continued to investigate alleged accounting irregularities. He is accused by The Office of Federal Housing Enterprise Oversight (OFHEO), the regulating body of Fannie Mae, of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses.

In 2006, the OFHEO announced a suit against Raines in order to recover some or all of the $50 million in payments made to Raines based on the overstated earnings initially estimated to be $9 billion but have been announced as 6.3 billion.

On July 16, 2008, The Washington Post reported that Franklin Raines had "taken calls from Barack Obama's presidential campaign seeking his advice on mortgage and housing policy matters." . Also, in an editorial in August 27, 2008 titled "Tough Decision Coming", the Washington Post editorial staff wrote that "Two members of Mr. Obama's political circle, James A. Johnson and Franklin D. Raines, are former chief executives of Fannie Mae."