Obama's House of Cards

Emanuel tied to Freddie Mac collapse; Update: The numbers for Emanuel
posted at 11:30 am on November 7, 2008 by Ed Morrissey
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During the campaign, Barack Obama had to fight off assertions that Freddie 
Mac and Fannie Mae had him in their pocket while the two GSEs committed 
fraud and declined to their collapse.  Obama didnt help that perception 
when he chose Jim Johnson, Fannie Maes former CEO and chair, as the leader 
of his VP search committee, a position Johnson resigned shortly 
afterwards.  Now ABC reports that Obamas new chief of staff, Rahm Emanuel, 
sat on the board of Freddie Mac during the critical period:

     President-elect Barack Obamas newly appointed chief of staff, Rahm 
Emanuel, served on the board of directors of the federal mortgage firm 
Freddie Mac at a time when scandal was brewing at the troubled agency and 
the board failed to spot red flags, according to government reports 
reviewed by ABCNews.com.

     According to a complaint later filed by the Securities and Exchange 
Commission, Freddie Mac, known formally as the Federal Home Loan Mortgage 
Corporation, misreported profits by billions of dollars in order to 
deceive investors between the years 2000 and 2002.

     Emanuel was not named in the SEC complaint (click here to read) but 
the entire board was later accused by the Office of Federal Housing 
Enterprise Oversight (OFHEO) (click here to read) of having failed in its 
duty to follow up on matters brought to its attention.

Emanuels action, or lack of it, came during a time when the SEC says 
Freddie Mac misrepresented its income to investors in order to maintain 
its price.  In other words, they committed fraud.  The SEC specifically 
notes that Freddie did this in 2000, 2001, and 2002, and Emanuel sat on 
the board in 2000-2001.

This is no small matter.  Had this happened when Sarbanes-Oxley was in 
effect, Emanuel would have had to sign off on those numbers under penalty 
of perjury.  He could be liable for criminal prosecution.  As it is, his 
actions and omissions as a board member may still result in civil and 
criminal liability, if the SEC discovers that he had a hand in the fraud 
committed at Freddie Mac, or if Emanuel knew about it and failed to act to 
stop it.

For an incoming administration that ran on cleaning up the greed on Wall 
Street, the selection of Emanuel speaks a lot louder than any campaign 
promises.  One might think that anyone who sat on the boards of Fannie Mae 
and Freddie Mac while the two GSEs cooked the books and set the stage for 
global financial collapse should at least be considered political poison 
for any appointment, let alone one as significant as White House Chief of 
Staff  if nothing else, then at least on the basis of competence. 
Instead, it looks like Obama is bringing the Chicago Way to Pennsylvania 
Avenue.

Hope and change, indeed.

Update: Business & Media Institute notes the numbers on Emanuel and 
Freddie Mac:

     Clintons going-away gift to Emanuel was a seat on the 
quasi-governmental Freddie Mac board, which paid him $231,655 in directors 
fees in 2001 and $31,060 in 2000, Lynn Sweet wrote for the Chicago 
Sun-Times on Jan. 3, 2002.

     During the time Emanuel spent on the board, Freddie Mac was plagued 
with scandal involving campaign contributions and accounting 
irregularities. Freddie Mac and its sister organization Fannie Mae were 
taken over by the federal government in September 2008 after years of 
mismanagement and scandal. Treasury Secretary Henry Paulson put the two 
beleaguered GSEs into a conservatorship, stripping common stock 
shareholders of their rights to govern the companies.

     Freddie Mac was accused of illegally using corporate resources between 
2000 and 2003 for 85 fundraisers that collected about $1.7 million for 
federal candidates, an Associated Press story from April 18, 2006 said. 
Much of the fundraising benefited members of the House Financial Services 
Committee, a panel whose decisions can affect Freddie Mac.

     And, since his successful run for the House of Representatives in 
2002, Emanuel has been the beneficiary of campaign cash from Freddie Mac 
and its sister organization Fannie Mae  $51,750 according to the Center 
for Responsive Politics Web site OpenSecrets.org.

Thats certainly something to keep in mind while recalling the promises by 
Barack Obama to change the way business gets conducted in Washington.

POINTER
http://hotair.com/archives/2008/11/07/emanuel-tied-to-freddie-mac-collapse/