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Line 7: − − ==Fraudulent accounting 1998 -2006== − In 2006 Fannie Mae was wracked by an accounting scandal. Regulators found a culture of corruption where management overstated earnings by $11 billion during the late 1990s and reaped huge bonuses for themselves.<ref>[http://articles.chicagotribune.com/2006-05-24/business/0605240197_1_senior-management-manipulated-accounting-fannie-mae-executive-officer-franklin-raines `Arrogant and unethical': Fannie Mae to pay $400 million penalty,] Robert Manor, ''Chicago Tribune'', May 24, 2006.</ref> As Fannie Mae was taken into conservatorship in September 2008 it was reported [[Barack Obama]] received more than $126,000 in contributions from the [[government sponsored entity]], more than any other political candidate for office since 1989.<ref>[http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html Update: Fannie Mae and Freddie Mac Invest in Lawmakers], By Lindsay Renick Mayer, September 11, 2008. opensecrets.org</ref> Line 18:
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When Fannie Mae purchases a mortgage from a loan originator, it is repackaged and sold in bundles to investment banks and other entities who market them globally with a credit rating stamp.<ref>True story. You can watch [http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards CNBC's House of Cards special here] to see it; reporter David Faber travels to the small town of Narvik, Norway, which invested $200 million lured in by their AAA ratings and the assurance by Citigroup of their safety. The town has had to close schools, slash expenditure to the elderly, and cut back on fire department hours. </ref>
When Fannie Mae purchases a mortgage from a loan originator, it is repackaged and sold in bundles to investment banks and other entities who market them globally with a credit rating stamp.<ref>True story. You can watch [http://www.hulu.com/watch/59026/cnbc-originals-house-of-cards CNBC's House of Cards special here] to see it; reporter David Faber travels to the small town of Narvik, Norway, which invested $200 million lured in by their AAA ratings and the assurance by Citigroup of their safety. The town has had to close schools, slash expenditure to the elderly, and cut back on fire department hours. </ref>
==Fannie Mae lowers guidelines for subprime borrowers 1999==
==Fannie Mae lowers guidelines for subprime borrowers 1999==
Countrywide and Fannie Mae further expanded their relationship with another strategic alliance agreement in 2005. During each quarter, Countrywide was required to sell to Fannie Mae at least 70 percent of all “Expanded Criteria Mortgages,” and at least 65 percent of those mortgages each month. Fannie Mae also agreed to “provide special marketing and other assistance” to Countrywide in its efforts to reach low-income borrowers. Both parties pledged to continue a “Favored Relationship” in which they were “committed to the business success of the other party.” The 2005 agreement required both companies to “maintain the complete confidentiality of the existence and terms of this agreement.”
Countrywide and Fannie Mae further expanded their relationship with another strategic alliance agreement in 2005. During each quarter, Countrywide was required to sell to Fannie Mae at least 70 percent of all “Expanded Criteria Mortgages,” and at least 65 percent of those mortgages each month. Fannie Mae also agreed to “provide special marketing and other assistance” to Countrywide in its efforts to reach low-income borrowers. Both parties pledged to continue a “Favored Relationship” in which they were “committed to the business success of the other party.” The 2005 agreement required both companies to “maintain the complete confidentiality of the existence and terms of this agreement.”
==Fraudulent accounting 1990s - 2006==
Accounting problems at Fannie Mae first surfaced in 2003, and led to investigations by the [[Securities and Exchange Commission]] and [[U.S Justice Department]]. Regulators found a culture of corruption where management overstated earnings by $11 billion beginning in the [[Clinton era]] and reaped huge bonuses for themselves.<ref>[http://articles.chicagotribune.com/2006-05-24/business/0605240197_1_senior-management-manipulated-accounting-fannie-mae-executive-officer-franklin-raines `Arrogant and unethical': Fannie Mae to pay $400 million penalty,] Robert Manor, ''Chicago Tribune'', May 24, 2006.</ref> As Fannie Mae was taken into conservatorship in September 2008 it was reported [[Barack Obama]] received more than $126,000 in contributions from the [[government sponsored entity]], more than any other political candidate for office since 1989.<ref>[http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html Update: Fannie Mae and Freddie Mac Invest in Lawmakers], By Lindsay Renick Mayer, September 11, 2008. opensecrets.org</ref>
Auditors stated,
{{CquoteThe image of Fannie Mae as one of the lowest-risk and `best in class' institutions was a facade...Our examination found an environment where the ends justified the means. Senior management manipulated accounting, reaped maximum, undeserved bonuses, and prevented the rest of the world from knowing.}}
The auditor's report stated executives moved profits from one year to the next to assure they would meet company goals to receive undeserved bonuses and accused Fannie Mae of taking large and sometimes unprofitable risks that were not revealed to investors. The report issued in 2006 was only the beginning of the revelations that shook the world.
==Collapse and conservatorship 2008==
==Collapse and conservatorship 2008==
[[Category:Economics]]
[[Category:Economics]]
[[Category:New Deal]]
[[Category:Franklin Roosevelt]]