[StBernard] Should Congress Be 'Perp-Walked'?

Westley Annis westley at da-parish.com
Thu Oct 2 00:21:50 EDT 2008

Should Congress Be 'Perp-Walked'?
By INVESTOR'S BUSINESS DAILY | Posted Tuesday, September 30, 2008 4:20 PM PT

Justice: A federal grand jury in New York is probing the accounting
shenanigans at Fannie Mae and Freddie Mac. It's about time, and we hope it
doesn't end there.

Remember the early 2000s, when companies such as WorldCom, Enron, Tyco and
Xerox suddenly and spectacularly were revealed to have been cooking their

Remember the glee expressed by Washington politicians, especially Democrats,
as they watched CEOs and their underlings get perp-walked out of their
buildings and into federal custody?

Enron became the poster child for corporate misdeeds. In the accounting
crisis of 2002, CEO Ken Lay was one of the most loathed human beings on
Earth. And no, that's not an exaggeration.

Here was California Attorney General William Lockyer, one of many Democrats
on the national scene who gloated at the downfall of the Enron chief and
others: "I would love to personally escort Lay to an 8-by-10 cell that he
could share with a tattooed dude who says, 'Hi, my name is Spike, honey.'"

Lockyer wasn't the only one swept up in a spiteful prosecutorial frenzy.
Sure, some of the prosecutions were deserved. But some were excessive, part
of a corporate witch hunt.

As noted in a 2003 study by Kathleen Brickey, a Washington University law
professor, the Justice Department brought 50 major fraud prosecutions from
March 2002 to August 2003. An estimated 90 corporate officers were involved.
That's a lot of prosecutions.

Basically, any major-company CEO whose stock price fell sharply could be
sued or charged with a crime and sent to prison.

Democrats wasted no time calling this a "GOP" scandal, tarring any
Republican official with charges of corruption for taking so much as a
dollar from any of the companies. Never mind that Democrats were also
prominent on the political gift lists.

Fanning the fire were news media highlighting Republican ties to
scandal-plagued firms while all but ignoring Democrat links.

In the end, what emerged from this atmosphere of retribution and attack was
Sarbanes-Oxley - the toxic corporate regulatory law that has arguably
destroyed more wealth than anything WorldCom, Tyco or Enron ever did.

We mention all this because we now have an opportunity, thanks to the New
York grand jury, to probe perhaps the greatest financial crime ever - one
that dwarfs Enron in size and scope.

Yes, we're talking Fannie and Freddie.

Here's how James B. Lockhart III, head of the Office of Federal Housing
Enterprise Oversight, described the two companies back in 2006, before the
meltdown occurred:

"The result of (Fannie's and Freddie's) rapid growth unconstrained by market
forces and a weak regulator was years of mismanagement, flagrant earnings
manipulation, and systems-and-controls problems. Managements of both
companies were forced out, earnings were misstated by an estimated $16
billion, fines exceeding one-half billion dollars were imposed, and remedial
costs will exceed $2 billion."

Yet Congress did nothing. Fannie and Freddie continued to enjoy a virtual
monopoly of the housing finance market, holding nearly half the nation's $12
trillion in mortgage assets in 2007.

And what happened to Fannie's and Freddie's top executives, almost all with
deep ties to the Democratic Party? Did they get perp-walked to prison like
WorldCom's Bernie Ebbers, Tyco's Dennis Koslowski, Adelphia's John Rigas,
ImClone's Sam Waksal, or any of the others who did time for corporate
misdeeds in the early 2000s?

No. Jim Johnson, former Walter Mondale aide, became head of Barack Obama's
vice presidential search committee. Franklin Raines, who headed Fannie from
1998 to 2004, the years of its worst excesses, pocketed nearly $100 million
in pay and bonuses from Fannie. He, too, became an adviser to Obama.

Other Fannie-Freddie alumni did equally well. Rep. Rahm Emanuel has been
front and center in crafting a new rescue bill. Ex-Clinton Justice official
Jamie Gorelick careens from career catastrophe to catastrophe, and still
gets top jobs. It pays to have ties.

Meanwhile, as previously documented, Rep. Barney Frank and Sen. Chris Dodd
repeatedly thwarted reforms. Yet today they stand front-and-center as
Democrats try to "fix" a problem they created.

As such, any investigation into Fannie and Freddie must include Congress,
both current and past.

There's lots of evidence that the two mortgage giants had become little more
than taxpayer-guaranteed front companies for Democrats, who used them to
reward supporters with cheap loans and to provide jobs for out-of-work

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