Blog

Fannie Mae, DC HQ (Manuel Balce Ceneta, AP/ August 8, 2011)

In July 2008, before the height of the 2008 Financial Crisis, the United States Government began to consider a federal takeover of Fannie Mae should the housing market further deteriorate. Just a few short months later, that’s exactly what transpired and in "one of the most sweeping government interventions in private financial markets in decades," the Federal Housing Finance Agency announced that Fannie Mae (and Freddie Mac) would be placed into conservatorship. Shortly after, the mortgage giant received ataxpayer-funded bailout to the tune of $116 billion and after more than four years the American taxpayer still hasn’t been fully compensated, and the housing market remains clouded with uncertainty.

Fannie Mae is the nation’s biggest buyer of home loans and guarantor of mortgages bundled for sale to investors and now a story out Monday, May 27^th, reveals major allegations of corruption at the government-run Fannie Mae. The details that have emerged make it almost impossible for anyone to be pleased with the fact that this is an organization that is operating at the cost of the taxpayer and what they allegedly are doing with the money they’ve been given is nothing more than corruption of the worst kind. The Los Angeles Times, in an article titled “Kickbacks as 'a natural part of business' at Fannie Mae alleged” details how “investigators are now looking into assertions” by former Fannie Mae employees that kickbacks were "a natural part of business" at the government-sponsored entity. Armed with information coming from wiretapped conversations and a sting operation, investigators allege Fannie Mae Foreclosure Specialist Armando Granillo demanded a 20% cut of commission amounting to an illegal kickback for steering foreclosure listings to brokers.

On Monday (January 14) the Taxpayers Protection Alliance showed that bankrupt doesn’t mean the taxpayer-funded gravy train has to stop, with a bankrupt Solyndra still receiving taxpayer funds (read previous blog posting here).  Today’s blog examines two contracts the government awarded to the law firm Morrison & Foerster to assist in the cleanup of the failed Solyndra experiment.  These examples reveal an alarming trend, one that doesn’t look like it’ll stop anytime soon—especially considering that one of the contracts was modified as recently as November 2, 2012. There is no telling when the government will stop punishing taxpayers for mistakes made by the government.

Even though the now infamous Solyndra has disappeared from the headlines, the financial mess of Solyndra still takes its toll on taxpayers.  Not many people have reported that over the past year the Departments of Energy (DOE) and Justice (DOJ) have doled out approximately $2.5 million in taxpayer money to clean up the ripple effects of the failed Solyndra experiment. Unfortunately, the federal government has failed to realize that when you’re in a hole, quit digging.  This blog is the first in a two-part series of a closer examination of Solyndra. Today’s examination involves two of the three companies, Lazard Freres & Co. and Labat Anderson. The second blog, tomorrow, will discuss federal contracts awarded to the law firm Morrison & Foerester.  According to the Heritage Foundation, the awards and contracts are separate from the money awarded to Solyndra as part of the loan guarantee program in the Energy Policy Act of 2005. When the government willingly risked $570 million of taxpayer money to fund Solyndra, there was good reason to be upset. But it reaches a whole new level when the federal government continues to award contracts intended to clean up the very mess it created. It’s ironic that the government is spending even more taxpayer dollars in an attempt to recoup the money it never should have spent.  So how many companies received Solyndra-related contracts? How much money was awarded and for what purpose? Three companies were awarded four different contracts totaling an estimated value of $2.5 million in taxpayer money. All involve throwing good money after bad in hopes of ameliorating the problems that the government’s poor discretion caused in the first place.

The Taxpayers Protection Alliance (TPA) joined with seven other taxpayer and free market groups to oppose H.R. 6477, the so-called "Taxpayer Protection Act," introduced by Representative Albio Sires (D-NJ).  Even though the bill is named the “Taxpayer Protection Act,” the bill does not protect taxpayers and could potentially burden taxpayers with billions of dollars in liabilities by creating a massive federal government-run reinsurance plan and establishing a loan program to facilitate state bailouts.  The reinsurance and bailout provisions in H.R. 6477 represent a tremendous expansion of the federal government's role in insuring and guaranteeing against losses that are now covered by the private sector. In establishing such programs, this legislation would discourage fundamental reform in states like Florida, whose ruinous Hurricane Catastrophe Fund has upwards of $18 billion in liabilities and would be unable to pay billions of dollars in claims if a sufficiently large storm were to strike. Perhaps even worse, it could encourage other states to create similar programs that are designed to fail in order to capitalize on easy money from federal taxpayers.