Taxpayers Funding ‘Business As Usual’ Corruption At Fannie Mae

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 a taxpayer-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.

The problems with the government-run Fannie Mae (and Freddie Mac) continue to be a burden on the taxpayers who are still owed tens of billions of dollars of loan money and taxpayers may still not see a full return for nearly another decade. The largest beneficiary of the profits seen by the group are not the taxpayers but the United States Government, and though the loan was through funds drawn from the United States Treasury the money that Fannie Mae gives back doesn’t have to go back to the draw it came out of originally. The discretion where those funds end up lies in the hands of the Treasury. If this seems unique, and arbitrary… it’s because it is: “It seems strange that everyone else who borrowed from U.S. Treasury in the crisis is allowed to pay back, but the GSEs are neither allowed to rebuild capital nor repay. Shouldn’t we get to reform rather than use them as a budget tool?” asked Graham Fisher Analyst Joshua Rosner. The fact is that the need to keep these entities under government control could be argued as simply the perpetuation of what is arguably a “government cash cow” that will continue to feed the beast.

Fannie Mae was suffering enormous losses, so the government decided to step in and take over and then decided to use taxpayer dollars to bail them out. Now we learn that not only can the government avoid sending the money back to taxpayers and instead direct the profits as they see fit, but that the corruption being investigated is now alleged to be widespread and being described as “business as usual” by individuals involved in carrying out those illegal actions. The taxpayers have not been given their money’s worth when it comes to Fannie & Freddie and these new allegations and investigation, combined with information detailed about how the profits of Fannie Mae can be directed prove the taxpayers are getting the raw deal here.