Fannie Legal Saga
If Fannie Mae wasn't busy enough sifting through the wreckage of its once-proud business while operating under conservatorship, the government-sponsored enterprise is still diverting resources to executives from crises past.
So far this year, Fannie — and therefore the taxpayer — has spent nearly $4 million defending three of its former top executives from a shareholder suit stemming from the GSE's 2004 accounting scandal, according to data provided by the Federal Housing Finance Agency.
The bulk of that amount — $1.76 million — went to Franklin D. Raines, the chief executive who was ousted in the wake of the accounting mess, which ultimately resulted in a $6.3 billion restatement. Another $1.3 million went toward defending Leanne Spencer, Fannie's former controller, and nearly $900,000 was directed to the defense of J. Timothy Howard, who was the chief financial officer.
Those figures are on top of the nearly $2.35 million Fannie spent defending the trio during the last three months of 2008.
Though any use of taxpayer money to support disgraced financial executives has fueled anger on Capitol Hill — think bonuses for executives at American International Group Inc. — the $6.3 million spent by taxpayers to defend Fannie's former leadership is rather minor, especially considering the GSE lost $956 million during the second quarter.
And it might even behoove the government to continue shelling out for Fannie's defense, even though there's no end in sight to the case.
For one, Fannie's employment contract with these former executives promised to pay the legal fees of actions related to the GSE. If the government canceled that arrangement, the executives would almost surely sue and cost the government more money.
Meanwhile, the government likely wants the executives to win the case or settle for as little money as possible. A big judgment against the company, at this point, would also be paid by the taxpayer's dime.
It's hard to imagine anyone even trying to pretend they were Alan Greenspan when he was chairman of the Federal Reserve Board.
After all, he was one of the most recognized public figures during his tenure and had almost attained celebrity status.
Sadly, the current chairman, Ben Bernanke, does not have such a widely recognized face, leaving an opening for identity thieves. According to Newsweek, Bernanke's identity was stolen last year after his wife, Anna, had her purse snatched by a thief.
In the purse were her Social Security card and the Bernankes' joint checkbook. The thief turned out to be part of a sophisticated ring of grifters who forged copies of stolen documents and attempted to collect money from their victims' bank accounts. They attempted to cash a $900 check in the Bernankes' name, but ultimately were foiled by the man himself. Spotting unusual activity on his bank account, Bernanke alerted his bank.
But Bernanke was not the only one being impersonated recently. The American Bankers Association sent out a warning last week that someone was using its name to send out "cash prize letters" as part of a fake-check scam.
"Winners" were asked to call a phone number to find out how to collect the prize. During the call, they were asked for personal financial information.
Many of the letters contained fraudulent checks for a nominal value of $1,000 to $5,000, which several trusting souls — apparently ignoring the fact that the ABA has never been known to give out cash prizes at random — actually attempted to cash or deposit.
33-Year Stint Ends
Mark Schmidt, the director of the Atlanta region of the Federal Deposit Insurance Corp., is retiring today.
Schmidt is a 33-year veteran of the agency, starting in bank supervision in the Kansas City region before moving to Washington in 1996 to serve as assistant director of supervision.
Schmidt was the agency's point man on Basel II, among other policy matters, until his appointment as a regional director in July 2002.
In April the FDIC detailed Schmidt temporarily back to Washington to help work on supervisory matters. During that time, Doreen Eberly, the regional director for the New York region, also was the acting regional director for Atlanta.
Schmidt, 55, has not said what his plans are and the FDIC has yet to appoint a successor.