The Fabulous Fiderer Rides Again
Bing, Bang, Boom, Boom, Boom !!
In my last blog, I linked an article by David Fiderer, a long time New York based financial services analyst , who has logged tons of hours going over all of the available public documents surrounding a fatuous but destructive 2004 regulatory allegation of “securities fraud,” lodged against three Fannie Mae senior executives by its then regulator the Office of Financial Housing Enterprise Oversight (OFHEO).
The regulator--employing its own interpretation --claimed the company had intentionally misapplied a new Financial Accounting Standards Accounting rule (FASB 133) to hide business weakness.
At the time, Fannie Mae's enemies picked up that handy cudgel, overwhelmed the Hill with the shorthand that, “Fannie's regulator says it cooked its books and then paid their officers big bonuses.”
It was a devastating allegation and did far more harm than even the most diehard opponent could want, since it ultimately destabilized the nation's entire mortgage market before the Treasury Department stepped in and took over Fannie and Freddie in 2008.
It was a groundless charge, but it sounded good and then all Hell hit Fannie, as its friends, allies, and supporters ran from it.
Senior Fannie officials were forced out and then very bad things happened when their successors made poor business decisions and red ink begun spurting from Fannie's books.
The SEC Piles On
To add to the fun of seeing a long time GOP political target publicly wounded, Chris Cox, George W. Bush's chosen head of the Securities Exchange Commission (SEC), and his team jumped on and said, “We agree with OFHEO. Fannie Mae missed the relevant accounting rules by a mile.”
Those allegations and implications lingered for eight years--ruining careers, reputations, costing the government millions in defense costs, and near crippling the mortgage finance system--until Federal Judge Richard Leon issued three decisions dismissing charges against the Fannie execs, citing no information/facts among the 65 million hearings pages that could lead any jury to find them guilty.
The Judge did not comment on what motivated OFHEO and SEC officials to come after the company and its senior leaders.
In “All the Devils Are Here,” the Bethany McLean and Joe Nocera, book on that era, the authors referenced a covert campaign called “Project Noriega,” in which the Bush Administration and conservative allies hoped to cripple Fannie and its operations.
Would the Bush appointees have engaged in that kind of BS and lied in those 2004 reports?
Would they say say/do things for the benefit of Fannie's business and political opponents and stagger a multibillion dollar corporation which was at the heart of the nation's efficient secondary mortgage market? Would they do this to a company that Republicans seemed to intensely dislike?
That's like accusing President Bush and his advisers of starting a costly and senseless war over nonexistent military intelligence and sending thousands of Americans to die while those military costs enriched a cadre of political supporters embedded in major defense industries.
Fiderer to the Rescue
David Fiderer, writing in Op Ed News a week ago, discussed the 2004 OFHEO and SEC regulatory treachery and Judge Leon's rulings.
This week in the same venue, Fiderer looks carefully at the very complex original Fas133 proposal, how many companies beyond Fannie failed to properly implement it, and why the major accounting firms all seemed to agree what Fannie had done was entirely correct?
Long after the charges against Fannie's top people, the national accounting firms collectively agreed not only was Fannie's early application of FAS 133 right (meaning OFHEO and SEC were wrong), but those same firms began giving their own financial service clients the exact same Fannie Mae implementation directions.
That deserves repeating.
After examining the FASB 133 history and purposes and how Fannie Mae initially had complied with the new rule, the nation's major accounting firms opined what Fannie had done was proper.
Fiderer certainly raises the question of why two Bush regulatory agencies tried to cripple Fannie Mae and the damage those campaigns produced.
Anyone who thinks they knew/know Fannie Mae and what happened to it before its descent into sub prime Hell, should closely read Fiderer's work.
Here is the link to his most recent article, from Jan. 28 (Fiderer #2), and I also link last week's (Fiderer#1), so they can be read serially. Fiderer's second article mirrors the same excellent research that was in his first.
I hope there will be more Fiderer's revelations, containing more evidence that craven politically driven regulators can easily ignore what is correct and lawful and willingly join a political witch hunt to wreak partisan havoc.
Congress and the media, take heed.