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It is the failure of the mainstream media to kick the spin and put out the facts before the
American people.

According to the auditors, "During the period covered by this report — 1998 to mid-2004
— Fannie Mae reported extremely smooth profit growth and hit announced targets for
earnings per share precisely each quarter. Those achievements were illusions
deliberately and systematically created by the Enterprise’s senior management with the
aid of inappropriate accounting and improper earnings management."

The audit report is specific — telling why the Fannie Mae folks inflated their books and
who was responsible for the systematic mirrors and smoke game to inflate earnings.

"By deliberately and intentionally manipulating accounting to hit earnings targets, senior
management maximized the bonuses and other executive compensation they received,
at the expense of shareholders. Earnings management made a significant contribution to
the compensation of Fannie Mae Chairman and CEO Franklin Raines, which totaled
over $90 million from 1998 through 2003. Of that total, over $52 million was directly tied
to achieving earnings per share targets."

So while Franklin Raines, currently
adviser to Senator Obama, walks
free with millions in his pockets,
homeowners and taxpayers all over
America are paying the price of his
failed leadership.

How did this happen? The answer again
comes from the audit report:
Basically,
the management at Fannie Mae hid
the payouts from public view.

"Enterprise executives purposely obscured
their official disclosures of executive
compensation and failed to provide
complete information on the post-employment compensation awarded to former CEOs,"
noted the audit report.

The whole story, as documented by the audit report, goes from one tale of falsehoods
followed by another chapter on cover-ups.

"Fannie Mae senior management achieved those earnings targets by regularly
manipulating earnings," notes the report.

"During the period covered by this report, Fannie Mae senior management
systematically withheld information about the Enterprise’s operations and financial
condition from the board of directors, its committees, its external auditors, OFHEO, the
Congress, and the public, or disclosed information that was incomplete, inaccurate, or
misleading," states the audit report.

While the books looked great — good enough to pay out millions to Raines and others
at Fannie Mae — the facts behind the scenes pointed to a crumbling empire ready to
collapse.

"Fannie Mae consistently took a significant amount of interest rate risk and, when
interest rates fell in 2002, incurred billions of dollars in economic losses," states the
report.

Worse still, when it appeared the cover-ups were failing and the auditors were closing in
on the truth, the executives at Fannie Mae combined forces with Democrats in Congress
to try to replace the auditors.

"Fannie Mae senior management sought to interfere with OFHEO’s special examination
by directing the Enterprise’s lobbyists to use their ties to Congressional staff to 1)
generate a Congressional request for the Inspector General of the Department of
Housing and Urban Development (HUD) to investigate OFHEO’s conduct of that
examination and 2) insert into an appropriations bill language that would reduce the
agency’s appropriations until the Director of OFHEO was replaced," noted the report.

So who helped out the Fannie executives?

    In 2007, Sen. Dodd, D-Conn., the chairman of the Senate
    Banking, Housing and Urban Affairs Committee, called on
    Fannie Mae and Freddie Mac's regulators to lift the portfolio
    caps. He argued that allowing the two firms to buy more
    subprime mortgages, at least temporarily, would inject much
    needed liquidity into the market and calm the financial markets.
    Of course, that was like offering heroin to an addict.

Sen. Dodd called Bush's proposed stronger regulations on Fannie Mae "inane" and
recommended the president "Immediately reconsider his ill-advised" proposals."

In 2000, when Republicans introduced a reform
act for Fannie,
Rep. Frank dismissed the bill,
saying concerns were "overblown" and that
there was "no federal liability there whatsoever."

In 2002, as alarm bells were ringing, Frank
dismissed them with "I do not regard Fannie
Mae and Freddie Mac as problems," according
to a Sept. 10 Wall Street Journal article.

When the accounting scandal finally broke open, Rep. Frank acted quickly . . .
to cover the whole thing up.

"I do not think we are facing any kind of a crisis," stated Frank.

When the scandals began to engulf Fannie Mae and Freddie Mac sending them
spiraling down the tubes, Frank reacted with a comment that is enough to make one's
head spin.

In the same article, Frank noted, "I think Wall Street will get over it if the two collapsed."

    Oh, and where was Obama? In his short term in Congress,
    Obama has raked in more Fannie Mae donations than
    any other member of Congress in 20 years except Dodd.
    Obama has sought the campaign advice of two former Fannie
    Mae CEOs who took money based on the "purposely
    obscured" accounting documented by the audit report. Obama
    has bundlers and advisers from the collapsed institution
    sprinkled over his campaign like sugar over cookies.

    Where was John McCain? In 2005, Sen. McCain proposed
    legislation that could have prevented this whole mess
    to reform Fannie and Freddie.

McCain's legislation was defeated by Dodd and the Senate Democrats. Since then Dodd
along with Democrat Sens. Obama, John Kerry, and Hillary Clinton — the top four
recipients of Fannie and Freddie campaign contributions from 1988 to 2008 — actively
opposed any reform measures and supported weakening existing regulations.

So while the mass media spins it all George Bush's fault, the very same people
who oversaw the disaster at Fannie Mae and Freddie Mac are now in charge of
the rescue effort.

© 2008 Newsmax. All rights reserved.
Charles R. Smith is one
of America's leading
experts on cyber
technology and its
implications for war,
terrorism, privacy and
every way technology
interacts with our lives.

He is an exclusive
columnist for
NewsMax.com as its
"CyberWar" expert and is
currently President and
CEO of SOFTWAR, his
own consulting company.

Mr. Smith's life sounds
like a character in a
Tom Clancy novel. He
received a U.S.
government "Top
Secret" clearance as a
top-level computer
engineer for EDS.
There he was assigned
to work with the U.S.
Army on logistic
projects during the
Cold War.

During the past ten
years, Smith has also
become a noted
investigative journalist
and his reports have
been covered by
NewsMax.com, Insight
magazine, USAF, "The
Connection"
Information Protection
journal, E-SOURCES
Online, U.S. Naval
Institute Proceedings
Magazine and dozens of
other outlets. He is a
journalist recognized by
the Central Intelligence
Agency (CIA), Dept. of
Defense (DOD), Dept. of
Justice (DOJ) and the
U.S. Commerce
Department (DOC).
Smith frequently
appears on national
television for the Fox
network on matters of
national security and
international affairs and
is a popular guest on
radio shows.
CHARLES R. SMITH
...Cover-Ups Led to Financial Crisis
One does not have to look very far to find the root cause of our
current financial dilemma.

Despite the partisan political spin that it’s "all George Bush's fault,"
the facts were well documented in 2006 by the audit report of
the Office of Federal Housing Enterprise Oversight (OFHEO).
Used by permission of
Charles. R. Smith and
NewsMax.com.
Click
here to read the entire
column at Newsmax.
Franklin Raines, paid $90 Million from
1998 through 2003 for Fannie Mae
"leadership"