Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.
One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel — now chief of staff to President Barack Obama — who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.
As gatekeeper to Obama, Emanuel now plays a critical role in addressing the nation's mortgage woes and fulfilling the administration's pledge to impose responsibility on the financial world.
Emanuel's Freddie Mac involvement has been a prominent point on his political résumé, and his healthy payday from the firm has been no secret either. What is less known, however, is how little he apparently did for his money and how he benefited from the kind of cozy ties between Washington and Wall Street that have fueled the nation's current economic mess. …
He was named to the Freddie Mac board in February 2000 by Clinton, whom Emanuel had served as White House political director and vocal defender during the Whitewater and Monica Lewinsky scandals.
The board met no more than six times a year. Unlike most fellow directors, Emanuel was not assigned to any of the board's working committees, according to company proxy statements. Immediately upon joining the board, Emanuel and other new directors qualified for $380,000 in stock and options plus a $20,000 annual fee, records indicate.
On Emanuel's watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.
The accounting scandal wasn't the only one that brewed during Emanuel's tenure.
During his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago.
"Political muscle" describes what Emanuel provided in exchange for his ride on the gravy train.
Financial disclosure statements that are required of U.S. House members show Emanuel made at least $320,000 from his time at Freddie Mac. Two years after leaving the firm, Emanuel reported an additional sale of Freddie Mac stock worth between $100,001 and $250,000. … One of Emanuel's fellow directors at Freddie Mac was Neil Hartigan, the former Illinois attorney general. Hartigan said Emanuel's primary contribution was explaining to others on the board how to play the levers of power.
He was respected on the board for his understanding of "the dynamics of the legislative process and the executive branch at senior levels," Hartigan recalled. …
Another focus of Freddie during Emanuel's day — and one that played to his skill set — was a stepped-up effort to combat [Republican] congressional demands for more regulation.
Dead Fish's Freddie connection continued after he left to join the Leviathan as a congresscrook.
Federal campaign records show that Emanuel received $25,000 from donors with ties to Freddie Mac in the 2002 campaign cycle, more than twice the amount collected that election by any other candidate for the U.S. House or Senate.
Emanuel joined the House in January 2003 and was named to the Financial Services Committee, where he also sat on the subcommittee that directly oversaw Freddie Mac. A few months later, Freddie Mac Chief Executive Officer Leland Brendsel was forced out, and the committee and subcommittee launched hearings to sort out the mess, spanning more than a year. Emanuel skipped every hearing, congressional records indicate.
As for the Obamination administration's loudly promised "transparency"…
The Obama administration rejected a Tribune request under the Freedom of Information Act to review Freddie Mac board minutes and correspondence during Emanuel's time as a director.
But not to worry:
Sarah Feinberg, a spokeswoman for Emanuel, said there was no conflict between his stint at Freddie Mac and Obama's vow to restore confidence in financial institutions and the executives who run them.
Let's not single out Dead Fish. He was hardly the only Democrat in Congress to help create the Freddie/Fannie fiasco that is snowballing into a depression. He's not even the only one who went on to the White House.
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