BlogWonks

Well it’s about time, since this whole financial crisis we’re going through right now, with all the trillions of dollars of wealth that has been lost by the American public, is all the fault of the corrupt accounting practices at Fannie Mae  and Freddie Mac.

Adding to their woes, mortgage finance giants Fannie Mae and Freddie Mac are facing a federal grand jury investigation into their accounting practices.

The mortgage finance companies said Monday that a federal grand jury in New York is investigating accounting, disclosure and corporate governance issues at Washington-based Fannie and McLean, Va.-based Freddie.

Fannie and Freddie said they received subpoenas Friday from the U.S. Attorney’s office in Manhattan as well as requests from the Securities and Exchange Commission that they preserve documents. Fannie Mae and Freddie Mac were taken over by the government earlier this month as their mounting defaults and foreclosures threatened the entire mortgage market.

The government investigation focuses on activities starting in 2007, Freddie Mac said in a statement.

Critics have long questioned the companies’ bookkeeping. Last November, for example, a Fortune magazine story said new accounting procedures at Fannie Mae masked potential losses on bad loans.

And several years ago, both Fannie and Freddie were forced to restate billions in earnings after federal regulators discovered accounting irregularities at both companies.

The scandals led to the replacement of the companies’ top executives. Freddie Mac’s former CEO, Gregory Parseghian was ousted in December 2003. Fannie CEO Franklin Raines and chief financial officer Timothy Howard were swept out of office a year later.

Yes, that Franklin Raines.  The same one that has been an advisor to the Obama campaign. The Franklin Raines who was praised by Maxine Waters and the other Democrats as an outstanding CEO back in 2004 when the Bush administration was trying to fix the problems at Fannie Mae and Freddie Mac before they caused an economic disaster like we’re having today.

Just remember and understand that that the free markets did not cuase this financial crisis. This is not a failure of the free markets or Wall Street. This financial crisis is a failure of government. Government created the crisis by encouraging Fannie, Freddie and others to loan money to people who couldn’t afford to pay it back. And then the government refused to see the problem and do something about it. And, it was the Democrats who looked the other way and refused to see the writing on the wall.