Prepare to be outraged.

When government officials pitched the Fannie Mae and Freddie Mac “bailouts” to the American people, we were told the purpose of this “taxpayer investment” was to bring solvency to two institutions that were simply “too big to fail.”

Nobody ever said anything about forcing the taxpayers to pay the legal bills of the political Fannie and Freddie executives who were key to creating the housing crisis. But that’s exactly what’s happening.

The New York Times broke the story:

Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud. The cost was a closely guarded secret until last week, when the companies and their regulator produced an accounting at the request of Congress.

The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.

One of the crooked executives specifically referenced by the Times is none other than Franklin Raines, Bill Clinton’s former budget director, who took a job as Chairman and Chief Executive Officer of Fannie Mae from 1999 to 2004. Raines allegedly cooked the books at Fannie, issued countless dubious mortgages, and then took a huge bonus before leaving the company. He is one of three executives who divvied up a tidy $24.2 million from the taxpayers to defend themselves in court.

Raines’ tenure at Fannie Mae was marked by massive corruption and mismanagement. And we’re supposed to bail him out, too? Once again the taxpayers are thrust into an Alice in Wonderland world where the government uses tax dollars to help politicians defend against government investigations.

(more…)

From The New York Times:

Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud. The cost was a closely guarded secret until last week, when the companies and their regulator produced an accounting at the request of Congress.

The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.

(more…)

Just one day after the Democrats seized control of Congress, the Chief Executive of Fannie Mae, Franklin Raines, received the patent for a residential cap-and-trade system (Patent 6904336), What this means is that Raines, along with several colleagues who also “own” the patent, could stand to make huge amounts of money if the cap-and-trade regime was ever brought to the residential marketplace. What does this have to do with Fannie Mae? Absolutely nothing.

To understand the implications, a little discussion about patenting is needed. Patents are basically “ownership” rights to an invention. If you invent something, you can license it to others to produce and collect royalties. Each year, thousands of patents are sent to the US Patent Office for consideration. Many “patent houses” simply put in very general patents so they can turn around and sue businesses later for “stealing” their inventions. Sometimes it’s legit, many times its bogus.

As examples, Amazon holds the patent of “one-click purchasing”. Litigation ensued on that. There’s a patent on a “self-executing webpage” which is the reason why a few years ago Microsoft had to convert Internet Explorer to not automatically play media as soon as someone visited a webpage. (i.e. why you have to click a YouTube video for it to play).

Here is where things get interesting. Cap-and-trade legislation literally creates an asset out of thin air. It requires some means to “value” the asset and some means to trade it. In essence, it would lead to government created assets and trading mechanisms. However, when this patent was awarded and applied for, cap-and-trade was not even on the public radar yet.

It is important to remember a few things. Franklin Raines has privileged access to Congress and politicians. He knew and could talk to them about what they were thinking and what they planned to do. As head of a government corporation, he also had a degree of access to the Patent Office to help “smooth the way” to get a patent.

(more…)