GLENN: From Radio City in Midtown Manhattan, hello, you sick twisted freak. Welcome to the program. I am so glad that you’re here today. We’re actually in Los Angeles, California for the week. I’m going to go down to KFMB on San Diego on Friday. We’re doing a show. You can find out all the details on KFMB’s website. But the first time I’m going to be in San Diego with KFMB and I can’t wait. We were out Friday in Phoenix for an event with KTAR. What an incredible radio station KTAR is and first time we were in Phoenix and had a great time with a sold out crowd there on Friday.
Now, I’ve been doing some I’ve been doing homework on Freddie and Fannie for I don’t know how long and I’ve been waiting for this day because I knew that if I presented this three, four months ago, nobody would really pay attention to it because everyone was denying that Freddie and Fannie were going to fall apart. Still everybody is in somewhat denial, everybody is saying, oh, this is only going to cost the American taxpayers you $200 billion. That is a lie. It’s going to cost you a whole lot more than that. Some say up to $1.6 trillion. To give you some idea of how much money that is, the original remember, "Oh, my gosh, all of a sudden we are having problems with our financial sector." The original panic was that the banks might have to write down as much as $200 billion. That’s what we’re writing a check for today for Freddie and Fannie, out of your pocket.
I told you at the time when everyone said, oh, it’s going to be $200 billion. No, it’s not. It’s going to be in the trillions, it will at least start with $1 trillion. Now we are approaching a trillion dollars in the regular financial markets and this is going to cost you a trillion dollars. This one is costing you. Now, I want to know where is the outrage. I want to know where is the outrage from the press. Where is the outrage from congress. I’m going to ask three questions and then I’m going to give you the answers, and I ask you just to pay attention here for just a second because when you know the real story behind Freddie and Fannie, blood is going to shoot out of your eyes.
Here are the questions. Question one: Why aren’t the CEOs of Fannie Mae and Freddie Mac going to jail? Do you remember the name Ken Lay? Why aren’t the CEOs and corporate executives required to give back, at the very minimum, give back the millions of dollars they put into their pockets while they inflated the results to meet their bonus triggers? I want to explain something here. What they did, what Freddie and Fannie did is they have these CEOs that said, oh, we’re going to meet our budget. And if they met their budget, they get these big bonuses. Well, they would say that they met their budget and then they would get the bonuses but then they wouldn’t meet their budget and they would come back later and say, oh, we had to readjust. No one, no one questioned them. I’m sorry. Members of the press like the Wall Street Journal questioned them. We had questioned them. But nobody else had questioned them. The question I have now is, why. Why. I’ll explain in a second when I introduce you to the players. I won’t even have to explain. You are going to say, oh, my gosh, you’re kidding me.
Question number two: Why aren’t the shareholders wiped out? Why is the federal government protecting the shareholders of Fannie and Freddie today? This isn’t capitalism.
Question number three: Where’s the end game? You know everybody always says in congress, especially the Democrats, "We want an end game. How come, you know, if you’re going to go in for a war, you’ve got to know how to get out. Where’s the strategy here? Where’s the end game? What does victory look like?" I can tell you what victory looks like but nobody else is going to tell you this. They will all deny it, but it is not a coincidence today that they put a 15 month, pretty much just a 15 month Band Aid on this. What they’ve done is save these problems for the next congress and the next President. Why? I’ll explain hopefully later on here. We’ll get into a chance to do that but I’ll explain in great detail on tomorrow’s program and show you what congress is actually doing right now. They are setting us up right now.
Okay. First of all, first question: Where are the regulators? Where is everybody? Why isn’t anyone going after this? This is from an article in The Wall Street Journal, 2004: For years mortgage giant Fannie Mae has produced smooth growing earnings and for years observers have wondered how Fannie could possibly manage its inherently risky portfolio without a whiff of volatility. Now thanks to Fannie’s regulator, we now know the answer. The company was cooking the books big time. In 2004 the SEC began an investigation into Fannie Mae which led to restating of previously reported profits to the tune of $6.3 trillion. What happened when the regulators stepped in? $6.3 trillion. I’ll give you a perspective on that here in a second.
When regulators stepped in, they fined them $400 million for that. Okay, let me give you the players. First one, Franklin Raines. Served as Clinton’s director for the U.S. Management and Budget. He is now the CEO of Fannie Mae or I’m sorry, he was CEO until 2004. He served as the CEO from ’99 to 2004. He took an early retirement while the SEC was investigating Fannie for accounting irregularities. Can you imagine if, while they were doing the investigation on Enron, if Ken Lay took an early retirement? Do you think anyone would have gotten up off of him?
They overstated under this guy, Franklin Raines, they overstated their earnings by $6.3 billion. Perspective: Do you remember how horrible things were with Enron? They overstated their earnings, Enron did, $567 million. Half a billion dollars as compared to $6.3 billion. The wheels of justice turn pretty slowly, but eventually they do turn. This year Franklin Raines settled a government lawsuit against him and, boy, we taught him a lesson. Listen to what we taught him. The headlines read that Rains agreed to $24.7 million settlement to have all of the charges dismissed, okay? So in other words, you can get out of it if you pay a penalty. You don’t have to go to jail. You don’t even have to have your name wrecked. Nobody even knows the name Franklin Raines. Nobody even knows he’s one of the guys who caused all of this.
He got off for $24.7 in a settlement. However, we looked into the settlement. The agreement includes forfeiting stock options worth $15.6 million at the time they were issued. At the time they were issued, they were worth $77.10. He could buy the options allowed him to buy shares for $77. The stock is at $9 a share. He’s not even he wouldn’t exercise those options. Why would you buy $9 stock for $77? It’s ridiculous. But we punished him. He can no longer buy that $9 stock for $77. Then he had to also pay $2 million to the federal government. Okay, so we get $2 million out of the guy, right? No, no, no, no. The $2 million, again if you look into it, is paid by you. It is paid by Fannie Mae’s insurance policy for something like this. So you’ve been paying for the insurance policy so this guy doesn’t have to pay the $2 million to the government.
Now, he also had to give up another $1.8 million in stock. It’s going to be donated to programs aimed at assisting financially strapped homeowners. So this is you know, $1.8 million that he has in stock, the only thing he’s got left, $1.8 million in stock and we’re going to give that now to people who are financially strapped. Unfortunately again if you read the fine print and care to do your homework on this, that $1.8 million of stock, he doesn’t even own. He was suing Fannie Mae for the $1.8. He said that’s mine. They said, no, it’s not. Yes, it is. No, it’s not, yes, it is. All right, you got me, I’m going to say no, it’s not. He didn’t even own the $1.8. Now we’re also told that he has agreed to part with $5.3 million in other unspecified benefits. I’d like to specify those. Could we get anyone in congress, can anyone on Capitol Hill? It’s my money! Can anyone on Capitol Hill ask Mr. Reins, could you specify that for me, please?
Then we have James Johnson, former CEO of Fannie Mae. You know, this guy, because he was selected by Obama to head the vice presidential search committee when the news broke that he may have received preferential loan rates for his personal loans through Countrywide. That’s another scandal. By the way, Obama threw this guy under the bus. What you may not have known is Mr. Johnson was the former chief of staff to vice president Walter Mondale and during his tenure accounting results were manipulated so that executives could earn larger bonuses. The accounting manipulation of 98 resulted in the maximum payoffs and payouts to Fannie Mae’s senior executives. He personally got $1.9 million. So in other words, what happened was they cooked the books under this guy again, so that way they could get the maximum bonuses. If you look back and we did. If you look back at the bonus charts, these guys never, ever missed a bonus. But there’s some way you never ever hit the bonus. They got the money but they never actually accomplished anything. Your government tax dollars at work. By the way, Franklin Raines, he is entitled to his monthly pension and he is taking his monthly pension from you of $114,393 for the rest of his life and for the life of his spouse, should she survive him. Fantastic.
Monthly, $114,000. He gets free medical and dental coverage for the rest of his life, for his wife, too, and his children until the age of 21. He gets free life insurance in the amount of $5 million until the age 60 and then $2.5 million after that. It’s unclear how much of these benefits, if any of them, are in those unspecified damages.
James Johnson, post employment inflation consulting contract of $390,500 that began in 2002. He also gets two employees and a chauffeur, office space at the Watergate Hotel. He even began work at an investment firm that gave him his own office. It’s been reported that Johnson was supposed to reimburse the company for 50% of the chauffeur’s time, but that didn’t apply to the time spent waiting for him or driving his wife around. He has, by the way, reimbursed Fannie for about 15% of that cost. On March 17th, 2005, Fannie Mae was engulfed in an accounting scandal. Johnson contacted board member Steven B. Ashley and said, "I should do my part to assist Fannie Mae’s efforts to reduce spent tours at this difficult time." He temporarily reduced his consulting fees, which he had increased to $600,000 a year, and he decided to end his support staff and driver. No update on whether he’s rescinded that deal and is getting by the way, who else works for Fannie Mae? How about this one, Jack Quinn, Esquire. Clinton appointee, he’s a board member. He was the attorney working for the pardon for Mark Rich. How about Jamie Gorelick, Janet Reno’s Justice Department who served on 9/11 commission. Gorelick, Gorelick, Gorelick, oh, she’s the one who built the wall between the CIA and the FBI so they couldn’t communicate. Remember her from 9/11? The compensation packages for Enron executives like Andy Fastow were similar to the Fannie Mae and Freddie Mac, the CEO Franklin Raines bonuses. Fastow raked in $37 million. Do you remember what an evil dude he was? According to Business Week, Fannie had paid its top 20 executives combined $245 million in bonuses. Rains made $25.6 million in incentive pay, including stock options. $37 million for Fastow. $25 million for Rains. One is evil. One should be in prison for the rest of their life. One destroyed grandma and grandpa’s savings. The other is is not that bad. You probably don’t even know his name.
By the way, during all of this, when all of this was when the mortgage meltdown began, the total compensation package comes in at $18 million for Freddie Mac. The CEOs total compensation comes in at over $11 million for Fannie Mae. That’s why all of this, that’s why all of this is happening.
Now, let me ask the media. Where are you on this? Where are you? We did an LexisNexis search. 3,000 hits on Enron from the time the story first broke and that goes through the following nine months. 3,000 stories. During that nine month time period, Enron disclosed that it had overstated its earnings by $567 since 1997, that key several figures in the embattled company testified under congress under subpoena. A similar LexisNexis search we have done with the term Fannie Mae, for those same media outlets, from the day the story broke in the following nine months. The results? 3,000 hits for Enron. 37 for Fannie Mae. Fannie Mae was asked by its regulator to revamp its accounting, key executives resigned, and $11 billion in accounting errors were revealed. $11 billion as opposed to $567 million. Why were there only 37 matches for Enron’s 3,000? Broadcast news wall to wall coverage of the endless commas and zeroes behind the Enron collapse. Fannie Mae’s staggers problems and the resignation of six top executives including the CEO, Chief Financial Officer, no virtually no TV coverage. Where’s the media? Where was the media then? Where was the media today?
Do you remember Enron with all the stories about the employees and the stockholders that lost everything, they couldn’t retire anymore, they had to get a second job, all the people who had Enron stock in their 401(k), they are never going to be able to retire? Fannie and Freddie? Fannie and Freddie have lost almost all of their stock value. At the time we put this piece together, we started putting this piece together about two months ago, they had lost 70% of their value over the last year. Where is the media concern now? It doesn’t fit their agenda. "We don’t like to talk about these new little organization attentions that merge capitalism with the government. We don’t like that. We don’t want to think that anybody in the government, you know, is not capable of running an airline or a healthcare system or oil companies." God forbid we ever see the incompetence, God forbid we ever see how much money has been stolen from us in the middle of the night, except they didn’t have to do it in the middle of the night. They do it in broad daylight. All of the facts and figures are all there. For some reason, though, nobody wants to look at it.