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.
Read the story and one will see that a lot of easy money was made for very little work–save the work done by people like Emanuel to ignore shenanigans like accounting tricks that were meant “to mislead shareholders,” and “illegally using corporate resources” to raise funds for politicians–and getting fined for it. Such shoddy business practices and unethical behavior helped lead to Freddie Mac becoming nearly insolvent and being taken over by the government. And Rahm Emanuel got rich in the meantime.
The story is even more amazing in the context of this:
Treasury Secretary Timothy F. Geithner plans to propose today a sweeping expansion of federal authority over the financial system, breaking from an era in which the government stood back from financial markets and allowed participants to decide how much risk to take in the pursuit of profit.
The Obama administration’s plan, described by several sources, would extend federal regulation for the first time to all trading in financial derivatives and to companies including large hedge funds and major insurers such as American International Group. The administration also will seek to impose uniform standards on all large financial firms, including banks, an unprecedented step that would place significant limits on the scope and risk of their activities.
Doesn’t it make you feel good that one of the people aiding in this attempt at establishing vast regulatory power–and one of the people placed in the role of regulator in the event that this legislation passes–will be none other than Rahm Emanuel? And make no mistake, he will be placed in that role, as the White House Chief of Staff.
Paradoxically, the only hope we have that Emanuel will not be involved is if he reprises his do-nothing, see-no-evil, hear-no-evil, speak-no-evil role from his days as a member of the Freddie Mac board.