He’s President-elect Barack Obama’s new chief of staff, according to various Nov. 6 media reports, but Rep. Rahm Emanuel, D-Ill., also has some baggage pertaining to the financial crisis. Will anyone in the media take note?
Emanuel, who was a senior adviser for former President Bill Clinton throughout the 1990s, was appointed to the board of Freddie Mac upon his departure from the Clinton administration.
“Clinton’s going-away gift to Emanuel was a seat on the quasi-governmental Freddie Mac board, which paid him $231,655 in director’s fees in 2001 and $31,060 in 2000,” Lynn Sweet wrote for the Chicago Sun-Times on Jan. 3, 2002.
During the time Emanuel spent on the board, Freddie Mac was plagued with scandal involving campaign contributions and accounting irregularities. Freddie Mac and its sister organization Fannie Mae were taken over by the federal government in September 2008 after years of mismanagement and scandal. Treasury Secretary Henry Paulson put the two beleaguered GSEs into a conservatorship, stripping common stock shareholders of their rights to govern the companies.
In 2006, Freddie Mac was forced to pay a $3.8 million fine to the Federal Election Commission to settle allegations it illegally contributed to congressional candidates between 2000 and 2003 – while Emanuel was on the board and running for and serving in Congress.
“Freddie Mac was accused of illegally using corporate resources between 2000 and 2003 for 85 fundraisers that collected about $1.7 million for federal candidates,” an Associated Press story from April 18, 2006 said. “Much of the fundraising benefited members of the House Financial Services Committee, a panel whose decisions can affect Freddie Mac.”
And, since his successful run for the House of Representatives in 2002, Emanuel has been the beneficiary of campaign cash from Freddie Mac and its sister organization Fannie Mae – $51,750 according to the Center for Responsive Politics Web site OpenSecrets.org.
Emanuel received $25,000 in contributions from Freddie Mac during his first run in 2002, right at the end of his tenure at the government-sponsored enterprise. Freddie Mac was his third largest overall contributor that year.
However, there was an even larger conflict of interest that Sweet pointed out in an editorial column published in the Chicago Sun-Times on Aug. 14, 2003.
“Emanuel’s trust is supposed to be blind, not stupid,” Sweet wrote. “Freshman Rep. Rahm Emanuel (D-Ill.), a former Freddie Mac board member, sits on the very House subcommittee that has oversight of the federal government-sponsored enterprise at the same time that he has outstanding options for 2,500 shares of the company.”
Emanuel told Sweet there was no conflict of interest because he put his financial stake in Freddie Mac into a blind trust and would recuse himself from any votes relating to Freddie Mac.
However, while Emanuel’s was on the Freddie Mac payroll in an overseer capacity, the government-sponsored enterprise was cooking the books. According to a Forbes magazine article from Dec. 11, 2003, the GSE was fined $125 million for understating its earnings by a whopping $5 billion.
“Handed down by the Office of Federal Housing Enterprise Oversight, the regulator of Freddie Mac and Fannie Mae, the fine was in response to the company’s admission of almost $5 billion in understated earnings over the past several years,” Ari Weinberg wrote for Forbes.
Although he was compensated handsomely, Emanuel told Sweet his job on the Freddie board was to attend quarterly board meetings and take part in committee meetings, either on the phone or in person.
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