Double standards

Matthew Hoy
By Matthew Hoy on March 28, 2009

Last Thursday, the Chicago Tribune published a story looking at White House chief of staff Rahm Emanuel's stint on the board of directors of Freddie Mac. To say the story paints a troubling picture of cronyism and corruption is an understatement.

In a year-plus tour, Emanuel attended a total of six meetings and made more than $320,000. Compare the outrage over the AIG bonuses in terms of pay per hour worked to what Emanuel got paid for attending six meetings!

And it's not as though Freddie Mac was a paragon of honest accounting while Emanuel was supposed to be overseeing its operations.

On Emanuel's watch, the board was told by executives of a plan to use accounting tricks to mislead shareholders about outsize profits the government-chartered firm was then reaping from risky investments. The goal was to push earnings onto the books in future years, ensuring that Freddie Mac would appear profitable on paper for years to come and helping maximize annual bonuses for company brass.

The accounting scandal wasn't the only one that brewed during Emanuel's tenure.

During his brief time on the board, the company hatched a plan to enhance its political muscle. That scheme, also reviewed by the board, led to a record $3.8 million fine from the Federal Election Commission for illegally using corporate resources to host fundraisers for politicians. Emanuel was the beneficiary of one of those parties after he left the board and ran in 2002 for a seat in Congress from the North Side of Chicago.

The board was throttled for its acquiescence to the accounting manipulation in a 2003 report by Armando Falcon Jr., head of a federal oversight agency for Freddie Mac. The scandal forced Freddie Mac to restate $5 billion in earnings and pay $585 million in fines and legal settlements. It also foreshadowed even harder times at the firm.

Many of those same risky investment practices tied to the accounting scandal eventually brought the firm to the brink of insolvency and led to its seizure last year by the Bush administration, which pledged to inject up to $100 billion in new capital to keep the firm afloat. The Obama administration has doubled that commitment.

Is there any doubt that had a similarly situated Republican -- say Karl Rove -- been at the center of a scandal such as this that the Big 3 networks, CNN, MSNBC and The New York Times would be hitting this 24/7?

And this is one of the rare instances where there is a demonstrable ethical difference between the two parties.

In his final year in office, Clinton tapped three close pals: Emanuel, Washington lobbyist and golfing partner James Free, and Harold Ickes, a former White House aide instrumental in securing the election of Hillary Clinton to the U.S. Senate. Free's appointment was good for four months, and Ickes' only three months.

Falcon, director of the Office of Federal Housing Enterprise Oversight, found that presidential appointees played no "meaningful role" in overseeing the company and recommended that their positions be eliminated.


Former President George W. Bush voluntarily stopped making such appointments following Falcon's assessment of their uselessness.

That's one for our side.

And, as for the "most transparent administration ever" -- well, there's not so much of that either.

The Obama administration rejected a Tribune request under the Freedom of Information Act to review Freddie Mac board minutes and correspondence during Emanuel's time as a director. The documents, obtained by Falcon for his investigation, were "commercial information" exempt from disclosure, according to a lawyer for the Federal Housing Finance Agency.

In the country's current financial situation is there really any competitive disadvantage to Freddie Mac to releasing 8-year-old information? (On a related note: Obama has now signed 10 bills into law and hasn't let the promised five days for public comment pass before he's signed any of them.)

The fact this story isn't on many front pages or on the nightly newscasts is just another sign of how too many media outlets are out of touch with their audiences. I applaud the Chicago Tribune for their reporting -- now if they could just get their brethren to follow suit.


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March 2009



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