Ex-Fannie Boss Franklin Raines Blames Bush White House For Accounting Scandal

CNN Money reports:

The former chief executive officer of Fannie Mae says the Bush administration helped orchestrate an accounting scandal that cost him his job and that he wants to use White House documents to defend himself in a shareholder lawsuit.

Franklin Raines, who served as President Clinton's budget director, argues in court documents that the Bush administration felt the government-chartered agency wielded too much power in the mortgage industry. His attorneys say the White House pushed regulators to weaken Fannie Mae and triggered a $6 billion accounting scandal.

Raines subpoenaed the White House for documents in July. Justice Department lawyers will go before a federal judge Thursday to fight it.

Relying primarily on articles by financial journalists and the testimony of industry analysts, Raines describes in court documents an unofficial task force dubbed "Noriega" that was formed to weaken Fannie Mae and drive down its stock price.

Fannie Mae is the largest U.S. buyer and backer of home loans. It was created by Congress but is publicly traded. Raines says the Bush administration wanted to undermine confidence in the agency so it could push for tighter government controls.

Raines names as task force members Assistant Treasury Secretary Wayne Abernathy; presidential economic adviser Keith Hennessey; Kevin Warsh, a special assistant to President Bush for economic policy; Jeffrey Kupfer, who served in 2003 as special assistant to Bush's chief of staff; Associate White House Counsel Reginald J. Brown; and Stephen S. McMillin, an official in the president's budget office.

He accuses the task force of influencing an investigation by the Office of Federal Housing Enterprise Oversight. Raines is also seeing documents related to former White House Chief of Staff Andrew Card.

In 2004, OFHEO released a report detailing widespread accounting errors at Fannie Mae. The scandal swept Raines and CFO Timothy Howard from office and led to a massive shareholder lawsuit. Regulators are also suing Raines and others, seeking fines and the return of millions in bonus money.

Raines believes he can show that regulators were aware of - and approved of - the company's accounting practices until the White House got involved.

The Justice Department is urging U.S. District Judge Richard J. Leon to throw out the subpoenas. Government lawyers say Raines "seeks a fishing expedition through the files of the president and the Executive Office of the President."

The documents Raines is seeking aren't relevant to the shareholder lawsuit and Raines has offered no evidence they even exist, Bush administration lawyers argue.

They argue in court documents that conducting a search would be an enormous burden on the White House, which is "already heavily strained by responding to numerous congressional inquiries, in addition to fulfilling their other responsibilities for running the federal government."

Mr. Raines is quite creative,according to his logic if it weren't for the Bush Administration Fannie Mae wouldn't have had accounting problems.Good luck on that one.