Friday, October 01, 2010

Rahm Emanuel's future

My prediction for Rahm Emanuel's future: he will fail in his endeavor to be Chicago mayor and will return to working somewhere on Wall Street. Remember this is a guy who, without any business background or or banking experience went to work at an investment banking firm for 2 1/2 years between working for Clinton and running for Congress. Yet somehow, this financial novice managed to rack up $16.2 million in that period of time. Or the former ballet dancer could return to his other former job as a member of the Board of Directors for Freddie Mac where he earned at least $260,000 a year for going to six meetings a year. And just in case this tidbit escapes all of Emanuel's opponents in the mayor's race, here is the tale of his leadership at Freddie Mac.
“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

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.(Links in the original)
So his story is that he got all that money but didn't really do anything. Perhaps his position was just a political plum with no real responsibilities. But that is no argument for voting for the guy.

But why on Earth would Chicagoans want some guy who has barely lived in the city and whose big position of executive responsibility was sitting on the board as Freddie Mac broke the law and ended up having to pay $3.8 million in fines for illegal comapign contributions and then had to pay a whopping $125 million fine for its $5 billion accounting errors? And think of how we're all still paying for Freddie Mac's mistakes and Emanuel's cruddy leadership.

And this is not even getting into what people think of his job working for Obama. Maybe he's popular enough in Chicago for his mantle to give Emanuel a gloss of popularity. But I doubt it. Chicagoans will go for a real Chicagoan in this election. And Rahm will just have to be satisfied with earning a few undeserved million dollars a year as some sort of investment banker.